roi impact of social retail victoria bracewell lewis senior analyst forrester research 1 may 2008

ROI Impact of Social Retail

Victoria Bracewell LewisSenior Analyst

Forrester Research

1 May 2008


Theme

Social retail is creating new opportunities for

shopping . . . and selling


Agenda

• What is social computing?

• The realities of social retail

• Mapping the social retail trendsetters

• Influencing the influencers: How to harness the value of social retail


Social Computing RSS

Open Source S/W

Blogs

Wikis / collaboration

Tagging

Social networks

Search engines

C2C Commerce

craigslist

P2P file sharing

PodcastingComparison shopping

User review portals


Technology is moving away from firms


Creators

Publish a blogPublish your own Web pagesUpload video you created Upload audio/music you createdWrite articles or stories and post them

Critics

Post ratings/reviews of products or services Comment on someone else’s blogContribute to online forumsContribute to/edit articles in a wiki

CollectorsUse RSS feedsAdd “tags” to Web pages or photos“Vote” for Web sites online

JoinersMaintain profile on a social networking siteVisit social networking sites

Spectators

Read blogsWatch video from other usersListen to podcastsRead online forumsRead customer ratings/reviews

Inactives Not using any social technologies

The ladderof participation


Online shopping has grown rapidly in the past few years, particularly in Sweden and the Netherlands

U

PLVS RLT

23m

31m

16m

4.5m

7.2m

4.4m

6.7m

56%

58%

39%

42%

18%

16%

71%

64%

59%

54%

45%

25%

20%

74%

70%

69%

54%

64%

31%

28%

66% UK

Sweden

Germany

France

Netherlands

Italy

Spain

Q2 2004

Q2 2005Q2 2007

Germany and the UK still account for 60%

of Europe’s online shoppers

Base: At least 22,102 European net users (16+) Source: Forrester's Consumer Technology Adoption Study, 2004 to 2007

“Have you bought any products or services online in the past three months?”


Shoppers use of social computing is on the rise

7%

6%

2%

7%

8%

7%

12%

13%

14%23%

Listen to podcasts

Publish your own Web pages

Use peer-to-peer file-sharing programs

Read customer reviews

2007

2006

2005

Base: EU-7 online shoppers

Source: Forrester’s Consumer Techno graphics, 2005-2007

Percentage of online consumers who use these technologies monthly or more often


Agenda






What is impact on eCommerce?Social networks drive more site traffic than search: Topshop.com

Source: Spannerworks / Topshop. Data compiled from Hitwise site traffic.


Consumer reviews drive hard conversions

Highly reviewed products receive more attention from both consumers and retailers, ultimately leading to higher sales

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Number of reviews

Co

nv

ers

ion

in

cre

as

e

10 to 241 to 9 25+

No reviews

Source: Bazaarvoice. Data compiled from Bazaarvoice customers.

Impact of review volume on conversion


Reviews also achieve lower product returns

Returns can reduce a manufacturer’s profitability by an average of 3.8%

Source: Bazaarvoice. Data compiled from Bazaarvoice customers.

0%

10%

20%

30%

40%

50%

60%

70%

1 to 5 6 to 15 16 to 24 25 to 59 50 to 100

Number of reviews

Re

du

cti

on

in

re

turn

s

Impact of review volume on returns


Many retailers haven’t got there yet

Yes, all the time27%

Yes, sometimes

5%

Yes, rarely5%

No, never64%

Base: 22 European leading multichannel retailers

“Do you use a recommendation engine?”


Many outright ignore this trend

36%

31%

21%

20%

25%

20%

24%

14%

16%

18%

32%

33%

29%

25%

30%

25%

23%

30%

26%

35%

Comparison-shopping sites

Wikis/collaboration software

Engage with/monitor blogs elsewhere

RSS

Blog section on our Web site

Monitor user review sites elsewhere

Social networks

Audio and video podcasts

Offer consumer section on our Web site

Forums Don't know / N/A

Will not use

Base: 122 European luxury brand retailers

“In what ways do you currently use Social Computing Web 2.0 technologies?”


Agenda






How you should think about these social retail engagement tools

Channel indirect sales

Low

Direct to consumer sales

High

Te

chn

ical

C

om

ple

xity

Customer ratings and reviews

Podcasts

Recommendation engines

Virtual worlds

Blogs

Wikis

Social networks

Niche Communities – User Generated

ContentPersonal

Assistants

RIA

Crowd Sourcing

Mobile Location Services

Searchandising – Faceted Search


Ratings and reviews: The top-rated shopping paths drive direct sales

Bass Pro Shops customers that browse top- rated products have a 59% higher conversion rate and spend 16% more than the average shopper.


Searchandising, Faceted Search, Recommendations

Implemented July ’07 –

40% of searches result in correct product placed at top of site.

Overall hard conversions increased over 10%.

Source: ComputerWorld UK report on Smart searching, Nov 19, 2007


User-generated content and products drive ROI directly and indirectly

User-generated = constant NavPix product replenishment

Links with social networks increases product awareness

• Navman’s NavPix library and tool kit; launched May 2006

• Partnered with Lonely Planet and flickr

• Build cost: £550K

• 23 million NavPix images generated

• 3,612 press pieces resulting in Navman as No. 2 for brand awareness


Agenda






What should you do about this?

Define clear business goals

There is little point marketing or merchandising with social technologies unless you know what you want to achieve

• Traffic to your Web site (What for?)

• Registrations (What will you do with them?)

• Advertising/eCommerce/subscription revenues (How much?)

• Customer relationship management (How will you manage the data?)

• Market and social retail mapping research (Where and who for?)

• Media publicity and PR (How will you measure?)


Development

Support

Sales

Marketing

Research

ObjectivesRoles

Listening

Talking

Energizing

Supporting

Embracing

Key roles and objectives


Why? Data indicates you will increase conversions, plus enhance. . .

• Cross-sell and up-sell

• Basket size

• Loyalty

• Service levels

• Satisfaction

• Positive experience and word of mouth

• Brand presence


Victoria Bracewell Lewis

+44 (0)20 7631 0202

[email protected]

To download this presentation, go to: www.forrester.com/internetworld

Thank you

roi impact of social retail victoria bracewell lewis senior analyst forrester research 1 may 2008

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