Business Value of Social Media in the Retail Industry

The business environment is changing rapidly due to a combination of demographic, organizational and technological forces. Social media represent one of the latest vehicles of rapid change in the way people work, interact and consume, and companies are trying to figure out how to generate business value out of these changes. Here we look at how they do it in the retail industry.

Social media involve both public social utilities (such as Facebook), which companies use for connecting to customers and prospects, and internal social platforms within companies that help people and teams to communicate and collaborate better. The retail industry is becoming increasingly more ?digital? and is wisely mixing both types of social media in order to empower business.
Companies in retailing, which is a vast industry and includes firms like supermarkets, specialty stores and department stores, had traditionally invested in technology for transaction functions (e.g. hardware and software used for checkouts). It is now increasingly using technology for strategic planning. Over the years, we had already witnessed an increase in ?data-based? decision making, which is empowered by Point of Sale (PoS) data (i.e. data collected in checkouts) combined with statistical analyses. These analyses are used to drive supply chain, merchandizing, and other planning activities in a more centralized way, thus reducing the reliance on stores? personnel. This has improved business via operational efficiency (e.g. better inventory management) or through processes such as marketing (e.g. offering targeted promotions).

Can companies improve their strategic planning even more? The data and knowledge acquired from social media, although not as structured as PoS, allows firms to develop new products and expand their markets. Companies already gather data from customers and prospects through public social utilities: they are, for instance, tracking what people say in Twitter about their products and services. Some others companies, such as Sears, have created their own communities and blogs (MySears) where customers post and express their ideas, which help innovating in terms of products. Kmart is combining their online gaming community at MyKmart.com with offline retail activity by taking video game reviews from the site and placing them on store shelves.

What about internal social platforms for collaboration within companies and with key partners? There are two main benefits:

A. Employee collaboration will uncover additional valuable customer insights directly from employees (complementing the data obtained directly from customers). Best Buy, for example, receives customer insights from engaged employees that share direct customer feedback, ideas and insights (Best Buy also has its proprietary social platform, IdeaX, for asking customers to suggest ideas).

Employee collaboration is particularly relevant in retailing because stores and teams are usually geographically dispersed. Tools like wikis and blogs provide a ?central? platform to share and collaborate on information / knowledge across stores and corporate. Blogs constitute a source of information about what is happening at the store, whereas Wikis present an opportunity to capture the experiential knowledge of some employees: one example is category management personnel (those who strategically break down products into discrete groups of similar or related products). The knowledge generated can be used for best practice sharing, inducting new personnel, etc.¹

B. Collaborating with suppliers and manufacturers can improve overall supply chain efficiency and forecasting, since the projections of retailers and suppliers usually differ.

The beautiful thing about the retail industry is that it shows very clearly how knowledge is being created though both external and internal social media: both employees and customers can co-create with the company. Interactions between buyers, planners, supply chain people, and store managers in issues like assortments planning and promotions are surely improving decision making and bring the business closer to the customers they serve. The key for business is how to analyze the tons of extra social data that are emerging from social media.

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Source: http://inseadelab.blogspot.com/2012/03/business-value-of-social-media-in.html

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