At least 22 retailers in the US have been driven into bankruptcy protection during this recession, including RedEnvelope and Eddie Bauer, or gone out of business altogether, like Circuit City. Blockbuster, Virgin Megastores and many more have closed stores. Survivors, suffering deflated profits and slow sales, warn of bleak holidays: The National Retail Federation predicts a 1 percent sales decline for the season compared to last year. Even Wal-Mart feels the slump, with same-store sales down 1 percent in its second quarter—its first such drop in years. But smart retailers are going where it's warm: the hot little hands of cellphone—and laptop—toting consumers who want to shop right now, wherever they happen to be sipping their lattes or watching their kids' soccer games. Technology-backed projects to increase revenue include mobile e-commerce, coupons by text message, even storefronts on social networks. As enablers of these projects, CIOs are moving ever closer to the customer.
Out of recession develops one picture—finally—of what true business-IT alignment looks like, says Drew Martin, CIO of Sony Electronics. "IT is becoming part of the product offerings." Whether that's hotel kiosks, mobile banking, hospital patient portals or retail, CIOs are getting their IT groups to the front line in the competition for consumer dollars. When a customer logs on to his new Sony e-book reader, for example, the device
automatically connects him to his existing customer profile, from which he can start buying e-books. This feature is thanks to Martin's efforts to connect product development with Sony's internal customer relationship management system.
As exciting as it is to live on the progressive edge of the CIO profession, though, it's a new world to navigate at a time when wrong moves can severely hurt a company. "The challenge is that now you're entering into the revenue space," Martin says. "You need to commit to delivering your part of what needs to be delivered."
Email marketing is in full swing now; the number of messages expected to be sent this holiday shopping season will far surpass last year's four billion, according to Experian Marketing Services, a consultancy. Of course, just a fraction of these will be opened. Even fewer messages will coax recipients to visit a website and buy something.
"Websites and e-mail—that's just too many steps now," says Brett Michalak, CIO with Tickets.com, which sells tickets to games, concerts and other events as well as its own ticketing technology.
Social media such as Twitter, Facebook and YouTube take e-mail out of the equation, putting offers in front of customers on sites they already visit. Dell, JetBlue, Whole Foods and other big brands have pounced on Twitter as a marketing and promotion tool, tweeting special deals to followers. Dell, for example, attributes more than $2 million in sales to its 14 Twitter accounts that promote offers to 1.4 million followers. ("15% off any Dell Outlet Inspiron laptop. Enter code at checkout...")
Sony is using Twitter, among other social networking sites, to hype the SonyReader. A recent tweet included a link to a page at Sony's site comparing the product favorably to Amazon's Kindle. "You can't build a site and expect people to come. We are on YouTube, Facebook and Twitter to go out and get them," Martin says.
On Facebook, millions of people declare themselves as fans of performers, products, even the president. The number-one fan page on Facebook is dedicated to the late Michael Jackson, with 10.3 million members.
President Obama is next with 6.8 million. Starbucks is the biggest retail brand with 4.8 million fans. But becoming a fan of something is the equivalent of wearing a logo T-shirt. It doesn't bring M.J. back to life, reform healthcare or sell more coffee. 1-800-Flowers intends to find out whether social networkers are also social shoppers. In July, the $714 million flower delivery company launched the first Facebook storefront. Collectively, Facebook's 300 million active members spend eight billion minutes per day on the site, according to the company. An Experian survey found that dwell time for an adult visiting a social network is 19 minutes and 32 seconds. Meanwhile, 35 percent of adults who had been on a social network in the past month had also bought something online in that time period, the survey found—a ripe demographic.
Still, there's a lot to do on Facebook, so any shopping has to be fast, says Vibhav Prasad, vice president of Web marketing and merchandising at 1-800-Flowers. The company's Facebook store, therefore, offers only 10 percent to 15 percent of the several hundred bouquets available from the main 1-800-Flowers website and the check-out process has been pared down. No suggestions to buy related products pop up, for example, and four special occasions tabs span the top of the page, instead of the eight on the main site.
"It's a fairly impulsive purchase in this channel," Prasad says. "As simple and as quick as we can make it, the more effective we'll be."
Impulsiveness is key. Every time Facebook members log in, they see updates about who among their friends is having a birthday. Prasad wants those regular reminders to spark flower buys.
The company is also tuning its marketing volume to match Facebook's atmosphere. That is, rather than promote products all the time in the store's status bar, there are trivia contests and craft ideas to keep fans engaged. "This is definitely a new and unique channel. Jumping in there and hard selling is not the way to go," he says.
Facebook users spend most of their time looking at their own homepages. They read their news feed—a display of their friends' status updates, quizzes taken, notes posted and games played. So, 1-800-Flowers is planning a way into the news feed. When a fan fills out a wish list to indicate which flowers she'd like to receive, notification would go into the feeds of her friends. Carol logs on to Facebook, sees Alice has a birthday on Thursday and wishes for the "Pleasantly Pink" bouquet. Ding! Carol clicks over to the 1-800-Flowers store and $29.99-plus-shipping later, takes care of that gift without ever leaving Facebook."We think people will do it because social networking is all about you expressing your interests and your friends responding," says Wade Gerten, CEO of Alvenda, the Minneapolis software developer that built the Facebook store for 1-800-Flowers. "Shopping online can be social again, as it was in person."
The wish-list feature is an Adobe Flex application that Alvenda tweaked to work with Facebook's application programming interface. Gerten says the investment is "small" for 1-800-Flowers because Alvenda gets paid part of the sales 1-800-Flowers makes on Facebook. "So we're incented to find them more ways to make money." The company declines to say how much revenue the storefront has rung up so far.
Going social was "a logical extention" for 1-800-Flowers, which was one of the first retailers to put up an e-commerce site, in the early 1990s, notes Kevin Ranford, director of Web marketing. "It comes from listening to customers and responding to the channels in which they're interacting," Ranford says.
Sales on the Cell
People lose their credit cards and forget their wallets. But cell phones? Some are so addicted they develop "BlackBerry thumb" and "cell phone elbow," requiring medical treatment for repetitive stress injuries. There is perhaps no combination of vices so bursting with commercial promise than that of cell phone-plus-caffeine. Starbucks is there.
In September, the $2.4 billion coffee chain began testing a system to let customers pay using their iPhones or iTouch devices. They download the Starbucks Card Mobile App and type in the number of their Starbucks loyalty card, preloaded with spending money. A 2-D barcode appears that cashiers can scan.
Just 16 of Starbucks' 11,000 locations are testing this mobile payment option, and the company hasn't decided whether to expand it, a spokeswoman says. The company will measure transaction frequency, speed of payment and overall customer feedback and participation, she says. So far, 37 percent of people who downloaded the mobile commerce application are using it.
Best Buy is going about mobile e-commerce differently, creating an e-commerce site honed for mobile phones that strips away the ads and images of its corporate Web store. Instead, it serves a simple search box, store locator and a clickable list of product categories.
Both of these systems aim for speed and convenience, which is what cell phone culture is all about, says Cathy Hotka, president of Cathy Hotka & Associates, a retail IT consulting firm in Washington. "You're in, you're out. It's extremely effective for sales." Mobile sales, though, aren't without problems.
Royal Oak Music Theatre, a Michigan music and comedy venue where acts such as Train and Bob Saget have played, started mobile ticketing three years ago and has adjusted its marketing to cover for finicky technology.
Anyone who's done self-check out at the supermarket knows that scanning takes a special, knowing touch. Still, scanning barcodes on the screens of mobile devices often requires extra wiggling of the phone and slanting it at different angles. It's slower than scanning paper tickets. To avoid ticking off patrons lined up to run in and grab general-admission floor spots, Royal Oak created a separate VIP entrance for the mobile customers. There, staff use the newer model scanners required for reading mobile barcodes, and it's not so apparent that the scanning takes longer, says Diana Williams, box office manager.
Mobile customers are also allowed to get into the theater a few minutes before traditional customers, which encourages more people to buy their tickets by cell phone, she says. That's cheaper for the theater than handling paper tickets—saving money and hassle time is Williams' goal. But it also positions the theater well for collecting future revenue.
Mobile ticketing skews young, Williams observes. The theater does shows for all ages, and for a typical adult event, 16 percent of tickets sold are through the mobile channel. But for a recent show by the boy-band Hansen, popular with tween girls, mobile accounted for nearly 40 percent of tickets.
"There's an age—around 22 or younger—where it would never occur to patrons that you couldn't buy a ticket from your phone," Williams says.
Mobile and social commerce projects will change the business of any company that invests in it, says Russ Stanley, managing vice president of ticket services and client relations for the San Francisco Giants.
For example, instead of being a long-planned activity, a Major League Baseball game can become an impulse buy, Stanley says, bringing in more sales for the organization.
Every game day, the Giants have 40,000 seats to sell. If they've sold only 30,000, 10,000 spoil every bit as badly as old pears. Last year, the team changed prices daily on about 2,000 seats. Stanley imagines the day when he'll have a database of fans who, say, live within a mile of the ballpark to whom he can text last-minute offers. "Hey, the Giants have $5 tickets left for tonight. For $5, I'll walk down there," he says. "As they're walking up to the entrance, they're buying on the mobile."
The Giants started to offer mobile tickets midway through the 2008 season, when they sold about 100 tickets that way per game. In 2009, it was about 200 and Stanley expects to do about 400 per game in the coming year. "Fans who use it love it. It's getting the people to use it," he says.
Like hot dogs and cold beer, holding a ticket is part of the rite of baseball, he says. Plus, there's the souvenir value. When pitcher Jonathan Sanchez threw a no-hitter against the San Diego Padres in July, about 50 mobile fans, as well as people who had bought tickets online and printed them on plain paper at home, later requested the team print "real" tickets for them to commemorate the event. "We did that for them. It's good relations," says Stanley. And, he adds, it could turn into a money-making service in the future.
Start small and expand gradually, Stanley advises. He could outfit all 42 entryways at AT&T Park with scanners to read mobile tickets, but the Giants just don't sell enough of them yet to make that cost worthwhile. Not until about 1,000 mobile tickets are sold per game—81,000 in a season—does he expect to see real labor savings compared to handling paper tickets. Ramp-up may be slow, but commerce in these new outlets is a commitment these early adopters say they will keep.
"Eventually there will be far more things that are accessible via your phone," Williams says. "I would rather have our box office be on the forefront of that than scrambling to catch up years down the line."
Today the payoff comes in other ways, she says. The novel technology makes retailers who use it more memorable among consumers and no paper—or less, anyway—makes it a greener way to do business.
These kinds of projects demonstrate new IT thinking about business alignment. That is, IT can clear the channels between customers and the company. At Starbucks, for example, the mobile commerce application came out of its My Starbucks Idea website where registrants submit and discuss ideas they want the company to adopt.
Sony CIO Martin talks as much about customer strategy as about technology. "We're trying to emphasize the out-of-the-box experience," he says of the SonyReader's built-in customer knowledge. "Right away, you can download content and get reading." But Martin admits this commerical orientation isn't yet a common role for a CIO. He still has to propose ways to other executives that his department can contribute beyond servers and wires. Martin points out that his IT department supports Sony's CRM system, which contains the data that will differentiate and polish the customer's experience. "Our systems are going to touch the customer no matter what," he says. "Even if [an outside developer] creates something elegant, it will come across to consumers as the left hand doesn't know what the right hand is doing."
Innovation for Growth
Weak signals of an abating recession have begun to appear. Retail's sacred number, Gross Domestic Product, which measures goods and services produced in the United States, rose 3.5 percent for the third quarter, according to the U.S. Department of Commerce. But in the second quarter, GDP sank 0.7 percent on top of an 8.6 percent drop the quarter before. Lasting recovery will take time. CIOs can, nevertheless, use this period to lead their companies to new sources of revenues, says Hotka, the consultant. Experimenting with mobile and social commerce creates the opportunity for forward-thinking projects that many companies in many industries will eventually adopt, she says.
Help pave the way, advises Sony's Martin, by not reporting to colleagues only the naked costs of corporate IT. Instead, those numbers should be accompanied by specifics about where and how the technology department can help generate sales for the company. "Every CIO has the opportunity to be involved. You have to step right out and take it."
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