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Speaking Their Language

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Savvy retailers are creating their own social networks to attract...
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Calvin Hollinger, CIO, Urban Outfitters ...

When Virgin Megastores realized that its target shoppers rely on electronic media rather than print advertising, the chain shifted its advertising strategy to reach younger consumers. As a result, the chain added a new weapon to its promotional arsenal—a social network. And Virgin is not alone.

As more retailers strive to grab wallet share from the Echo Boomer generation, the writing is on the wall: It is time to shift away from traditional practices and use emerging electronic media that is second nature to them.

This was the message delivered during the panel discussion, “Digital Natives and Retail,” a session held at the Technology & Operations Store Summit (TOPSS). Chain Store Age and Retail Technology Quarterly sponsored the event, held in Las Vegas in June.

Retailers catering to Generation Y have their work cut out for them. Comprised of young, savvy shoppers born in the 1980s and early 1990s, this group has unofficially been called the “Net Generation,” and it is not surprising as to why.

A majority of members of this group own a computer and cell phone; they stay connected with friends electronically via instant messaging and texting. They rely on Web sites as their primary source of news, and blogging is a natural way to share their opinions on a variety of topics.

When it comes to shopping, Gen Yers are different than baby boomers. They don’t want to clip coupons—paper or electronic—or receive promotions by snail mail. If retailers are trying to snag them using e-mail promotions, chains better make sure each one is personalized based on their specific preferences, or they will undoubtedly end up in the spam folder.

Rather than raise a white flag, retailers need to understand this generation. But as the saying goes, chains do need to crawl before they can walk.

The first critical step is finding these fickle shoppers. Placing an ad in a magazine, however, is not going to jump-start any relationships.

“We did some analysis to understand shopper trends,” Robert Fort, VP of IT, CIO, for Virgin Entertainment North America, Los Angeles, said during the panel discussion.

“When we realized that the average reader of magazines was 40 years old, we started rethinking how we reach these shoppers,” he said. “That was when we decided to spend where the trends were pointing.”

While all roads pointed online, Virgin quickly learned this demographic’s Web tastes went beyond simple e-mail promotions.

“In fact, retail e-mail is declining,” panelist Calvin Hollinger, CIO, Urban Outfitters, said during the session.

What’s the reason for the decline? This group is looking for more “genuine” connections. The best place for retailers to make these connections is through social-networking sites, or online communities where members can share photos, journals and interests with existing and new friends.

“We need to reach out to where these shoppers are online, and that’s at sites like Facebook, MySpace and Flicker,” Fort said. “These sites have their own momentum as well as dedicated marketing.”

Once chains know how to reach Gen Y shoppers, they need to learn how to “speak their language,” Fort noted.

“Finding the shoppers is half the battle. Retailers also need to know how to create a discussion using their phrases, because this group has a strong ‘B.S.’ detector,” Fort explained.

Taking a lesson from Gen Y’s favorite third-party social communities, savvy retailers are creating their own networks to attract this young segment of shoppers. “If sites like Facebook and Flicker have taught us anything, it is that the blogs they support are very effective,” Hollinger noted. “As retailers move blogs onto their own sites, there are a couple of benefits. Besides attracting additional unique traffic to the site, a [well-visited] blog makes a retailer’s site more relevant during a Google search.”

Hollinger speaks from experience. Urban Outfitters’ blog, found on blog.urbanoutfitters.com , lets shoppers—both domestic and abroad—post their input on topics from the latest fashion trends and music to local events.

Virgin has also joined the blogging ranks with its forum, www.VirginMegaMashup.com . This is a candid sounding board for Virgin’s loyals here and overseas who log on to share their views on an array of topics from live events hosted by the entertainment and lifestyle retailer, to music, film, fashion, Hollywood gossip, books and gaming. They can also sound off on “off-topic” forums, including bad jokes.

Bloggers can also stay abreast on current members and status reports. For example, Virgin reported that the most users logged onto “Mashup” were 54, on May 28, 2008, at 6:55 p.m. It also keeps bloggers updated to the latest member statistics. For example, at presstime, the site featured 186 threads, 315 posts, 42 members and six active members who were blogging at the time. It also welcomed its newest member, xfusion.

“It is a way for us to connect with our shoppers. Rather than put out a list of the best albums of the year, we let our members do it on the site so it is more ‘word of mouth,’ than an advertisement,” Fort explained. “We totally agree with Urban Outfitters that members’ input makes the site more genuine and makes a stronger impact among this shopping segment.”

There is no doubt that this tech-savvy customer segment is fickle, and their tastes are always changing. But if Virgin and Urban Outfitters have learned anything from this shopping segment it is that these young consumers are clearly in control. And if chains can’t satisfy their needs, chances are they won’t get a second chance to win their loyalty.

“These customers don’t like to be dictated to—they are calling the shots and telling us what they want,” Fort said.

This is also helping Virgin better target its assortments and live events. “By ‘listening’ to what members post on the blog, we are in a better position to introduce new products and sponsor events,” Fort noted.

“By responding to the customer demand, we are primed to get a higher return on our investments than rely on events and merchandising strategies that we think up ourselves,” he said. “By going directly to the source and giving them what they want, we don’t have to pray that we aren’t risking our investments anymore.”