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Retail Trends

Social Gets Down to Business

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F acebook’s imminent IPO should put to rest claims that social networking is a short-lived fad. Experts say sites like Pinterest, Twitter and Tumblr, Google+ and Svpply, Instagram and Spotify are reshaping shopping and turning old methods of customer engagement upside down. They’re telling retailers to forego ROI metrics — for now, at least — pointing out that investments in social media will yield deeper customer relationships.

Still, skepticism remains. In many C-suites, executives are struggling to understand what social means to their business. They’re seeking the best ways to engage with customers on social networking sites; not surprisingly, the ability to measure ROI is the greatest concern. In an industry that monitors margins with the same intensity that fashionistas focus on hemlines, it may be hard to accept that the sweet spot for social is more about deeper engagement and brand building than a lift to the bottom line.

“Social media may not yet be driving a ton of direct retail ROI — though that varies by retailer — but it’s become an expected part of retail,” says Vicki Cantrell, NRF senior vice president of communities and executive director of Shop.org. “Customers expect to be able to talk to a retailer and they look to share their feedback, ideas and comments.” In Shop.org’s State of Retailing Online 2011 report, retailers listed the top benefits of Facebook as brand building (40 percent) and listening to customers (37 percent).

Jeremiah Owyang, an industry analyst and partner with Altimeter Group, insists retailers shouldn’t measure success solely by the number of fans and followers, but instead focus on business goals — namely, how social channels increase awareness, boost traffic and lift wallet share.

“We cannot rely on a steady carpet bombing of leaflets, broadcast advertising and media plugs to win customers,” Owyang says. “Today’s consumer is empowered with information from three powerful sources: mobile devices that allow anytime/anywhere access, apps that can deliver best prices and inventory availability at the touch of a button, and trusted friends and family members.

“The empowered customer is able to assert control over brands and retailers faster than ever before, and retailers must catch up,” he says. “Retailers must use the same tools and technology customers are … to meet them where they stand.”

David Dorf, senior director of technology services for Oracle Retail, says consumers “are so deluged with advertising that they’ve become numb to it. ... Social is the opposite of interruption-based advertising, and that’s a big part of what resonates with today’s customer. Social is an opportunity to engage her where she lives.”

Dave Bruno, director of commerce studies for RedPrairie, advocates integrated messaging to consumers who are social, mobile and local (SoMoLo). “It’s time to stop thinking of websites and social networking as separate,” he says. “It’s time to make shopping more social and social more engaging. Once [retailers] do, they’ll see higher conversion rates.”

There are countless reasons retailers need to be engaged in social media. STORES has winnowed the list down to five.

Social is Too Big to Fail
It’s been a long time since the retailer-customer relationship existed solely during business hours and within a store’s four walls. Social networking has quickly become part of the cultural fabric of retail.

Facebook grabs the lion’s share of attention, but so many sites have sprung up that it is difficult to keep track of them all — and even harder to nail down how many users each can claim. Pinterest, the “it” social network of the moment, only recently appeared on the scene, yet is reported to be attracting 11.7 million monthly visitors.

“There are some 800 million people on Facebook who are talking about brands. It’s very compelling,” says Scott Silverman, co-founder and vice president of marketing of Ifeelgoods. “What also makes Facebook unique is that these 800 million people are giving marketers ... access to hundreds of important pieces of information about their preferences and tastes.”

Numbers Don’t Lie
Nielsen’s Social Media Report, released last fall, quantifies what a powerful influencer of consumer behavior social networking has become. A key finding is that social networks and blogs account for nearly a quarter of total time spent on the Internet. Nearly 80 percent of Internet users visit social networks; the report showed that Americans spend more time on Facebook than any other U.S. website. Sixty percent of people who use three or more digital means of research for product purchases learned about a brand or retailer from a social networking site; 48 percent of these consumers responded to a retailer’s offer posted on Facebook or Twitter.
Other key findings:

Nearly 40 percent of users access social media content from their mobile phone.

70 percent of active, online adult social networkers shop online.

53 percent of active adult social networkers follow a brand.

This Year is Different
With top tech vendors now providing social sentiment analysis tools, retailers have the chance to gain greater insight into what customers are talking about. The chance to finally understand what IBM has dubbed “the noise on the wire” is a powerful differentiator.

While fan pages enabled users to connect and share, recent Facebook developments could shift the focus from accruing fans to actually generating commerce. In mid-January, Facebook announced an extension of Open Graph, a tool that transfers information into Facebook from third-party websites and applications.

Jon Kubo, chief product officer at 8th Bridge (formerly of Wet Seal), insists 2012 could be the year retailers learn to derive true ROI from social. “The soon-to-be public Facebook has a more urgent motivation for revenue growth and is launching many small and large ways to monetize the social network,” he says. “Social commerce will see good ROI opportunities this year.”

New data from Kenshoo, a leader in digital marketing software, suggests that Facebook advertising budgets are growing by double digits, outpacing paid search budgets. After analyzing more than 100 billion ads delivered on Facebook, Kenshoo concluded that seasonally adjusted impressions grew 47 percent between Q3 and Q4; ad clicks were up 105 percent.

Peter Leech, a partner in The Partnering Group, says retailers are “using measurement tools that don’t translate in this channel. Expectations are high, and skeptics like to point out that they derive ‘X’ from Google. Maybe so, but that requires considerable investment. Social networking requires people, time and effort. ... A small investment goes a long way in impressions and brand building.”

Being There Matters
From the outset, social networking backers have encouraged retailers and brands to immerse themselves in all things social. Verizon vice president of retail and distribution Ravi Bagal boils it down thusly: “Participate or abdicate ... Social is where the consumer goes first to start a conversation, and retailers need to pay attention.”

Forrester vice president and principal analyst Sucharita Mulpuru says that some of the most important reasons for companies to be socially engaged aren’t about sales, but rather “managing customer service issues ... It’s about listening and hearing trends on what could be selling or what customers want.”

“A considered and timely response to a comment, a simple acknowledgement or a small token of fan appreciation will all build valuable brand goodwill,” says Ron Ladouceur, executive vice president and creative director for Media Logic. “In our word-of-mouth world, a brand’s fans are its most effective and influential marketing channel.”

It’s also about gaining insight. Several brands, ModCloth and Wet Seal in particular, have used social networking sites to involve “fans” in product selection. “Social media, unlike all other media, is two-way,” he says. “It’s an always-on research channel.”

Cantrell says there’s a tendency to undercut the role social plays in influencing purchasing, pointing out that customer ratings and reviews — the original elements of social media — are especially powerful influencers.

The 2011 eHoliday Post-Holiday Study, published in January, reports that 34.3 percent of online holiday shoppers used customer ratings and reviews when making a purchase online; one in 10 holiday shoppers who own a smartphone used it to reference ratings and reviews while holiday shopping. Fifteen percent of tablet owners used the devices to look up customer ratings and reviews.
“The percentages are compelling,” Cantrell says.

It’s Working
Social success stories have been difficult to measure, but Facebook spokeswoman Jillian Stefanki shared four recent stories.

Fab.com: This design site reported that more than half of the $1.1 million in sales it logged from Black Friday through Cyber Monday came from people who joined the members-only site via social sources; more than 25 percent joined via Facebook.

Giantnerd: This outdoor gear and apparel retailer reported that conversions from Facebook traffic increased 20 percent this past holiday season and yielded an average order value that was 300 percent higher than the site average.

ModCloth: During the first week of the holiday shopping season, the online boutique doubled its typical revenue, helped by a 27 percent increase in Facebook traffic and a 28 percent boost in Facebook ad click-through rates.

Yardsellr: Social swap meet retailer Yardsellr introduced a comprehensive holiday gift guide for friends and saw a 1,000 percent year-over-year increase in traffic.

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