It's time for retail to get radical - Expert Opinion with Shaun Smith
Christmas is the peak-trading season for many retailers and yet a record number have reported declining sales this year. Already this year, HMV, the music retailer, announced the closure of more stores and the possible sale of its live music business. Blacks Leisure Group announced a post-Christmas break-up and the potential loss of 2,000 jobs.
We also saw the release of the long anticipated report to Government by Mary Portas, the retail guru, on how she believes the high street can be saved. It has many sensible and helpful recommendations but I doubt that they will be enough to reverse the trend because the fact is that consumers want to shop in new ways. It's time for retail to get much more radical.
Let's take two examples; Burberry, the luxury retailer recently launched its new range of cosmetic products called 'Burberry Body' via social media platforms to its 10 million followers. It continues to increase sales year on year.
Amazon.com continues to see incredible growth. It has launched an app that allows users to use their smartphone to scan product bar-codes or enter product information to get an immediate quote on how much they can save by ordering through Amazon and then it makes it simple for them to do so straight from their phone with next-day delivery.
So why is it that some brands are barely surviving whilst brands like Burberry and Amazon are thriving?
There are many factors at play of course, but one key factor in my view is their use of innovation. Now, I am not talking about innovation in the purely technological sense, although that is necessary too, rather I am referring more to the application of that technology and innovation to new business models and the way in which organisations behave. The brands that are winning are re-thinking their relationship with the customer and interacting with them in very new ways. According to Angela Ahrendts, Burberry's CEO, unless businesses embrace social media it will be very difficult for them to survive.
Marc Benioff, CEO of Salesforce, in his keynote address at Dreamforce 2011, talked about the importance of creating the Social Enterprise, an organisation that is completely integrated with the way in which its customers prefer to interact. He said that there were three steps to achieving this; Creating the customer social profile- knowing who your customers are, what they like, and how they are behaving; Creating the customer and employee social network so that you are able to communicate and share information rapidly both internally and externally, and finally; Creating the customer and product social network so that your customers become part of your brand and are able to interact with your products and even participate in their development. Organisations like Burberry, KLM and Toyota are all moving rapidly in this direction and, in my view, there is little that traditional competitors can do other than become social enterprises themselves.
Let's take a few examples; many people know the story of Dave Caroll the United Airline customer who posted a video on YouTube of his band playing a song called 'United breaks guitars' following his unsuccessful attempt to get United to respond to his claim for damage to his beloved Taylor guitar. Over 10 million people viewed that video and it did major harm to United. Fewer people are aware of the antithesis to this story which is when KLM was launching a new service to Miami, one of its customers tweeted saying that it was shame that the inaugural service wasn't a week earlier because it would enable him and his friends to use it to travel to a major music festival they were attending in Florida. KLM picked up the tweet and responded immediately saying that if he could fill a plane they could lay on the flight. The customer went out to his social network and did just that. The flight was scheduled a week early and became a 'gig in the sky' with DJ's and musicians using the flight to start the festival as soon as the aircraft took off. The result was the customers got the flight they wanted and KLM filled an aircraft with no cost of sales and in so doing generated a huge of amount of positive social media comment.
In the automotive sector Toyota is transforming the relationship between the car and the driver by using a customer and product social network. It calls the network 'Toyota Friend' and it connects owners to dealers, manufacturers, family and friends in one seamless environment. So for example, the network will communicate directly to the owner via a smartphone app to inform him or her about scheduled maintenance and offer discounts at local service centres, it can share the driver's current location or other places of interest with friends and family, or inform the driver that the front-offside tyre is under pressure and could do with some attention at the next fuel stop, and in the case of the Toyota Prius, the current state of charge.
I believe that we are going to see a blending of the on-line and off-line consumer experiences so that innovations like product comparisons and consumer ratings that customers have become accustomed to on-line will increasingly happen in-store too. We will also see crossover innovation in the other direction. For some time customers have been recognized on-line for their value to the brand, preferences and the type of experience they wish to have. That will happen in the real world too as in the case of the Coca-Cola vending machines that can reward loyal customers and create unique product flavours for them if the customer has a special app loaded on their mobile device.
So is high-street retailing dead? I don't think so, providing organisations see the store as just one touch-point in the end-to end customer experience and one node of their integrated social enterprise network. So get radical. You can start by watching this video:
Copyright. Smith+Co 2011.