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Leveraging Social Media to Optimize Sourcing-to-Shelf ProcessesAs Facebook, Twitter and other social tools go mainstream, retailers must tap these rich pools of consumer-generated data to make more strategic buying, stocking and selling decisions.
• Cognizant 20-20 Insights
Executive SummaryBased on a survey of more than 2,000 shoppers,1
we identified 10 megatrends transforming the retail industry. One trend we unearthed was the convergence of social media and product devel-opment.
Retailers are learning to deal with a generation of consumers who not only demand instant gratifi-cation but are also among the biggest consumers and generators of information. Moreover, they expect retailers to leverage all available infor-mation about them. For these consumers, product value and quality are not achieved by detailed planning and product development in silos. Instead, they prefer doing business with companies that are transparent and allow them to actively participate in the product design and development (PDD) process.
This white paper analyzes how retailers can leverage social media across the entire value chain, from sourcing through arrival on the shelf. Shoppers are already connecting with retailers and their products in innovative ways by interact-ing on Facebook, sharing user-generated content, creating viral videos, blogging and tweeting.
Thus, we believe retailers should take this existing dialog one step further and actively involve them in the product design and development process.
Retail Challenges and Opportunities in ‘Source to Shelf’Before we analyze how these trends can benefit retailers, we need to understand how the “source-to-shelf” process has historically worked for retailers and where the gaps lie between customer expectations and retailer operations.
Retailers have typically had to work around long lead times, seasonal fluctuations and an inability to react to customer demand within the selling season. From a sourcing perspective, retail buyers endured these challenges, along with their colleagues in the sourcing and product develop-ment functions. Today, however, buyers can incor-porate historical trends, customer insights and future consumer demands surfaced by social media analytics into the company’s buying plan. Following creation of this buying plan, buyers generate initial orders and wait for products to reach distribution centers and ultimately stores, hoping that their instincts map with shopper buying behavior.
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Buying Process Challenges
A typical product development lifecycle is depicted in Figure 1. This process inherently challenges retailers to be relevant to consumers. The challenges of the buying process include the following:
• Insufficient data for a proper look forward:
> Within fashion and other short lifecycle categories, the design and/or use of prod-ucts can vary significantly from one season to the next. While product attributes have yielded some success in forecasting de-mand, it is still a challenging endeavor.
> The buying decision (what to buy and how many to buy) is made based on historical analysis and future forecasts, while accom-modating long lead times for imported mer-chandise.
> Consumer engagement through focus groups and surveys is largely not reflective of their current demands and needs.
> These challenges relegate the process to more of a push system. The retailer com-mits in advance to what to sell and pushes it to the customer, then waits for the consum-er’s reaction before sending some more their way. When initial feedback is not posi-tive, the items are instantly marked down, leading to a reactionary cycle of events.
• The degree of uncertainty over consumer acceptance of a product is quite high:
> More importantly, the current process also negates retailers’ ability to truly react to consumer feedback in the current season.
• Retailers are missing a potential opportunity to creatively engage with consumers, resulting in the loss of a collaborative brand-building opportunity.
Getting it Right: A Proposed Approach to Leverage Social MediaConsidering the challenges with the traditional approach of product design, development and promotions, the opportunities offered by social media can provide a handsome payoff. Social media can help retailers combat many of the aforementioned challenges, since it provides an instant way of connecting with consumers. Figure 2 (next page) offers a basic construct that can help retail buying and planning organizations more effectively leverage social media.
Getting Started with Social Media
Social media clearly helps retailers connect the dots of customer input and feedback on product creation. However, the most difficult decision is determining the right time and method to begin leveraging social media and setting proper expec-tations with consumers on how ongoing conversa-tions will be translated into an improved shopping experience. Hence, while a social presence is almost mandatory for retailers these days, it is important to ensure this additional channel is fully leveraged for business benefits. Here’s a basic checklist:
• Continuous social conversations: Retailers must engage consumers all year round in PDD and promotional conversations. Sporadic attempts to seek input will very quickly lose relevance with the customer. Social conversa-
Traditional Buying Process
Buy Trip
Commit Buys
Historical Analysis
Focus Group Studies/Trends
Strategic Intent
Buying Plan & Intent to Buy
Virtual Sample Range & Buyer Edits
Sampling & Final Approvals
Final Inwards & Shipments to Stores
Figure 1
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tions are an ongoing exercise, unlike the tradi-tional means of customer engagement, which are typically sequenced and pre-planned.
• Continuity of physical and virtual experi-ences: It is important for in-store experiences to flow freely into social conversations and the online experience. Retailers should leverage existing social media channels like Shopkick, Facebook, Foursquare and Pinterest to enable this in a much faster way than starting from the ground up. These channels should also be seamlessly integrated with the retailer’s existing Web sites in order to ensure continuity of the customer experience across media and channels.
• Mechanisms for customer engagement: It is very important for retailers to have a process designed to solicit PDD input from consumers and to incorporate their input into their internal PDD process. Transparency is another key requirement. Consumers should be able
to see for themselves the value created from their inputs. This will motivate them to engage with the brand over the long term.
• Scalability: As the number of consumers who participate in the PDD process and promotions increases, it is important to keep in mind that this form of customer engagement must be consistent and scalable. A scalable approach will ensure long-term creative collaboration.
Build Actionable Social Data
Most retailers embark on the social journey with a basic listening page on any of the existing social media brands such as Facebook and Twitter. However, even as these pages gather customer feedback and interaction, engagement sustenance is threatened if the retailer is not perceived as acting on this information. Hence,
Building actionable social data
Becoming a social enterprise
Beginning to leverage social media
1
2
3
Figure 2
A Phased Approach to Leveraging Social Media in PDD and Promotions
The top 250 Internet retailers are on Facebook, Twitter or Pinterest.2 And 64% of the Interbrand Top 100 retailers are on Google+.3
Charming Charlie, a boutique fashion retailer, encourages conversations around in-store experiences and Pinterest contests on its Facebook page.
Threadless.com has opened its entire product design and development process to crowdsourcing. Its Web site ensures consumers can score/submit designs, participate in design challenges and win awards. The entire process is clearly communicated to consumers online.
Walmart has embarked on creating store-specific Facebook pages in order to better engage consumers and track the company’s huge fan following. This ensures that its Facebook engagement is scalable beyond its current reach and effect.4
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it is important for retailers to have a definitive framework for the data they want to collect and specific insights that they want to derive from this data.
Typically, retailers that have been successful in disseminating social data take the following actions:
• Define specific business objectives. Are you looking to improve an existing product or create a new one? Have consumers expressed a desire for a different product configuration then what you currently offer (e.g., available in plus sizes or a new color palette)? You will need to consult with key stakeholders throughout the product development and mer-chandising process in order to establish and prioritize these objectives. Without identify-ing specific business objectives, you may find yourself chasing a lot of “potential” solutions that appear to have value but instead result in a waste of time and resources.
• Search across several social platforms and look to extract only relevant data. Your business objectives will define what you should gain in the social ecosystem. By using sophisti-cated text analytics tools and creating targeted search streams across Facebook, Twitter and other social platforms, you will eliminate irrelevant chatter and noise and drill down to the sentiment that corresponds to your overall goal of deriving value from social media. In addition, don’t limit your search to your own social platform; apply the same qualifications and rigor to the publically available informa-tion from your competitors’ social networks.
• Once you’ve obtained the data and prioritized the outcomes that align with your business objectives, the next step is to identify which outcomes should be incorporated into your existing product development process. While it may be disruptive to your organization’s current workflow, it is imperative that the results be included as part of PDD so that it
can be tested and measured. The value of social sourcing can only be measured through inclusion of the relevant data in the product development cycle.
Build a Social Enterprise
Involving the customer socially in business functions such as PDD and retail promotions inherently demands that the enterprise be more socially affable. This involves the following:
• Social collaboration in regular business operations. Clearly, customer input should be solicited all along the value chain of sourcing-to-shelf. However, it is important for retailers to reverse-engineer their working terms with vendors as well, to enable them to incorpo-rate social feedback. This increases flexibility across the supply chain and makes it collab-orative. Many times, while a retailer is not in a position to act on customer feedback, vendors can make necessary changes to product design and course-correct prior to shipping out the merchandise. Buyers can even ask consumers to rate new product offerings before bringing new vendors onboard, thereby reducing the risk of having to wait for consumer reaction to ascertain the product’s potential.
• Empower employees to act. Social media, by its very nature, is instantaneous and trans-parent. Hence, it is important that retailers empower employees to immediately act on information flows. This will mean changing internal operations, workflows and approval mechanisms within the business in order to truly leverage the social medium. The hidden challenge is identifying experienced employees who are ”socially” comfortable. Additional training and focus will be required to create this social workforce, and technology can be leveraged for managing and monitoring. Retailers that are moving into the social construct are now creating new roles, such as sentiment analysts, social corporate responsi-
BestBuy, Krogers, Chico’s, Kia and many other retailers are embarking on investments related to social sentiment analysis. The findings are then integrated into their merchandising processes to ensure consumer sentiment is accounted for in their product offerings.
Walmart recently introduced the Orabrush brand of toothbrush, based on its popularity on YouTube and a Facebook ad campaign targeted at the Walmart buyer. Walmart also ran a “Get on the Shelf” contest, whereby consumers were allowed to select the products they wanted stocked in their neighborhood Walmart.
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bility personnel and crowdsourcing teams, all of which will engage in PDD processes.
If retailers can embrace all of the above in their social media strategies, we believe they can be more successful in their social sourcing-to-shelf journey. There are many nuances in this journey that will be specific to the retailer. Thorough con-sideration of the customizations required will be critical to success.
Looking AheadClearly, social media has the potential to radically improve product design and development and its impact across the entire retail value chain. As indicated in Figure 3, a retailer that is embarking on including social data in this function can anticipate a two-fold change in its product design development cycle:
• Creation of organizations that leverage social media in the PDD process lifecycle.
• Creation of a social data construct that will enable the new PDD processes.
Either can be leveraged in both new product creation, as well as enhancement.
However, both avenues are fraught with challenges in working through the familiar working processes within PDD. We propose the following immediate actions to mitigate risks while integrating the social medium within PDD:
• Embark on including social media in PDD processes by means of a pilot, using a subset of products (one brand/season) to actively engage shoppers in the PDD process.
• Set up existing/new social media forums to:
> Get started with a product line that is gen-erated by these shopper engagements.
> Build actionable social data.
> Identify the new “social enterprise/teams” needed to sustain interactions with these shoppers in the PDD processes.
• During and after the duration of the pilot, measure and analyze the impact on sales, margin and customer connect changes affected by the use of social media, and benchmark these against past results.
Figure 3
Using Social Data in PDD Processes
Crowdsourcing Team Sentiment Analysts
Create New Product
Social Data
Social Enterprise
Customer Data Product Data Experience Data
Improve Existing Product
• Demographic• Psychographic• Geographic
• Features• Pricing• Other Attributes
• Shopping Experience• Product Experience• Feedback & Comments
Historical Analysis
Product Concept
Product Sampling
Product Design
Selling & Promotion
Social Help Force
BestBuy has a dedicated “Twelpforce” of individuals who are empowered to act on problems that consumers tweet about. This team consists of roughly 2,600 employees whose job is to resolve customer issues using Twitter as a medium of conversation.
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• Discuss results and potential for future expansion with your merchandising and marketing teams.
We expect the results from these early pilots to be compelling and that most retailers will drive significant growth from improved use of social media in their sourcing-to-shelf processes.
Footnotes1 “Changing Consumers & Technology: Ten Megatrends Transforming the Retail Landscape,” Cognizant
Technology Solutions, November 2010, http://www.cognizant.com/retail/sitedocument/ten-megatrends-transforming-retail.pdf.
2 “Top 250 Internet Retailers on Social Media,” Campalyst Blog, May 2012, http://blog.campalyst.com/2012/05/15/top-250-internet-retailers-on-social-media-q1-2012-infographic/.
3 Adam Schoenfeld, “Google+ Month 6 Adoption and Engagement Report,” Simply Measured, May 8, 2012, http://simplymeasured.com/r/google-plus-month-6-brand-adoption-and-engagement-report/.
4 Brennon Slattery, “Wal-Mart Makes Big Facebook Push: Offers ‘Rollback’ Price Alerts,” PC World, October 2011, http://www.pcworld.com/article/241713/walmart_launches_local_deals_facebook_page.html.
References
• George Guildford, “Four Ways Brands Can Use Social Media in New Product Launches,” Social Media Today, February 2011, http://socialmediatoday.com/george-guildford/268906/four-ways-brands-can-utilise-social-media-maximise-launch-new-products?ref=node_other_posts_by.
• Jamie Mahoney and Marcos Corminas, “Accelerating Speed to Market for Proprietary Retail Brands,” Auxis, August 2009, http://www.auxis.com/about_us/experts/pdf/accelerating_speed_to_market_for_proprietary_retail_brands.pdf.
• Katy Daniells, “Diesel’s Real Life ‘Likes’ via QR Codes,” Digital Buzz blog, June 2011, http://www.digitalbuzzblog.com/diesels-real-life-likes-via-qr-codes/.
• Artemis Berry, “How Under Armour and Warby Parker Win with Social Media,” blog.shop.org, March 2012, http://blog.shop.org/2012/03/01/how-under-armour-and-warby-parker-win-with-social-media/.
• Emil Protalinski, “Facebook Contest: Around the World in 80 Clicks,” ZDNet, March 2012, http://www.zdnet.com/blog/facebook/facebook-contest-around-the-world-in-80-clicks/10028.
• Richard Spiegel, “Three Ways to Benefit from Social Media Crowdsourcing,” Social Media Examiner, June 2011, http://www.socialmediaexaminer.com/3-ways-to-do-social-media-crowdsourcing/.
• Michael Marchionda, “Crowdsourcing Spreading like Wildfire with Social Media,” Prescient Digital Media, http://www.prescientdigital.com/articles/web-2.0/crowdsourcing-spreading-like-wildfire-with-social-media/.
• “Top Internet Retailers’ Facebook Presence Dwarfs Other SocNets,” Prescient Digital Media, May 2012, http://www.marketingcharts.com/direct/top-internet-retailers-facebook-presence-dwarfs-other-socnets-22081/.
About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 150,400 employees as of September 30, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
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About the AuthorsPJ Walker is a Senior Manager with Cognizant Business Consulting’s Multichannel Business Practice. She has over 15 years of digital marketing, e-commerce and social analytics expertise across retail, consumer goods and travel and hospitality verticals. PJ has a B.A. from Emory University in Atlanta, GA. She can be reached at [email protected].
Mahalakshmi Rajagopalan is a Manager with Cognizant Business Consulting’s Retail Practice. She has over seven years of experience in product/retail merchandising, retail marketing and operations. She has a master’s degree in apparel marketing and merchandising from the National Institute of Fashion Technology, India. She can be reached at [email protected].
Rachit Anand is a Consultant with Cognizant Business Consulting’s Retail Practice. He has three-plus years of experience in the IT industry across ERP, consulting and business analysis. He has an MBA in operations and IT from the National Institute of Industrial Engineering, Mumbai, India. He can be reached at [email protected].
Sampath Jagannathan is a Consultant with Cognizant Business Consulting’s Retail Practice. He has six years of experience in ERP, procurement, inventory management, vendor collaboration and e-commerce. He has an MBA in retail supply chain management from Sam Walton College of Business. He can be reached at [email protected].
