Five Reasons why Supply Chain Leaders need to know More about Social Commerce

by Lora Cecere on March 19, 2010 · 2 comments

As he opened the door and smiled to let me out of my cab, my eyes read the slogan on his tie-dyed T-shirt.  It read “keep Austin weird.” I smiled back, and walked into the world of South by Southwest (SXSW).  Not only is Austin a little avant-garde, SXSW is TRULY an experience. 

The comments by the readers of my blog should have been my first clue that attending SXSW was going to be a unique experience.  The comments varied by generation. The response from my baby boomer friends  was “why are YOU going to SXSW? And, what is SXSW anyway?”  While my millennial buddies responded with “ cool, very cool. I am jealous. Please tell us about it on Twitter.”  The funniest response came from one of my prior employees.  I had managed this employee in a very hierarchical organization.  She was my creative web designer when I was a Chief Marketing Officer (CMO).  As I was stepping off the fourth floor conference center escalator at SXSW, she saw me, stopped her conversation with her group of friends and said, “what are you doing here?”  Her body language reminded me of the time that my daughter asked me to park four blocks away from the movie theatre so that her image with the cool kids at school was left untarnished.  SXSW is definitely for the cool kids of social commerce.

 Yes, my traditional supply chain friends, SXSW is not your average experience.  My Altimeter partner, and now my friend, Jeremiah Owyang aptly described it as “twitter manifested in the physical”.  It is the nexus of social commerce coolness.  Social commerce is the use of social media (e.g collaborative communities, mobile applications, blogs and twitter) for commerce. I went to learn.  I wanted to understand why supply chain managers should care about the evolution of social commerce.  While I am still on my journey, here our my initial thoughts:

 Five Reasons why the Supply Chain Leader needs to Care about Social Commerce

 

-Understanding YOUR True Customer.  The best supply chains start with the customer and work backwards.  (Traditional supply chains were erroneously designed to work forward from supply.)  Social commerce opens new avenues for you to truly KNOW your customer.  Whether it is through micro-blog feedback, rating systems on social networks, or twitter comments, the feedback is quicker, more direct and more actionable. Johnson & Johnson has a group focused on developing and gaining insight from the Mommy Bloggers and many sales of wine are influenced by blogger feedback.  Social communities allow you to have direct interaction with your customers.  Take Kohl’sfor an example.  If you are having a bad day, join arms with the 958 thousand Kohl’s fans on Facebook.  The comments are SO positive. And, why? The stores are measured based on customer feedback.  The comments are quickly channeled to the stores to drive improvement.  The Kohl’s curator of the sight does a masterful job of orchestrating the comments and building a community. It is like going to cheerleader camp: enthusiastic sharing.  

There is a reason why there are 140,000 iPhone applications.  At SXSW, there were many sessions to discuss successful iPhone application.  My take away?  Success comes when it provides unique insights that lifts the brand.  Consider the Charmin application, SitorSquat, that rates bathrooms.  It is utilitarian. It helps families to find the closest, cleanest restroom without in-your-face marketing for Charmin. It follows the right rules for an iPhone application:  communication by a passionate brand to convey essential information in a changing environment without in-your-face marketing.

-It is about Commerce<stupid>. In the youth and energy of SXSW, there was very little tie to real commerce.  One of the reasons why I find it so exciting is that it opens up new opportunities for demand shaping.  Whether it is Whole Foods’ Four Square promotion, Wet Seal’s virtual reality changing room (allowing your friends to comment on your clothing selections before you buy), product reviews, iPhone applications, or tailored promotions pushed to your mobile device, social commerce is opening new, and creative ways, for companies to shape—boost demand—to spur sales. 

To do this, the challenges for the traditional organization are many. We lack history to guide value-driven decisions.  Many of the forays are based on creative leaps of faith.  While we know, that traditional promotions affect lift within the period of sales, pricing has defined elasticity curves and advertising has multiple-year halo affects on demand, we have no history for social commerce.  It is new.  While marketing mix applications can help us to rationalize the ROI and the potential lift for the right mix of price, promotion, and conventional advertising.  Not so, for social commerce…. It is too new.  We do not know the trade-offs, and most of the time we cannot share a well-defined ROI plan.  It worked for YUM brands.  Through the use of their iPhone application–enabling the ordering and configuration of pizza online– YUM brands successfully snagged competition from the mom and pop pizza operators.

As these programs become more mainstream, the supply chain manager needs to prepare.  The demand from these programs is more erratic and demand volatility is higher than conventional promotions. For example, Kraft Foods experienced over 100X the sales through their picnic ad last Memorial Day.  As a result, companies activating promotions through social commerce need to re-design their supply networks for greater resiliency, and build a more agile response expecting higher demand volatility.

-Blurring of Channels.  With the introduction of e-Commerce, the goal was clear.  The race was on to deliver a seamless cross-channel experience.  Social commerce ups the ante.  Take Best Buy as an example.  90% of Best Buy’s customers start their shopping experience on-line on Best Buy’s website.  The more advanced social commerce user will search online, read the reviews, and take a trip to the store to check out the physical experience.  But, then, like my savvy stepson, they pull out their iPhone and place the order in the store.  They avoid the lines and the check-out hassle, and they snag even more loyalty points by ordering on-line.  In the last six months, customers have downloaded 700 thousand Best Buy iPhone applications.  Social Commerce and eCommerce is converging.

What does this mean for the supply chain executive?  Master data accuracy, accurate real-time inventories, and better Available to Promise (ATP) signals. With social commerce, there is a greater need for the immediacy of data and the bar for service is greater.  Imagine how asavvy iPhone user will feel when they learn that their item is out-of-stock.   No longer will they be silent.  Their friends will hear about it on Facebook.

-Driving Open Innovation Networks.  In the next year, social commerce can drive a step-change in open design networks.  It gives us access to customers that REALLY care about products to give us immediate, and knowledgeable feedback spanning geographic boundaries.  Consider Fiat’s foray and use of social communities in Brazil to gain loyal customer feedback on which products to launch,  or Lego’s use of educational communities to package the right products for in-school learning for each geography.   For R&D, raising the curtain to gain real-time immediate feedback from customers cannot come fast enough.  The average consumer products 18 months to launch and brands are under attach from private label sales.

Next Evolution of True Participative Team Management.  Peter Drucker drove it.  New manufacturing plants were built on the concept. Supply chain excellence results year-over-year rewards companies that build strong horizontal processes across source, make, deliver processes in flat—not hierarchical– organizations.  Supply chain leaders that have built and managed high-performance teams know that it works. The problem is sustaining it.  And, how to reach Gen X and Gen Y, and hold their attention.  Social commerce enables flat organizations.  …consider AAFES.  This retailer supplies the armed forces of the United States in peace and in war globally.  Most of their employees in their stores do not use email.  So the answer? Collaborative communities pushed to their mobile device.  Direct communication, self-service human resource functionality, and employee suggestions on store operations on their mobile device. It gives us new ways to communicate and truly COLLABORATE with our most important resource.

So, let me know.  What do you think will be the most important?  How do we prepare?  And, did I miss anything?

If you are like me, a supply chain executive that grew up in a stodgy manufacturing environment, attending events like SXSW and plunging into the use of social networks and twitter may feel awkward.  There is a generational divide, little adult supervision, and over-blown expectations.  You are right to be circumspect.  The technologies are in a hype cycle that will make the .com bust look pale;  but, as you experience the applications and the energy around them, you cannot deny their promise.  Like eCommerce, social commerce will have a long lasting affect on supply chains.  To understand and drive the best opportunities, we need to take the plunge and have the courage to feel a bit out of place.  No doubt about it.  As it evolves, new chapters in supply chain excellence will be written. 

Next week, I am off to India.  I look forward to sharing my stories from this trip.  I welcome your thoughts.

{ 2 comments… read them below or add one }

Ayush March 20, 2010 at 7:30 am

Wonderful article. It is so true that very few companies are using social media to gage the customer’s reaction. Again, another challenge going into the future is going to be “data cleansing”. As accessible as social media is, it is bound to have more bad data as more people adopt. Separating the good data from the bad is going to be a challenge.

Good luck with your trip to India – A country with a much evolved but vastly inefficient push-based supply chain. I recently wrote about Wal-Mart’s interesting India Strategy. An interesting facts from that article about supply chains in India: Almost 40% of all fresh produce in India gets wasted between the time it is produced and the time it reaches the customer – because of the lack of a refrigerated cold chain.

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loracecere March 24, 2010 at 4:13 pm

Thanks Ayush
Always great to hear from you. The more that I research the application of social media and supply chain, the more excited that I get. All the best!
Lora

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