What does the social revolution mean for retail?Posted: April 20, 2010 | |
In 2005 the National Retail Federation (NFR) coined the term Cyber Monday to highlight the growth of online shopping. NFR predicts that retail sales will grow 2.5% in 2010 overall, while online sales will grow at a rate of 12%. In 2010 online shopping in the US market is predicted to be $144b.
As retail sales move online, the digital nature of the shopping experience will continue to become more important, as a differentiating factor. If we benchmark against a wide range of industry verticals we see a clear trend towards communality. Communality is second nature to retailers. Traditionally communality means member benefits and monthly member publications. As retail becomes more digital and mobile, I will see an influx of mobile applications facilitating the purchasing experience.
I predict that the number of digital retail communities will continue to increase. The web has a tendency to democratize business models and lower the barriers for entry. Facebook with its more than 400 million users is already a digital retail community in a loose sense of the term. 78% of consumers rely on peer reviews on products and services over traditional marketing. A social network service, such as Facebook, through its members is immensely powerful in influencing purchasing behavior. eBay and Amazon are examples of brand driven retail communities. There is an overall trend within social networks to segment into sub-networks (‘gated communities’) based on interests and themes. I predict an emergence of cooperative member driven digital retail communities. These communities will be niche, but without geographic boundaries will grow into hundreds of thousands or even millions of members. The only growth boundaries that digital retail communities have are cultural.
According to research, 78% of consumers trust peer reviews. Only 18% of traditional television advertisement generates a return. Communality is not just about pooling purchasing power. There is also an important social element. Brands are eager to tap into this discussion, which is generally known as engagement marketing. Most digital marketing agencies are still all about conversion. Traditional push messaging using current social tools is an intermediary phase until agencies recognize that conversion is just a milestone and that the post conversion relationship with the consumer is what is important.
Any lasting relationship is about a respectful dialogue rather than self centered monologue. Marketers need to be mindful of tonality and they need to re-learn what it means to have a dialogue with a consumer. Crowdsourcing and User Generated Content (UCG) are communal participation phenomena. Consumers are not product marketing specialists, but we are experts in our personal passions. Retailers deep down are not about products, but about enabling a life style. Each retailer has a target audience that defines the kind of lifestyle they promote through their brand and products selection. Let’s allow members to take part in building the retailer’s life style brand through their passions. Then let us enable those passionate members to share their passions with their social networks forming linkages far beyond any loyalty program could ever reach.
In a retail setting, participation means enabling the membership to impact planning, buying, pricing, promotions, allocations, replenishment, distribution, and sales processes in real time. In digital community every member action generates a digital transaction, which through analytics translates to brand sentiment, demand forecasts, product innovations and real time flow optimization. The future is dynamic member community analytics driven digital retailers.