IBM: Consumers Trained to "Sniff Out" Promos, Sales Online

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IBM: Consumers Trained to "Sniff Out" Promos, Sales Online

By Jessica Binns, Contributing Editor - 07/19/2012
In-store sales of women's clothing are expected to increase by 9.2 percent in the third quarter of 2012, according to a new IBM analytics-based forecast of U.S. retail sales data. The prediction accompanies a new IBM analysis of social media chatter indicating that U.S. consumers' desire for sales promotions skyrocketed in the second quarter as economic concerns mounted.

The IBM analysis of both U.S. sales figures and social media data gives marketers a more complete picture of a fast-evolving sales environment.

The IBM forecast for 3Q 2012, produced by IBM Global Business Services chief scientist Michael Haydock, is summarized in the chart below:

Category                        Year-Over-Year Increase/Decrease

Women’s clothing:                 +9.2%

Men’s clothing                        -6.7%

Children’s clothing                +6.2%

Footwear                                +5.2%

Other clothing                        +7.5%

"This forecast reflects a growing trend: consumers are ready to shop," said Jill Puleri, global retail leader for IBM Global Business Services. "Consumers will be stocking up on items that they need, but still earmarking products for later in the season. For retailers to effectively tap into consumer desires, they need to deliver timely, hyper-personalized promotions that will compel consumers to instinctively act on a deal."

Demonstrated to be accurate to 97.26 percent (the average across the multiple retail categories listed above), the IBM forecast relies on 22 years of historical data and sophisticated analytics software developed by IBM to evaluate both long-term trends and seasonal peaks. IBM consultants use these predictive techniques to help clients improve performance by addressing complex issues of supply and demand. These techniques also aid clients in planning product mix and new store locations. In producing the forecast, IBM applies analytics technology to economic data gathered by the U.S. Census Bureau.

Online chatter about promotions double – but are consumers really satisfied?
Complementing the retail sales forecast, IBM released a new analysis of conversations on social media channels about fall shopping activity. Using powerful analytics software, IBM studied approximately 236,804 mentions and posts on Twitter, message boards, blogs and news sources from two time periods -- mid-April to mid-July 2011 and 2012.

The IBM Social Sentiment Index reveals a more than 50 percent increase in online discussion and sharing of promotions – such as coupons and sales. This suggests that consumers have been trained to sniff out sales and share promotions with their online communities.

Affinity for Promotions Increases

Of particular note, the analytics software measured the "affinity" – or desire – that consumers posting online have for promotions. It discovered that women have developed a much stronger desire for promotions this year compared to last year, which creates incentive for retailers to offer additional promotions and discounts this season.

Despite the increased interest and activity about online promotions, IBM's analysis surfaced a compelling trend: consumers are seeking even better promotions and deeper discounts.

Indeed, the ratio of positive versus negative online comments about retail promotions declined twenty percent from 4.2 to 1 in 2011 versus 3.35 to 1 in 2012. The analysis revealed that consumers were not seeing the value from coupons and offers and the incentives were not substantial enough.

On the flipside, the conversation about product assortment and range was increasingly upbeat – with positive sentiment increasing by 54 percent. Consumers appeared to be seeing a good sample of products, and had ample choices to select from.

For example, consumers online posted favorable comments about clothing styles ranging from "casual," "chic," and "back-to-school," to "formal" and "suitable-for-work."

In other findings, consumers seem to be worried about ill-fitting clothes; especially in plus sizes. The conversations tended to focus on complaints – as the shift in the ratio of positive to negative comments fell by 37 percent year over year.

In the area of fashions, some key must-have products for fall include leather goods, leggings, and skinny tights.

More buzz around fashion and romotions found in New York

In a comparison between the online activity of consumers within the local markets of New York and Chicago, New York dominated the Internet Back-to-School shopping buzz. Buzz on retail shopping increased by 9 percent in New York from 2011 to 2012. In Chicago, the overall buzz decreased by 3 percent from 2011 to 2012.

New York also had a higher ratio of buzz around promotions (a 23 percent increase from 2011 to 2012) versus a 15 percent decline in Chicago during the same time period). This difference may be attributed to the fact that consumers in Chicago appear to still be on vacation, and do not seem as focused on fall shopping.

IBM researchers used Cognos Consumer Insight to perform the social sentiment analysis.

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