From advertising on Facebook to connecting with consumers in stores, the digital world is rewriting the rules of commerce faster than ever and forcing brands to keep a close eye on the horizon for what’s next.
This story first appeared in the February 4, 2014 issue of WWD. Subscribe Today.
Much of what comes is expected to be a continuation and deepening of major trends from 2013 — when mobile commerce saw explosive growth, Twitter began life as a public company, advertisers took a much more targeted approach on social media and more and more retailers and brands embraced omnichannel practices.
There are also issues that, while already important, could come more to the fore this year.
For instance, China has a quickly growing digital presence and is becoming a greater force, especially since Alibaba took an 18 percent stake in Chinese social media outlet Sina Weibo. Then there is Amazon.com, which continues to make a major fashion push and is increasingly becoming an advertising platform for fashion brands. Amazon also reportedly is looking to become even more of a tech company, eyeing the potential of offering retailers its Kindle notebook as an in-store payment device.
Not all the action is happening among the digital giants, though.
Independent boutiques are now turning to new apps that connect salespeople with their customers. And brands are starting to use new technologies that help them take advantage of user-generated images on sites such as Instagram while closing a sale.
And the digital world is nothing if not a cross-pollinator, with ideas springing up in one sector rapidly spreading to others. The impact of the on-demand car service app Uber, for instance, cannot be denied. The site’s success has encouraged a slew of other on-demand apps catering to the beauty and wellness industry and serving customers on the go.
Here, 10 trends to watch — for now — in the digital realm.
Advertising in the Mall of Amazon: Fashion and beauty brands want exposure on Amazon and are willing to pony up for it. Digital think tank Luxury Lab, or L2, said half of the 85 fashion brands it tracks are paying to turn up in Amazon searches, even though just 16 percent sell through the e-commerce giant. Experts believe Amazon’s ad revenues might ultimately outpace those of social media firms. The e-commerce giant is using its brand and influence online to build an advertising platform that allows it to get a portion of sales that happen on other sites, an approach that’s similar to Google’s product-listing ads. Tory Burch, Nordstrom, Gap, Old Navy and Athleta are among the brands using Amazon to drive traffic directly to their own sites — paying the e-tailer to get access to new and existing consumers via Amazon. A search for Tory Burch Reva flats, for example, generates results — many from Amazon or independent sellers — but also from toryburch.com with small print below that reads “available at external Web site.”
About 40 percent of the units sold on Amazon are now from third parties, and these can either be fulfilled by Amazon or not, according to Brian Pitz, managing director of Jefferies & Co. The e-tailer generates revenue by receiving either a cut of sales or an advertising fee from third parties advertising on the site.
User-Generated Sales Tools: The visual side of the Web is expected to continue to take off this year, with brands cozying up to concepts that are both mobile and highly dependent on images. To date, fashion has tapped user-generated content to further branding efforts, but now the focus is shifting to closing the sale. Platforms such as Olapic help users create content that is both aspirational and will work in a sales context.
A study by Olapic and the University of Wisconsin showed that there’s a difference between photos that prompt engagement online and those that drive sales. For example, while the color green in images elicits engagement, it’s yellow or blue that tends to drive purchases. (When the user is the variable, it’s high-volume sharers who drive the most engagement but low-volume sharers with a lot of followers who influence purchasing activity the most.) Instagram’s 20 filters, which let users tweak the colors in their images, also impact how the photos are received. Lo-Fi might be the only filter that boosts engagement, but it’s the nonfiltered pictures that are best for lifting e-commerce sales. The research showed that the Hefe and X-Pro II filters both have negative effects when it comes to e-commerce.
Targeted Social Advertising: Social media is going to become less social and more about media. Sites like Facebook and Twitter are refining their marketing programs, and digital ads are getting high tech with a slew of programmatic marketing platforms — such as Chango, AdRoll and Dstillery — culling through enormous amounts of online data and helping brands make highly targeted media buys.
“We wouldn’t be investing in Facebook if it wasn’t real, tested and proven. The client partner team at Facebook was able to demonstrate a very clear return on investment with both retention and acquisition campaigns,” said Ryan Bonifacino, vice president, digital strategy, at accessories and lifestyle brand Alex and Ani. The brand, which saw revenues surpass $220 million last year, advertises on both Facebook and Twitter. In the fourth quarter of last year, the company spent $551,394 on direct advertising with Facebook — with a campaign reach of 50.4 million users with impressions that topped over 1 billion.
Alex and Ani also partnered with the National Football League and Major League Baseball at a product level, and tailors advertising messages specifically for each party’s Twitter audiences. This means that New York Yankees fans can be targeted specifically, and shown ads for products tied to their team.
Growth of China, the Digital Dragon: The Chinese consumer is purchasing more online than their U.S. counterparts, and social platforms are more commerce-oriented. China also has platforms such as WeChat that serve as a social meeting place but also offer mobile payments, a loyalty program and customer marketing.
China’s Sina Weibo — billed as the “Chinese Twitter” — has evolved into a microblogging platform with a focus on commerce since Alibaba acquired its stake in the company nine months ago. Mounting competition from three-year-old WeChat is also pushing Sina Weibo to innovate — and Weibo’s introduction of online banking services in July illustrates that. The app — image-based and heavily reliant on loyalty and mobile payments — has more than 270 million monthly active users.
Every Salesperson is a Stylist: A series of apps that streamline the shopping process and provide e-commerce options for independent boutiques are putting sales associates in the spotlight. PS Dept. and House Account are two of the options for retailers venturing into the digital world.
House Account launches Thursday, with an emphasis on local boutiques. Cofounder Laura Vinroot Poole hopes to bring online shopping to stores that might not have the scale to maintain an e-commerce site. Poole, owner of Charlotte, N.C.-based boutiques Capitol and Poole Shop, partnered with Travis Parsons, chief executive officer of product development agency Cloud Castle, to create the app, which provides users with a feed where they can see (and buy) new arrivals from the local shops they follow. The app has 375 active shops in 21 states, including FiveStory in New York, ByGeorge in Austin, Tex., and Forty Five Ten in Dallas.
PS Dept., which made its debut in November, connects shoppers with store associates via text and photos. Currently, the app has close to 50 partners — including Michael Kors, Stella McCartney, Derek Lam, Theory, Helmut Lang, 3.1 Phillip Lim and Diane von Furstenberg. Store associates can conduct sales through the app, which charges a commission to participating stores.
For Desiree Gruber, ceo of Full Picture, executive producer of “Project Runway” and cofounder of Theodora & Callum, brands for the first time have tools that enable salespeople to get intelligence on their clients with social media and apps.
“It used to be ‘How can I find this piece?’ but it’s now ‘What do I do with it?’ and what the utility of the item is. That will be the winner. That is the true measure of the brand connecting with the client,” Gruber said. “That will be the killer app, and I don’t think it exists yet 100 percent.”
For her, content delivered digitally by the brands is a huge asset to consumers, and the app space is wide open for this.
The “Uber” Effect: Beautified, StyleBee, Hotel Tonight and Zeel are among a handful of service apps billed as the “Uber” of whatever industry they focus on — creating apps that deliver on-demand messages, beauty treatments and more for users. Uber, the on-demand transportation app, has raised $307 million in funding since 2009 and continues to attract attention.
Beautified cofounders Hannah Bronfman, Annie Evans and Peter Hananel launched their app in May, providing a way for users to book last-minute beauty appointments on the go. Already available in New York City, Los Angeles and San Francisco, services like haircuts, blowouts, manicures, pedicures, waxes, facials and massages can be booked at any of the nearly 150 partner salons and spas (the number of partners has almost quadrupled since launch). The Red Door Spa at Union Square, John Barrett Salon, Kiehl’s Spa, Warren-Tricomi, Caudalie, Shibui Spa and Tenoverten are among those participating.
“The partner marketplace is expanding really rapidly, and it has a lot to do with the Uber effect in terms of demand for these kinds of marketplaces,” Hananel said, adding that they are focusing on their product in existing marketplaces. Later this year, there are plans to expand to Miami and Washington.
“We’re [also] interested in the Texas community — whether it’s Houston or Dallas, we’re looking at that. It’s an interesting consumer base,” Bronfman said.
The app is also gathering data regarding user behavior and the business of beauty, such as how rainy days impact certain categories, Hananel said, pointing to the way Uber has used their data to map out cities and understand traffic patterns.
Multitasking: Companies are realizing more than ever that in order to succeed at retail, they need to play in all channels to serve a more-informed consumer. But testing continues as retailers try to figure out just which omnichannel strategies work.
Sephora, Coach, Macy’s, Burberry, Gap and Giorgio Armani are several of the companies in the retail space that are executing omnichannel experiences.
“Our system was set up to work seamlessly in both channels [online and in-store] and provide reward information, points you’ve earned or offers available,” said Julie Bornstein, chief marketing and digital officer of Sephora Americas, of integrating omnichannel strategies into the brand’s business strategy seven years ago with the introduction of its Beauty Insider loyalty program.
According to Bornstein, no matter which channel a consumer is accessing Sephora from — in-store, online or via mobile app — the same information is available to them.
David Duplantis, president of global digital and customer experience at Coach, said more than 50 percent of the brand’s online traffic now comes from a mobile device. This has resulted in many of their stores getting rid of cash registers altogether, instead giving associates mobile points of sale.
Apple’s Luxe Bench Strength: Apple’s high-profile poaching of two top executives from the luxury fashion world made headlines last year. But what will former Yves Saint Laurent chief Paul Deneve and former Burberry ceo Angela Ahrendts do to build the megabrand’s profile? Many are watching for developments in the world of wearable technology.
Rebecca Kaden, an early-stage consumer technology investor at San Francisco- and Seattle-based venture capital firm Maveron, said the next phase for wearables will come from manufacturers enhancing how the product looks to broaden the market. Expect other technology companies to follow in Apple’s footsteps and hire fashion veterans. “That will result in these aesthetic changes and stuff will start to look better. You’re starting to see integrations with brands — Tory Burch with Fitbit and the CFDA with Intel,” Kaden said. “The wearables market is very real.”
Intel tapped Ayse Ildeniz as the vice president of business development and strategy for its new-devices group — which revealed its first project earlier this month with the Council of Fashion Designers of America, Barneys New York and Opening Ceremony: a smart bracelet designed by Opening Ceremony that will be sold at Barneys.
“Wearables are very personal devices in a sense, and they have to have some sort of aesthetic that matches how we see ourselves. It’s time for fashion and designers to get involved in how they are worn and what purpose they serve,” Ildeniz said.
She added, “The CFDA is looking at creating a platform to bring the tech people who design with the fashion industry — normally two very distinct industries.”
Mobility: The quickly growing world of mobile commerce is only gaining steam, and many experts see the sector’s surge as the big change in online retail. Growth during the holiday season was substantial. According to Custora Pulse, share of mobile purchases grew by 50 percent this holiday season — with one in three purchases completed on a mobile device, up from one in five in 2012. On Cyber Monday, Adobe Digital reported that online shopping for the day set a new record — hitting $2.29 billion, a 16 percent year-over-year increase from 2012, with 18.3 percent of sales, or $419 million, coming from mobile. IBM Digital Analytics Benchmark said mobile sales were responsible for more than 17 percent of overall e-commerce sales during the holiday season.
The IPO Effect: Facebook and Twitter have taken the plunge and gone public, giving them a higher profile and an easy currency — stock. But who’s next and what will the ripple effect be as the profit motive of Wall Street sweeps over Silicon Valley? Uber, Snapchat and Pinterest are all rumored to have initial public offerings in the works.