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At the WWD Leadership Forum in New York City last month, speakers shared innovative and often inexpensive ways to improve customer service and, as a result, boost sales.
This story first appeared in the August 13, 2008 issue of WWD. Subscribe Today.
EBags.com Pockets Customer Service
Launched in 1999 and now the world’s biggest online retailer of bags and accessories, eBags has pioneered the use of social media to improve customer service and sales.
The company has collected more than a million customer reviews since 2000, which have increased sales, creating “significant conversion” on reviewed products, said eBags.com senior director of global merchandising Nancy Behrendt. Bags that receive consistently poor reviews are removed from the site.
The company receives 25 to 50 e-mails a day from customers with suggestions, praise and criticism. EBags is working on three enhancements to its Web site requested by customers, including a feature that will let customers browse bags by color. The company also has a blog, which has had the unexpected benefit of keeping the site ranked highly in search engine results at no extra cost.
The site recently added videos on topics such as vendor stories, trendy brands and staff product reviews. “On the Streets” videos profile emerging designers. Conversion has increased four times for products featured in videos. “We’ve got hundreds of customers telling other customers: ‘Watch the video,’” said Behrendt. “It’s the reason they bought the bag.”
EBags, which has more than 6.8 million stockkeeping units, plans to add customer-generated videos about purchases soon, starting with its own private label line.
“As we are building up the strategy for our eBags brand in relation to our product, it’s really about listening to our consumers,” she said. “Don’t listen to us. The voice is really going to be from the consumers and we are going to use video as a way to tell the story.”
— Alexandra Steigrad
Wet Seal’s Teen Social
The purpose of typical loyalty programs is to track the voice of the customer, improve the customer experience and create brand advocates. The purpose of social media is to give the customer a voice, said Jon Kubo, The Wet Seal Inc. vice president and chief information officer.
In April, the retailer unveiled a social networking community on its site where teens can create, tag, share, vote on and purchase outfits from Wet Seal merchandise. They can also create profiles, network, block friends and spam, message each other and report abuse.
So far, 1.2 million outfits have been created, and the site has generated a 10 percent increase in revenue. Conversion rates double when a shopper visits the fashion community, and 25 percent of buyers visit. Those who visit the community spend three times as long on the site.
More than 90 percent of the retailer’s merchandise is on the site, and 90 percent of the styles are incorporated in at least one outfit. The average is 24.
The idea started two years ago as part of a redesign. “We were seeing a significant increase in traffic on social networking sites to the point where it was really a paradigm shift,” said Kubo. Wet Seal has changed the way it shoots and sizes photos of online merchandise so they can be used in the community.
Because only 10 percent of teens have a credit card, most of their purchases are made in Wet Seal’s stores rather than online. But teens can scan an item and look up the most popular outfits on the community or in that particular store on in-store kiosks.
Out-of-stock items are automatically deleted from outfits on the site. (Wet Seal replenishes jeans only.) After three months, a user can delete an outfit.
Promotions have included Ashlee Simpson and other musicians creating their own outfits. The next promotion will be a makeover contest, and a celebrity will design an outfit for the winner, who will wear it to an event and receive $2,000.
A small number of customers are the most active participants, said Kubo. “The conversion comes because the general community is viewing that advice and taking it,” he said.
— Cate T. Corcoran
The Coca-Cola Co. Rings Up Sales with Mobile Technology
The Coca-Cola Co. produces about 1.4 billion of the 50.4 billion nonalcoholic beverages served worldwide annually, and is experimenting with innovative ways to increase its market share by using mobile technology.
To build brand awareness, for example, Coca-Cola ran a multimedia cell phone campaign in Italy. The company sent out two video commercials via cell phone and asked consumers to vote for the one they preferred. Almost nine out of 10 consumers who were sent the videos watched the commercials and voted, said Tom Daly, Coca-Cola’s group manager of strategy and planning for global interactive marketing.
To encourage people to try new products, the company also launched a text messaging and mobile Web campaign that drove 181,000 consumers into Coca-Cola’s retail partners’ establishments. This was as effective as any of the company’s off-line programs, he said.
One way the multibillion-dollar Atlanta-based company is driving profits is via the use of “smart” vending machines that communicate with mobile devices. Popular in Japan, they sell Coke products and will snap a funny photo and send it to a friend’s phone as well as dispense ringtones and games. The company plans to roll out the machines worldwide. “We can generate nearly two-and-a-half times more revenue per machine when we enable it with wireless technology,” Daly said.
Coca-Cola has partnered with cinemas, where customers can get deals on refreshments and watch movie trailers over a Bluetooth-enabled phone. The program, which has been running for 18 months, has increased Coca-Cola’s and its partners’ sales, Daly said.
Because the mobile environment is complex, Daly advised companies looking to implement such technology to “keep it simple.”
R/GA Customizes Nike Retail
“Customers want control of style in all areas of their lives today,” said John Mayo-Smith, executive vice president and chief technology officer for the R/GA interactive agency, which helped Nike Inc. create its custom business. NikeiD has grown from a small shoe-design program online to include retail stores, mobile commerce and other lines of business, including equipment and clothing.
Mayo-Smith showed photographs of a variety of do-it-yourself customized objects, from guitars to iPod holders. Another slide graphed objects according to their degree of uniqueness and difficulty of production, from tube socks to wedding dresses.
Nike now has six iD Studios, or stores, where customers can design their own products. This year, the company ran a campaign on a billboard in Times Square in Manhattan that let customers customize shoes via cell phones.
Customers don’t pay much of a premium for the custom products, and the wait time of a few weeks is part of the experience. If they order in a store, they leave with a card.
“The amount of time they spend with your brand is giant,” Mayo-Smith said. “They’re not just going to the store and picking something off the shelf.”
The return rates are very, very low, he said. Inventory is minimal.
The New York-based agency’s clients include Bed Bath & Beyond, Levi Strauss & Co., Target Corp., L’Oréal, Subaru and Circuit City.
Liz Claiborne: The Launch of a Loyalty Program
What are the basic needs of a Liz Claiborne shopper? It’s a question Michele Rast, vice president of marketing for Liz Claiborne Outlets, asked herself constantly while helping to create the company’s loyalty program.
The objective was to retain customers, while also luring in new ones, and to phase out the 1 million pieces of direct mail Claiborne sent out every month. Fortunately, the company already had customer data in its customer relationship management program.
Rast and her colleagues began culling though piles of research on the company’s customers and its competitors’ comparable programs. Rast discovered the Liz Claiborne shopper is active, older and clips coupons.
The company decided on a points-based card that rewards members with exclusive discounts and advance notice on sales. Claiborne sent out mailers advertising the rewards program and began testing in select stores in June 2007.
Since the program was rolled out to all 100 Outlet stores in February, Liz Claiborne has experienced a 40 percent increase in frequency of purchase among rewards members. Of the program’s 185,000 customers, about 13,000 have already moved up to elite status, meaning they can gain points faster.
“In this day and age, why does a customer want to give you any information? They don’t unless they are getting something back for it,” Rast said.
The loyalty program is expected to have roughly a three-year return on investment, she said.
Moving forward, some of Claiborne’s initiatives will include creating a Web site where members can check their points balance, as well as shifting more direct marketing toward the rewards program.
DSW: Building a Shoe Retail Giant’s Web Site from Scratch
DSW is no stranger to competition. Last year alone, the company had sales of approximately $1.5 billion, and it operates some 270 stores. Remaining competitive was the impetus behind the creation of DSW.com, said Steve Kahn, DSW vice president of interactive marketing.
The retailer rolled out a multichannel strategy that emphasized the company’s brick-and-mortar stores. By offering free in-store returns on items purchased online, DSW would lure consumers into the store where they would hopefully spend more money, Kahn said.
Another vital part of DSW.com is the detailed presentation of the shoes. On the Web site, a pair of shoes may be inspected from every angle, by using zooming tools or watching a high-definition video that shows a 360-degree view of the product.
“We sell shoes,” Kahn said simply. “We try to unleash women’s passion for them.”
Everybody in an organization has bright ideas, said ShiSh Shridhar, Microsoft Corp. retail industry solutions specialist. But how can those ideas bubble up and become a reality in a short amount of time?
People are a top resource in any company, and 68 percent of young people are eager to help companies with new ideas, he said, citing New Paradigm magazine. Companies such as Starbucks, Tumi, Harley Davidson, Four Seasons and TiVo succeeded with innovative products. FedEx, eBay, Google and Dell exemplify business model innovation. Toyota, Boeing and Wal-Mart are examples of operational innovation, he said.
Good tools will increase participation and leverage all employees, not just a select group. Microsoft has married the idea of a wiki with innovation to create a simple but powerful tool to help any organization unleash its creativity.
Employees can post ideas on an internal Web site and rate each other’s ideas. The good ones rise to the top, where they can be evaluated by senior management. The software can be tailored to an individual company’s needs, with space for explaining why an idea was rejected or accepted, and links to related resources such as employee profiles, blogs and sales data.
Microsoft plans to make the idea into a product based on SharePoint and that can be accessed through internal corporate portals.
ShopLocal LLC Glimpses the Future of Retail via the Internet
“The Internet is a marketing tool, not a buying tool,” said Bob Armour, chief marketing officer of ShopLocal LLC.
The site, which is owned by Gannett Co. Inc., the nation’s largest publisher of newspapers, is the “interactive version of what you find in your Sunday newspaper, localized to the store level,” said Armour. What this translates into is a Web version of a supermarket circular that allows retailers from all over to localize their promotions based on where the Internet viewer lives.
Currently, Armour said, ShopLocal works with 44 of the top 50 multichannel retailers. Many merchants are profiting from online initiatives that bring customers into stores, he said.
“The message that I’m trying to convey is that there is going to be a trillion dollars worth of sales impacted by the Internet that are going to happen in stores, and by 2012 that’s going to be about half of retail,” he said. Right now, 92 percent of consumers do product research online, and 93 percent of sales still happen in-store.
Retailers are letting the consumer decide where to shop by putting in-store information and product information on the Web. They are also giving the consumer the convenience of ordering online and the immediacy of picking up the merchandise in-store. Armour added that companies are finding new ways to present the best of their store’s merchandise online, such as Borders’ new virtual bookshelf.
“Retailers are trying to answer what I would call three basic questions for consumers, and they’ve been doing this since the dawn of retailing,” he said. “Is the product right for me? What is the price, is it on sale? Where can I get it, is it in stock?”
Applied Retail Technologies Sorts Out Assortment
“The challenge today for those who have lots of stores is to deliver as good an experience as on their Web sites,” where they are starting with a clean slate, said Theodore Rose, principal with consulting company Applied Retail Technologies Ltd.
Industry mergers, and data and system limitations make it impossible for retailers to understand the assortment of goods that go into all their stores, said Rose, who was once a buyer at Bamberger’s, which was bought by Macy’s. “You cannot possibly sift through all that data and understand what’s going on with your customer.”
Retailers need to start with common data, systems and collaboration. They need to look at their customer segments and design assortments for them, not just deliver what manufacturers can deliver, he said.
Fortunately, many different vendors are on the cusp of releasing new assortment planning software that will greatly ease difficulties retailers are having in getting the right merchandise in the right place at the right time.
Assortment planning must be done first, so buys will be based on customer demand and store capacity. It must be linked to a space plan. It is not a function of allocation, he said.
Forthcoming applications will share business intelligence and marry assortment planning to the visual directive, he said.
TradeCard: Supply Chain Equals Service
When a store has an out-of-stock, the risk is much more than one lost sale, said Marshall Gordon, TradeCard senior vice president of worldwide sales and marketing. “It’s a potential future loss of a customer,” he said. When an out-of-stock happens, 31 percent of customers will go to a different retailer.
“At Victoria’s Secret, almost everything is air freighted,” he said. “Previously we thought that was crazy,” but from the perspective of not losing a customer, a retailer wins, he said.
A smoothly functioning supply chain is key to supporting a good customer experience. “If you can’t get the product in the hands of the customer, it’s pretty hard to sell stuff,” he said.
As for the other customers, 19 percent buy the same brand in a different size, another 19 percent substitute a different brand, 13 percent delay the purchase, 9 percent buy nothing and 9 percent do something else (“other”).
Retailers who are supply-chain leaders carry 15 percent less inventory, have 17 percent stronger order fulfillment, a 35 percent shorter cash-to-cash cycle and 60 percent better profit margins, he said.
Examples include TradeCard customers Brooks Brothers, Dick’s Sporting Goods Inc. and Rite Aid Corp., according to Gordon. Brooks Brothers started a collaboration with its Asian suppliers last year. Turns increased 28 percent, in-stock levels reached 98 percent and inventory was reduced 8 percent compared with the year before. Sell-throughs increased to 57 percent, up from 49 percent the year before, and the company sold 17 percent more items than they did the year previously.
At Dick’s Sporting Goods, private label became 10 to 15 percent more profitable. Gross profit increased 44 percent.
TradeCard created a supply chain network for Rite Aid to help it manage 200 to 400 seasonal vendors that change every year and supply fun items such as Valentine Day’s hearts and summer sand buckets.
Sony Envisions Retailers Using RFID Card
Sony Inc.’s versatile FeliCa can be used by retailers to increase customer loyalty and sales, said Tim Lindner, director of strategic business development for FeliCa Americas for Sony Electronics Inc.
The RFID-based cards were first used for travel on the Japanese subway system. The cards can be read at a distance. Alternatively, the same system can be set up on a cell phone instead of a card. There are 300 million FeliCa users worldwide today.
In 2006, $1 billion Japanese retailer Casual City replaced its loyalty program with a new one using FeliCa called “Right-On.” The average spend increased from $57 to $86. The prepaid card transferred money from Internet checking accounts. Forty percent of users were men in their 30s, and women in their 20s and 40s made up the rest. Seventy-five percent of customers chose to use a virtual wallet in their phone rather than a card.
Retailers could bring brands onto their card program and target customers with coupons. Digital signage can be interactive, since the display will sense the person standing in front of it. The card eliminates printing and distribution costs.
PlayStations and Sony laptops will come with the chip next year.
A university in California is using FeliCa for freshman ID cards and resort operators and theaters are planning tests this year, said Lindner.