Retailers Experience the Ripple Effects of Web 2.0


By Wayne Usie, senior vice president, retail, JDA Software

According to a recent comScore, Inc. study, 95 percent of frequent social network users visit retail Web sites compared to only 80 percent of the total U.S. Internet audience. So it makes sense that today's savvy retailers are going beyond traditional push-marketing campaigns in order to engage customers and build meaningful relationships through a variety of Web 2.0 technologies.

Banner and pop-up ads have given way to interactive Web 2.0 technologies such as blogs, rich media, podcasts, wikis, web surveys and social networking forums including Facebook and MySpace. In the process, those companies willing to plunge into this interactive world are not only gaining consumer insight, building brand awareness and increasing customer loyalty, but they are also obtaining valuable information that can impact an unexpected area - their  supply chain.

All retailers share a common goal of wanting to get goods in the hands of customers. But what goods will customers want? And when will they want them? Each season retailers undergo a complex process of utilizing supply chain planning tools to evaluate past sales, margins and returns in order to create financial, merchandise, channel and key item plans for upcoming seasons. By engaging in ongoing conversations through Web 2.0 technologies, retailers have the unique opportunity to get a glimpse into the minds of their consumers. In addition to using this information for marketing and promotional campaigns, cutting-edge retailers are taking this information a step further and integrating it into their inventory and assortment planning.

To better connect with its teen and young female audience, a leading accessories and apparel retailer is taking some creative approaches to engaging consumers. Online surveys where shoppers can provide feedback on style, size and color preferences are giving the retailer instant access to important planning information. More creative tactics such as allowing consumers to design their own outfits, running online fashion contests and giving customers the opportunity to rate products, are allowing the retailer to not only gather important data, but also to create a sense of community among its customers. Seeing which items user's pair together or which are the most frequently viewed can impact how the retailer displays these items on their Web site or in their stores to boost sales. These data points can also enable more intelligent decision making in terms of merchandise planning - especially for retailers that have agile planning solutions and can adapt plans 4-6 weeks out.

Leveraging functionality that allows it to create consumer-centric plans based on product hierarchy and product attribute (theme, collection, floor-set plans and promotions) this leading teen and young female retailer is able to utilize the information it gathers from its various Web 2.0 initiatives to alter the inventory on its shelves. If tunics are predicted as a hot item but customer feedback through online surveys and virtual outfit builders is showing that there is not much interest, the company can quickly adjust quantities and re-allocate inventory. Visibility into sizing preferences has already helped the retailer adjust the number of XS jeans it produces, ensuring that the sizes customers need are available to them.

The ability to consider real-time information coming directly from customers puts forward-thinking retailers a step ahead of the competition. A recent report from AMR Research cited another example: "A vertically integrated apparel retailer is using Enterprise 2.0 technology to solicit insights from consumers and associates within the store. This process allows for efficient reactions to allocation and product design to affect the current fashion session as well as influences decisions regarding future merchandise colors, silhouettes and fabrics. This represents a prime example of crowd sourcing, or at least user-directed product design."

While the road ahead is not simple for all retailers, those willing to invest the time and effort to understand the broad impacts of Web 2.0 will reap the benefits. The primary challenge to adoption right now, according 39% of the retailers surveyed by AMR Research, is simply the lack of understanding. So, while Web 2.0 is far from being mainstream, early adopters are experiencing benefits that ripple throughout their organization. Access into the minds of consumers is making inventory plans more closely aligned with consumer demand and marketing campaigns more effective. Closing the gap between buyer and consumer is creating more accurate assortments, greater full-price sales and less excess inventory. So, supply chain costs go down and consumer satisfaction goes up. Who knew technology that can connect you with  an old high school buddy could help you do all that?

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