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NEW YORK — It’s the year of the department store.
The category posted growth in retail market share for the first time in nearly three decades — and it just might have something to do with innovative digital strategies, according to Scott Galloway, New York University marketing professor and co-founder of NYU think tank Luxury Lab, which released its second annual Digital IQ Index ranking specialty retailers according to their online competence.
This story first appeared in the August 24, 2011 issue of WWD. Subscribe Today.
Macy’s took the number-one spot in the survey, which used a 350-point data system to rate retailers in digital competency, spanning categories such as social-media strategy, site interface, mobile-commerce capabilities, digital marketing, search engine optimization and more.
“To be at the top of the pack, you have to make investments in social and mobile. You have to be at the forefront of digital investments,” Galloway said, adding the findings mimicked financial performance, indicating that companies investing in digital mediums are increasing shareholder value.
Rounding out the top 10 were Victoria’s Secret, Nordstrom, Sephora, Urban Outfitters, Threadless.com, Bluefly, Bloomingdale’s, Gilt Groupe, Net-a-Porter and Pottery Barn. Neiman Marcus and Saks Inc. also scored well, and Bergdorf Goodman ranked 22nd — which is surprising considering it has only one brick-and-mortar location and is competing in the digital realm with retailers that boast hundreds of doors, such as Macy’s and Victoria’s Secret.
According to the study, the average Digital IQ for department stores grew 14 points from 2010 — coming in second to e-tailers for highest category IQ — a telling statistic about the impact of digital, given that the latter are native to the medium. The category as a whole went from “average” to “gifted” status, and Macy’s and Nordstrom were even labeled “genius” in terms of innovation in mobile, social and branded sites.
But Galloway contends that the most dramatic changes this year occurred within the mobile space, with two thirds of retailers now having mobile sites, versus just 25 percent a year ago. Retailers on Twitter have also jumped to 52 percent, up from 28 percent last year.
“Mobile and social innovation is so torrid right now. You can’t move forward at a trot, because the industry is moving at a gallop. If you move ahead at a steady pace, you will fall behind,” Galloway said.
While this might have been the year of the department store and mobile commerce, Galloway believes that Facebook commerce — or F-commerce — will be the next big thing in digital. Gilt Groupe launched F-commerce Monday with a Facebook store, allowing fans to purchase directly on the medium using their Gilt.com user names and passwords, and Rachel Roy pioneered the commerce platform in February 2010. Galloway expects many to do the same in the coming months.
“Almost 100 percent of brands cite Facebook as a source of upstream traffic,” he said, citing Burberry as an example of the medium’s impact. “[Burberry] is getting more traffic from Facebook than Google. It’s the largest source of traffic to its site. Brands are transitioning from spending money on Google into Facebook programs. All of this [Facebook] traffic and investment is leading towards commerce.”