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In the Know

BY CSA STAFF

When it comes to staying in touch, reaching out and attracting new customers digitally, Facebook is just the tip of the iceberg. There are many up-and-coming applications that retailers can use not only to leverage brands but to bring in big sales. Here’s a look at several sites that should be on retailers’ watch lists:


Groupon.com 

Groupon.com made headlines in November when Google put in a bid to buy the popular deal-of-the-day site and e-mail newsletter company for a whopping $5.3 billion. News of this was widely spread throughout the industry, raising many questions about how a company that just formed in 2008 could possibly be worth so much. Even more surprising was that Groupon turned down the offer. 


The Chicago-based Internet-coupon service is all about geo-targeting, providing its 35 million users steep discounts on things to do, see, buy and eat in various cities. The catch is that a certain amount of people must buy the deal in order for it to actually be valid. Since the minimum amount of daily purchases is almost always met, it has become one of the most recognized group-buying sites around.

Savvy companies from Gap and American Apparel to small salons, restaurants and boutique shops have joined forces with Groupon. (The deal site shares part of the revenue with its retail partners.) In August, it launched its first national, non-local discount by offering $50 worth of apparel and accessories at Gap for $25. About 441,000 Groupons were sold that day, raking in $11 million. 


The exposure that sites like Groupon give retailers big and small is a huge traffic- and sales-driver. Plus, it links them to a hip, savvy and budget-minded new brand, according to Susan A. McKenna, CEO of Winnetka, Calif.-based social media firm McKenna’s Marketing.


“We are living in a new social Internet, and good ideas are growing faster than ever,” she said. “Groupon’s concept is one that retailers should take note of and perhaps even consider emulating, especially given their very early success. Regardless, looking for ways to partner with Groupon could be an amazing geo-targeting tool for both brick-and-mortar and online retailers.”


Social Shopping Sites
Many social shopping sites are a gold mine for merchants. GoTryItOn.com, for example, has become a hot new destination site dominated by teens and young adults. Serving as a virtual dressing room, members can use a Web cam or upload pictures of what they are wearing and share it with the community. Those on the site can then leave comments about the outfit, offer style suggestions and, if more than one photo is uploaded, vote on which look is best for them. This also means photos can be snapped from a dressing room of a store, and, depending on the feedback, shoppers can decide whether or not they should make a purchase. Users can also keep pictures private and seek feedback from trusted friends.


“We have thousands of people uploading pictures while in the dressing room at stores,” said Marissa Evans, CEO of Go Try It On. “Brands and retailers could get engaged with our community by reaching back to customers who are at the point of purchase and making the ‘to buy or not to buy’ decision in real time — whether they are in their own stores or a competitor’s shop. Shoppers are usually alone with brand labels in a fitting room, but now retailers can access [those consumers] directly when they are seeking advice and feedback, which could be very powerful.” 


Another popular social shopping site is Chictopia.com, a blogging community that offers fashion inspiration from photos of people in places around the world. Launched in 2008 and now with more than 100,000 registered users, Chictopia is a mecca for trendsetters and allows members to post pictures of what they are wearing on the street. Retailers can analyze which styles are trending and determine if any are worth bringing into their stores.


“The ‘word on the street’ is always important for fashion and retail, but so is staying true to one’s brand,” said Lauren Freedman, president of Chicago-based e-tailing group. “However, the interpretation of street trends is the most successful part of merchandising strategies, and this is where Chictopia can help merchants. Fashion trends are also being spread quicker and faster through sites like this, so retailers can listen in and be a part of the conversation.”


Alibaba.com

Alibaba.com is China’s largest e-commerce company and the world’s largest online business-to-business trading platform for small companies. The site — which is 40% owned by Yahoo! Inc. — connects retailers looking for inventory to worldwide sellers with wholesale prices. Although the site has been around since its launch in 1999, it is a huge resource for small businesses looking to get off the ground and grow their supplier network. In fact, it has more than 50 million registered users in more than 240 countries and regions.


The site, a unit of Alibaba Group, was in the news most recently when the group’s founder Jack Ma had reportedly been approached about joining a private equity group considering a bid to buy Yahoo.


Set up like popular career-networking site LinkedIn, Alibaba encourages users to chat in forums, leave comments and build professional relationships. In June 2010, the company purchased Vendio, a provider of e-commerce solutions to 80,000 retailers, to further its supplier reach and help small retailers run Web stores with various e-commerce services.


Penny Auction Sites

Penny auction sites have seen exponential growth in the last 12 months due largely to the down economy in the United States and other parts of the world. The business model for sites such as Swoopo.com, Beezid.com and Quibids.com allows shoppers to bid on factory-sealed products at huge discounts, from mobile phones and laptops to cameras and TVs. First, users have to place a bid on products. At Swoopo, each bid costs $0.60, but bid-packs are sold at a discount (e.g. 40 bids for $24.00). To win, shoppers have to be the leading bid when the auction clock runs out. On average, winners end up saving 65% off the retail price. 


Some industry experts recommend retailers take a look at this business model and even partner with sites like these to get rid of surplus or clearance items. According to McKenna, these sites may also become viable channels for retailers looking to establish an online brand for new products.


“Retailers of any size that ignored eBay, Amazon and Overstock.com as distribution channels for products regretted it over time, and the same might be true for the penny auction sites,” McKenna said. “They are not only taking the Internet by storm, but even challenging the eBays and Amazons, especially in this economy. Where these will end up, I’m not sure, but the model and current popularity certainly should be noted by merchants.”

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Focus on: Compensation Outlook 


BY CSA STAFF

Economic forecasts for 2011 are a mixed bag for senior executives in retail companies. Executive compensation packages and salary increases are expected to be healthier than in the last two years, but the overall economy is, at best, in a state of stagnation. 


The Society for Human Resource Management, or SHRM, based in Arlington, Va., projected median salaries across all industries would rise 3% this year, compared with the more modest 2.5% increase that was the median in 2010. 


Similarly, a recent survey of more than 1,450 large companies conducted by AON Hewitt, a human resource consulting firm headquartered in Lincolnshire, Ill., predicted a 2.9% salary increase for executives in 2011, a moderate uptick from last year’s 2.4% increase but an impressive spike over the 1.4% increase that was the norm in 2009. 


The 2010/2011 U.S. Compensation Planning Survey conducted by New York-based Mercer drilled deeper into specific industries and concluded the retail industry would experience average salary increases of 2.8% in the coming year. 


The real opportunity to increase earnings, according to many in the industry, will be through bonuses and incentives — perks that will likely extend from the most senior executives into middle management. 


The Hay Group, which has its global headquarters in Philadelphia and does management consulting for some of the largest retailers, including Wal-Mart Stores, The Home Depot and Macy’s, reported that 39% of companies have already increased or have plans to increase the proportion of variable pay in compensation packages. 


For example, Sears Holdings Corp. awarded its CFO a 16.7% merit increase, from an annual salary of $600,000 to $700,000, but the executive’s total targeted cash award increased by 26.7% because the incentive plan was raised from 75% of the fiscal 2010 salary, a targeted bonus of $450,000, to 90% of the fiscal 2011 salary, a targeted bonus of $630,000. 


Incentives are typically defined as “targets” because, as the Hay Group stressed, there is a renewed focus on performance-based criteria. The company conducted a survey of more than 1,300 companies and analyzed detailed data from an internal database of more than 14,500 organizations to arrive at its assessments. 


Performance-based pay is definitely on the rise, agreed Bob Cartwright, president and CEO of Austin, Texas-based Intelligent Compensation and a member of the Total Rewards/Compensation and Benefits Special Expertise Panel for SHRM. The difference, Cartwright noted, is that in the current environment, incentive compensation will be based largely on the individual’s contribution to the company’s performance. 


Research by the Hay Group supported this thesis, with 51% of the companies surveyed indicating they would rely on “hard” financial metrics such as revenue, profit and sales to evaluate the performance of individual contributors. 


This approach presents a slippery slope for retail executives, many of whom face an uphill battle if they are to exceed expectations for the new fiscal year. One issue is that year-over-year improvements will be harder to achieve this year than in 2010, when retailers were competing against back-to-back years of dismal comp sales in 2008 and 2009. From this perspective, some may view retail executives as victims of their own successes.


Truthfully, however, the stalled economy remains the real culprit. Performance-based pay usually takes a hit when a company is unable to grow its bottom line, and the domestic market looks bleak with the U.S. GDP expected to decline from 2.6% in 2010 to an even more sluggish 2.2% this year.

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This IS the Next Big Thing

BY Cynthia Cohen

Smart phone Mobile Apps! Just like the accessibility of airplane travel for the masses revolutionalized the travel industry, smart phones will revolutionalize the retail industry. Although I may use hyberbole on occasion (but only to make a point), this is not one of those times. They will truly change the industry as we know it. 2011 will be the tipping point — the point where the line on the penetration chart crosses over. More than 50% of cell phones in the United States will be smart phones versus functional phones, according to Nielsen. That means massive penetration of mobile app capability for consumers. 


Oh yes, those iPads are quite nice, and Boomers especially love them. They, along with notebook and netbook computers, are not going away. But can you put them in your pocket? Will you carry them to the movies on date night or to the Red Sox (my Boston roots are showing) game? Consumers want to buy the dress they just saw Sarah Jessica Parker wear in the movie and order the “We’re Number 1” logo shirt after the series-winning run before they leave the venue. The college crowds don’t think they need an iPad if they have a laptop and a smart phone. A netbook doesn’t fit in a fashionista’s little clutch when she is out on the town. Companies can restrict access to outside Web sites on your office PC but not on your personal cell phone. So smart phones are it for portability and usability, as consumers will let their thumbs do the job with mobile apps in a variety of daily activities. 


Whether you are a department, big box, drug, specialty, food, off-price or convenience store, wake up and see the thumbs moving. E-commerce has grown exponentially over store growth in the last few years. Consumers will never stop visiting stores altogether, but they have radically changed their buying habits forever thanks to highly functional Web applications for price checking and shopping. smart phones can now put all that functionality in their hands every minute of the day, wherever they are. It’s in a retailer’s best interest to capitalize on mobile apps to further decrease information processing and advertising costs, as well as find new opportunities for sales growth.


Rather than write 10 or 11 prognostications for 2011, because mobile apps are the next big thing, I give you 11 mobile apps that retailers need to consider implementing to stay competitive in this revolutionary new retail world: 


1. Price checking — Make sure you put your best offer forward when you know consumers are competitive checking. 


2. Shopping — Enable product purchases anywhere using a product code.


3. Advertising — Send an ad based on the time of day or when the consumer hits the mall.


4. Market research — Collect immediate feedback.


5. Payment processing — Verify and process credit and debit cards.


6. Advertising effectiveness measurement — Get immediate feedback on when and where your broadcast, print and outdoor ads are seen. 


7. Coupon and credit redemption — Save the paper; send and process these.


8. Self checkout — In-store app to cut the checkout lines.


9. Product directions and care — Make information and assistance readily available from the product code.


10. Customer service — Give immediate responses and gain customer satisfaction.


11. Pre-order food and drinks — Yes, even at your snack or Starbucks counter, this will increase sales and convenience.


Final words of encouragement to all retailers: Join the mobile app shopping revolution to reduce operating costs and increase sales. 


Final words of doom: If you don’t join the revolution, within the decade see your business crushed by the pounding thumbs finding your competitors’ mobile apps. 


Cynthia Cohen is president of Strategic Mindshare, a retail strategy consulting firm. Follow Cynthia’s consumer trend findings and retail reviews at twitter.com/strategydiva or friend her at facebook.com/cynthiarcohen.

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