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Posted Date: 4/24/2008

RETAIL 2.0: OPPORTUNITIES ABOUND


Chris Fletcher and Rob Garf
From life sciences to manufacturing, consumer electronics, and high-tech industries, companies across the board are taking advantage of consumer Web 2.0 technologies such as social networking, blogs, wikis and the like to gain valuable insights into customers...but not retail.

Retailers have been slow to jump on the Enterprise 2.0 (the business use of Web 2.0) bandwagon, a recent AMR Research survey shows. And it's a shame, since retail could benefit the most from these systems. These technologies are all about establishing communities around a topic, like a brand, helping establish interactive conversations that identify important product needs and service requirements.

Given the web-savvy nature of many customers and store associates, retailers are missing a great opportunity to explore and get direct feedback on their own internal operations, product mix and overall brand value in the market.

The good news is retailers do recognize the value. When asked what business issues were behind their companies' use and adoption of Enterprise 2.0 technologies, 64 percent of retailers surveyed cited such issues as improving customer service, supporting sales efforts and improving corporate public relations and communications.

Applications: product development, customer intimacy and collaboration

So what can retailers gain from these technologies? Talks with earlier adopters point to the following:

Mom knows best - A major food retailer created a social networking site aimed at mothers. Besides providing content for this lucrative demographic, the retailer monitors the site and offers discussion topics to lead conversation. One of the findings that came out of these discussions was the need to get kids to eat healthy. This led to the development of a new prepackaged, fresh-food product targeting finicky kids who wouldn't eat the lunch they brought to school.

Fashion forward - A private-label apparel retailer is using Enterprise 2.0 technology to solicit insights from consumers and associates within the store. This lets the company get direct feedback from customers on hot fashions for the season and gather information for colors, silhouettes and fabrics for future products. It's a prime example of crowd sourcing, or at least user-directed product design. No more costly, time consuming focus groups; just instant feedback direct from consumers.

Ringing up Wikis - Consumer electronics manufacturers are beginning to partner with retailers to share insights and brand recognition with users. One manufacturer of cell phones uses its site - a Wikipedia-like product directory - to allow users to share photos and videos, ring tones and insight on product features. The manufacturer mines the wiki for insight into the features that are or are not being used. It then gently pushes promotions and product recommendations (downloadable coupons, for example) to be redeemed at participating retailers in stores or online. Other uses include internal collaboration, a secondary but important priority across industries. Marketing teams that are dispersed either geographically or organizationally can post ideas and exchange insights on collateral. More efficient operations are also a frequently cited byproduct.

For example, an automotive manufacturer has used internal social networking tools to connect brand marketing managers. These social and enterprise connections encourage more open sharing of information and have, in some cases, allowed more effective management of agency budget and spending.

Retailers would be smart to use similar tactics, particularly as private-label become more prevalent. Innovation abounds among your employees and customers, so use it!

Challenges

Education remains a hurdle, with 39 percent of retailers citing a lack of understanding of Enterprise 2.0 technologies as the single largest obstacle to furthering adoption. An additional 13 percent cited the lack of a quantified business justification or return on investment model. With current economic conditions and IT budgets being scrutinized like never before, education and a strong business case must be in place to get these projects the attention they deserve.

On the other hand, technical hurdles don't seem to be as much of an issue as simple awareness. Road blocks put in place by IT and the immaturity or unreliability of Enterprise 2.0 were cited by only six percent and 10 percent, respectively.

Next steps

First stop: Solicit input from your marketing, merchandising, store operations, e-commerce and PR/communications departments to better understand their business objectives and the Enterprise 2.0 tools that already may be in place. Because many Web 2.0 applications, such as LinkedIn or Facebook, can be used without the approval or involvement of IT, there may be more Enterprise 2.0 adoption than you realize, even when these tools are not ideally suited for corporate use.

Within the guidelines of IT and legal policy, encourage your managers and users to define how these technologies can be used best. Also have them recommend specific products or functionality they think would be useful.

Given the relatively low cost of many Enterprise 2.0 tools, you can hardly go wrong. If you try something only to realize it's not a good fit for your company, you probably won't lose a lot. The mantra is quickly becoming, "fail fast and try again."

About Chris Fletcher & Rob Garf

Chris Fletcher is a research director in AMR Research Inc.'s Enterprise Strategies Service, covering customer-facing issues. He brings more than 25 years of industry experience to his role as a research director at AMR Research. A well-known industry analyst and enterprise applications veteran, Chris is responsible for research and coverage in customer-facing technologies, customer relationship management and enterprise mobility as part of AMR Research's Enterprise Research Strategies Service.

Prior to joining AMR Research, Chris was director of alliance and solutions marketing at Nokia. Chris was also a vice president and research director with Aberdeen Group for six years. He has held a variety of business development and management positions within established and start-up technology companies such as Action Technologies, AT&T, Staffware plc and Symbol Technologies.

Chris has been quoted in many leading trade and business publications including The New York Times, the Wall Street Journal, USA Today and InformationWeek. Chris received his BA in philosophy from the University of New Hampshire, and his MBA from UNH's Whittemore School of Business and Economics. He can be reached at cfletcher@amrresearch.com.

Rob Garf is a vice president in charge of AMR Research's Retail Strategies Service. He brings more than 15 years of experience with leading retail organizations to his role. Rob advises line-of-business and technology executives regarding store and cross-channel operations. He covers specific processes and technologies such as work force and task management, customer intelligence and loyalty, advanced selling strategies and cross-channel operations.

Prior to joining AMR Research, Rob worked for several retailers in various parts of the organization, including home office, call center, warehouse and stores. Most recently, Rob led cross-channel system development and marketing at Lids, a leading cross-channel specialty retailer.

Rob is a frequent speaker at retail events and has been quoted as an expert in trade and top tier publications, such as RIS News (a sister publication to Apparel), The Wall Street Journal, BusinessWeek, and Internet Retailer. He can be reached at rgarf@amrresearch.com.

About AMR Research Inc.

AMR Research Inc. is a Boston-based company that advises manufacturers, retailers and technology executives on operational decisions. Visit AMR Research Inc. at AMRResearch.com.

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