Retailers shift their ad spending from TV, radio and print ads to digital ads.
Ravi Raj and the @WalmartLabs team bring pizzazz to social marketing, just one example of how retailers seek to grab the attention of social shoppers.
Few retailers are more determined to chart social marketing's future path than Wal-Mart Stores Inc. The world's largest retailer has roughly 200 employees in its @WalMartLabs research group whose sole mission is to figure out new ways to marry Wal-Mart's stores with its social, web and mobile channels. That's not to mention a smaller team that handles day-to-day interactions with consumers on online social networks.
Wal-Mart recognizes that there's been a fundamental shift in consumer behavior, says Ravi Raj, vice president of product at @WalMartLabs. "Social media is where consumers are spending their time," Raj says. "It's where they're creating and consuming content in the form of tweets, posts, pins and anything else. Mobile is having an effect too, as consumers are walking into stores with mobile devices that enable them to check prices and tell their friends where they are. Those changes are changing the game in retail."
With half of U.S. adults carrying web-connected smartphones into their stores, it's easy for retailers to see the importance of mobile marketing. And there's ample data to back up Raj's assertion that online social networks represent a significant shift in consumer behavior. Nine out of 10 U.S. Internet users visited a social network at least once a month last year, according to web measurement firm comScore Inc. And social networking accounts for one of six minutes spent online, with Facebook alone accounting for 15% of all time spent online and roughly 16% of page views.
With consumers spending so much of their time on Facebook, Twitter, Pinterest and the like, some retailers are brushing aside questions about the return on social marketing dollars. "Measuring the ROI of social media is like measuring the ROI of air conditioning," says Lisa Gavales, Express Inc.'s chief marketing officer. "It's necessary."
Many others agree. 76% of marketers in a recent Forrester Research Inc. survey said social networks are key elements to building their brands. Moreover, 71% said that by leveraging social media they could gain an edge on their competition.
But just routinely posting new arrivals to a Facebook page or "pinning" images to a Pinterest board won't cut it. Consumers spend time on social networks to interact with friends, not brands. Consider that Facebook's more than 845 million worldwide members post 2.7 billion comments or Likes each day to the social network but that the retailer that generated the most comments on its Facebook page during a recent 30-day period—Wal-Mart—accumulated 7,656 comments, or 255 per day, according to a recent study by social media and digital analytics provider Socialbakers. That means 1,000 Wal-Marts would represent less than .01% of Facebook activity.
To avoid being a wisp of seaweed in the social ocean, retailers are realizing they have to offer something dazzling and different on social networks, and there is plenty of experimenting going on. Express is relying on the strong online persona of chief marketer Gavales, while web florist 1-800-Flowers.com Inc. takes an all-marketing-is-social-marketing approach and e-retailer Gemvara jumps on the fast-accelerating bandwagon of the hot new social network Pinterest. All of them can point to some early returns from those initiatives.
But perhaps no retailer is as all in on social networks as Wal-Mart.
Wal-Mart put its stake in the ground in April 2011 when it purchased Silicon Valley firm Kosmix Corp., a start-up focused on searching and analyzing online social data like Twitter and Facebook posts to personalize web content. After the acquisition, Wal-Mart folded Kosmix's staff and technology into a new group called @WalmartLabs that it tasked with serving as a hub for social innovation.
A big part of its mission is to crack the social puzzle—how can the retail giant make use of the copious amount of information consumers share online to drive consumers to buy at Walmart.com and in its more than 10,000 stores in 27 countries?
If Wal-Mart proves successful in finding concrete ways to turn social data into sales it would be a major coup, says Sucharita Mulpuru, Forrester Research Inc. vice president and principal analyst for e-business. "There's still so much unknown about social," she says. "Many retailers don't have a clear understanding of how social has a clear impact on their brands."
@WalMartLabs is hoping to change that. The group's first effort debuted in December. Called Shopycat, it is a Facebook application that mines a consumer's posts and Likes to help her find the ideal gifts for her friends and family.
If a consumer posts a status update, "On our way to cheer on the Sox at Fenway," Shopycat infers that the user is a fan of the Boston Red Sox and presents Red Sox-specific gift ideas from Walmart.com, as well as from about 50 other online retail sites, including BarnesandNoble.com, such as a Red Sox-themed Monopoly board game. The application is also designed to ensure that a Yankees fan whose Facebook page oozes hatred of the BoSox won't receive Red Sox-themed gift suggestions, Raj says.
Because @WalMartLabs is initially focused on figuring out what resonates with consumers, the retailer is primarily measuring how often consumers use Shopycat, not the sales it generates. Launched Dec. 1, Shopycat was installed roughly 125,000 times during its first three weeks. The average session time was about 15 minutes, Raj says. Those results exceeded expectations, he says, convincing Wal-Mart to continue investing in the application to improve the quality and relevance of the recommendations.
Big companies don't usually move quickly, and that's why most of @WalMartLabs' experiments don't initially appear on Wal-Mart's Facebook page or Walmart.com. "By not always using Wal-Mart's scale we can be nimble and fast when it comes to innovation," Raj says. "We can experiment and try new things like a start-up. Then, when we're ready, we have access to Wal-Mart's scale."