SYS-CON MEDIA Authors: Roberto Medrano, Dmitriy Stepanov, Gilad Parann-Nissany, Srinivasan Sundara Rajan, Sean Houghton

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Tablets and Smartphones May Increase UK Consumer Impulse Buys by up to £1.1 billion Per Year, Indicates Rackspace Retail Research

Impulse purchases in the UK may have increased by as much as £1.1 billion* a year thanks to the online shopping convenience offered by smartphones, iPads and other tablet computers, suggests data from a new study.

The study, conducted by Rackspace Hosting (NYSE: RAX), the open cloud company, indicates that nearly half (48 per cent) of UK adults who use smartphones or tablets to make purchases online admit to buying things on impulse more frequently now by using their connected handheld devices – spending on average £329 extra per person per year**.

Impulse shopping on the rise

Overall, approximately 17 per cent of the study’s UK consumer respondents say mobile devices have increased their on-the-spot purchasing, with 71 per cent of this group saying that the main reason for the upswing in spending is that the process is so simple and the technology is so easy to use. Over a quarter (27 per cent) of this group also say that the experience of shopping with smartphones and tablets is better than shopping in store.

Rackspace’s research reveals that mobile shoppers are using technology in the hunt for better bargains: almost a third (32 per cent) claim that the main incentive behind making impulse purchases is to use promotional codes that save money. It also suggests that the younger generation is more decisive and tech savvy, with 62 per cent of 18-34 year-olds buying things on-the-spot today, compared to 32 per cent of 55+ year-olds.

“As more consumers turn to their mobile devices for impulse and on-the-spot purchases, retailers must make it a priority to provide the right information with the best user experience on each device type,” said Duncan Hallas, COO of Netbiscuits, a leading cloud platform for developing and delivering mobile web apps. “This survey shows that failure to deliver a mobile shopping experience that meets customers’ high expectations could mean losing business to another site who is serving a more relevant experience. With more than 110,000 web apps built on our platform, delivering more than 10 billion pages each month for our clients, we understand that having the right mCommerce strategy is key.”

Sofa surfing shoppers

The study shows that almost one in five respondents (18 per cent) make spur-of-the-moment purchases at work during their lunch break, while 62 per cent turn to their smartphones and tablets when at home relaxing. Between 7pm and midnight is the most popular time for making immediate on-the-spot purchases on mobile devices.

Clothes are the most popular impulse buy for 41 per cent of mobile shoppers, followed by books (35 per cent), music (32 per cent) and fast food or takeaways (14 per cent). Women are most likely to buy clothes (47 per cent) while men are most likely to buy music (38 per cent).

Consumer brands are traditionally fast on the uptake when it comes to adopting new technology, as they seek to cater to a new generation of sophisticated ‘on the move’ IT-savvy consumers. Domino’s, for example, is the UK and Republic of Ireland’s leading pizza delivery company with over 730 stores. They combine a fun approach to ordering pizza (either through their Apps or website) with a Rackspace cloud computing solution that can cope securely and efficiently with huge influxes of orders at peak times. It’s a cost-efficient combination of creativity and technology which, together with some pretty special toppings and sauces, has been a key contributor to their success.

Colin Rees, IT director at Domino’s, says: “Since launching our pizza apps, we’ve seen an increase in orders through our mobile service, as customers realise how easy it is to use whenever and wherever they are. More than 52 per cent of our UK delivered sales are currently taken online, so having a reliable hosting solution is absolutely essential and a fundamental driving factor in our on-going business growth.”

Storing credit card details causes security concerns

Despite many UK consumers embracing the mobile shopping experience, 60 per cent of those surveyed do not shop online at all using their smartphones or tablets. When asked about the reasons why not, more than a quarter (27 per cent) of this group said security fears prevent them and 84 per cent simply prefer to use their laptop, PC or Mac.

The study also suggests that companies at the front line of e-retailing today need to build trust in the security of online shopping as over half of smartphone or tablet owners surveyed (59 per cent) are uncomfortable with, or wary of, storing credit card details online. Nearly a quarter (22 per cent) of respondents are concerned that retailers will share their details. More than a third (37 per cent) admit that, although they are wary and have security concerns, they do it because they have to.

Of the 29 per cent of respondents who don’t store credit card details online at all, two in five (43 per cent) believe that they would spend more using a tablet or smartphone if they felt comfortable storing their details.

Fabio Torlini, VP of Cloud at Rackspace, says: “We’re a nation of bargain hunters, so tablets and smartphones make it easier than ever for consumers to keep their eyes open for great deals and snap things up wherever they are. This is good news for retailers in general of course, but our study provides some additional insight here. The retail trade still has work to do in order to convince the majority of the British public that using mobile devices to shop online is a safe, preferable and attractive alternative to logging on from their PC or visiting a store.”

Battle of the brands

When it comes to the battle of the brands, iPhone users are UK’s biggest mobile shoppers. The study reveals that 69 per cent of consumers with an iPhone use it to shop online. This is compared to 37 per cent for Android, 32 per cent for Windows Phone and 33 per cent for RIM Blackberry.

ENDS

Notes to editors

The research was carried out by independent research company, Vision Critical, in August 2012 and involved 2,009 UK adults who own a smartphone and/or a tablet. It is representative of the UK adult population of smartphone/tablet owners.

* The survey utilised the latest stats on the UK adult population (18+ year-olds) from the Office for National Statistics of 49.1 million (2010). According to Ofcom’s Communications Market Report 2012, 40% of UK adults own smartphones, which would indicate that there are approximately 19.65 million (49.1 million x 0.4) adult smartphone owners in the UK. The study uses these two assumptions as a basis for information presented in this release.

The study found that 17 per cent of respondents say that their impulse spending has increased because of their mobile device. Using the assumption that there are 19.65 million adult smartphone users, this would indicate that approximately 3.35 million (19.65 million x 0.17) people have increased impulse spending in the UK because of their mobile device.

The research also found that the average monthly increase made per person because of this additional impulse spending is £27.40, or £329 (£27.4 x 12) per year (See calculation below).

Therefore, utilising the assumptions above, the estimated total sum for the average increase in spending each year thanks to smartphones and tablets would be equal to £1.1 billion (3.35 million x £329).

** The average monthly increase from impulse buying per person of £329 per year as used in this release is calculated by taking a fixed mid-point for each range indicated by the respondents in the survey (for example, the fixed midpoint for the range £0-£5 is £2.5), multiplied by the respective number of respondents who selected that range, with the resulting amounts for each range then added together (this was equal to £9,524.50). The sum was then divided by the total number of respondents for the question (347) to produce the average monthly increase spend from impulse buying (£27.40). The monthly increase was then multiplied by 12 to provide an annualised number.

About Rackspace

Rackspace® Hosting (NYSE: RAX) is the open cloud company, delivering open technologies and powering more than 190,000 customers worldwide. Rackspace provides its renowned Fanatical Support® across a broad portfolio of IT products, including Public Cloud, Private Cloud, Hybrid Hosting and Dedicated Hosting. The company offers choice, flexibility and freedom from vendor lock in. Rackspace has been recognised by Bloomberg BusinessWeek as a Top 100 Performing Technology Company and is featured on Sunday Times list of 100 Best Companies to Work For. Rackspace was positioned in the Leaders Quadrant by Gartner Inc. in the “2011 Magic Quadrant for Managed Hosting.”

Rackspace Limited, the UK subsidiary of Rackspace Hosting®, is headquartered in San Antonio with offices and data centres around the world. For more information, visit rackspace.co.uk.

Forward Looking Statements

This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Rackspace Hosting could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements about historical results or third party data that may suggest trends for our business or industry; any statements of the plans, strategies, and objectives of Rackspace for future operations or growth; any statements of expectation or belief regarding future events, and any statements of assumptions underlying any of the items mentioned. Risks, uncertainties and assumptions include the possibility that expected growth or success may not materialize because of the lack of acceptance of cloud computing in the marketplace or specifically, Rackspace’s cloud computing services, Rackspace's failure to execute on its operational plans, rapid technological changes that adversely affect the demand for Rackspace services, and other risks that are described in Rackspace Hosting's Form 10-Q for the quarter ended June 30, 2012, filed with the SEC on August 9, 2012. Except as required by law, Rackspace Hosting assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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