Social Media Index: Apparel

Let's try to end the week with a little fun, ok?

Using Google Blogsearch, I queried how often forty-one apparel and shoe brands were mentioned in blogs, both ever, and during the past month. Only brands with distinct names were included. For instance, a query on "Gap" is not fruitful, as the search returns too many instances not related to the Gap store. The problem is much less pronounced with "Zappos".

For each of forty-one brands, I calculated an index that balances long-term blogging buzz, and short-term (30 day) blogging buzz. Long-term and short-term buzz are weighted equally. The results are in the table at the end of this article.

Here are the top ten apparel/shoe brands, based on long-term blog buzz and short-term blog buzz.

1 = REI
2 = American Eagle
3 = Sears
4 = Urban Outfitters
5 = Patagonia
6 = Old Navy
7 = Gymboree
8 = Liz Claiborne
9 = Lane Bryant
10 = Eddie Bauer

Brands that had good long-term rankings include Sears, REI, Lands' End, American Eagle, L.L. Bean, Zappos, J. Crew, Old Navy, Victoria's Secret, and Patagonia. Most of those brands sell a ton of merchandise, and therefore, may influence the total number of mentions in the blogosphere.

Brands that had good short-term rankings include Sierra Trading Post, REI, Liz Claiborne, Lane Bryant, Urban Outfitters, Bluefly, Gymboree, Orvis, Anthropologie, Nine West. These brands had "buzz" that exceeded what they had achieved prior to the past thirty days.

By combining long-term and short-term buzz, we get the ranking illustrated earlier.

Buzz does not translate to sales or profit. But it is interesting to see which brands had a lot of long-term mentions, and to compare that list with the brands that have improved their buzz in the short term. REI appears on both lists, clearly leading the pack.

What do you think, folks? Is there any validity to measuring buzz in this manner? Send me your comments, and let me know whether this or some other version of this is a worthy endeavor.



The Table:

Apparel And Shoe Social Media Index: February 8, 2007
	Mentioned Ever	Mentioned Last Month	Last Month Pct.	Ever Rank	Last Mo. Rank	Index
REI	159,992	27,266	17.04%	2	2	2.0
American Eagle	130,589	17,259	13.22%	4	14	9.0
Sears	221,819	27,060	12.20%	1	19	10.0
Urban Outfitters	27,626	4,502	16.30%	16	5	10.5
Patagonia	49,700	6,602	13.28%	10	13	11.5
Old Navy	64,590	7,952	12.31%	8	18	13.0
Gymboree	18,430	2,860	15.52%	20	7	13.5
Liz Claiborne	14,584	2,478	16.99%	25	3	14.0
Lane Bryant	14,760	2,444	16.56%	24	4	14.0
Eddie Bauer	23,582	3,142	13.32%	18	12	15.0
Victoria's Secret	54,609	6,373	11.67%	9	21	15.0
Anthropologie	16,302	2,358	14.46%	22	9	15.5
Neiman Marcus	31,608	4,134	13.08%	15	16	15.5
Sierra Trading Post	7,328	1,511	20.62%	32	1	16.5
Abercrombie & Fitch	35,069	4,221	12.04%	13	20	16.5
L.L. Bean	116,647	12,749	10.93%	5	28	16.5
Lands' End	137,618	14,437	10.49%	3	30	16.5
Nordstrom	44,558	4,981	11.18%	11	23	17.0
J. Crew	70,282	7,708	10.97%	7	27	17.0
Bluefly	9,681	1,521	15.71%	31	6	18.5
Nine West	14,210	1,989	14.00%	27	10	18.5
Orvis	10,180	1,569	15.41%	30	8	19.0
eBags	15,222	2,010	13.20%	23	15	19.0
Bloomingdales	10,601	1,470	13.87%	28	11	19.5
Saks	39,673	4,283	10.80%	12	29	20.5
Ann Taylor	14,544	1,795	12.34%	26	17	21.5
J. Jill	17,713	1,976	11.16%	21	24	22.5
Brooks Brothers	18,650	2,063	11.06%	19	26	22.5
Zappos	75,526	4,978	6.59%	6	39	22.5
Banana Republic	34,739	3,617	10.41%	14	32	23.0
J.C. Penney	26,477	2,777	10.49%	17	31	24.0
Norm Thompson	2,663	303	11.38%	40	22	31.0
Chadwicks	3,101	344	11.09%	39	25	32.0
Burlington Coat Factory	10,572	441	4.17%	29	41	35.0
Dooney & Bourke	3,977	413	10.38%	38	33	35.5
Jos. A. Bank	4,696	432	9.20%	37	34	35.5
Talbots	4,885	432	8.84%	36	35	35.5
Bergdorf Goodman	5,189	441	8.50%	35	36	35.5
dELiA's	5,984	435	7.27%	34	37	35.5
Coldwater Creek	6,562	439	6.69%	33	38	35.5
Lord and Taylor	2,133	117	5.49%	41	40	40.5

The Neiman Marcus Fashion Week Blog

Once you start writing daily blog posts, and earn the right to have an audience, you wonder why companies are SOOOO SLOOOOOW to adopt this form of communication.

So when a reputable company launches a blog, you open your eyes and your mind.

Neiman Marcus is hosting something that resembles a blog, discussing the events transpiring at Fashion Week.

There isn't a social aspect to what is being written. Readers cannot offer their comments. But Neiman Marcus Fashion Director Ken Downing gives his customers a glimpse into an event they can never hope to attend. His writing brings fashion and commerce to life.

Neiman Marcus customers are buying the fusion of the story and the fashion.

Finally, somebody in e-commerce is communicating a story. Somebody is finally romancing the customer.

Downing is channeling Fashion Week to loyal customers, who will spend more than a thousand dollars in a heartbeat based on Ken's writing.

To heck with the ROI of blogging, the IT infrastructure needed to do this, the public relations nightmares that can occur. In fact, to heck with blogging. Why not simply romance your customers for once?

Stop cross-selling and up-selling. Stop trying to avoid shopping cart abandonment. Stop the boring e-mail campaigns. Stop the generic discussion about why your denim jeans are better than twelve thousand other brands.

Start giving your customers something they can't get anywhere else.

Ken Downing is giving his customers insight into an event they cannot hope to attend. He's giving them a reason to purchase something. And that's why we all work for businesses ... we are trying to sell our customers something. Instead of trying to interrupt the customer, give the customer something, SELL them something. Use words, communicate, share your emotion and passion.

Thumbs-up to Neiman Marcus for at least trying something interesting.

Where's The Talent?

I participated in a vendor-sponsored survey today, answering questions about the relevance of a product the vendor wanted to sell to businesses.

Toward the end of the survey, the person asking questions queried me regarding what the first thing is that I would purchase if I had an additional $100,000.

I told her, "A Highly Talented Analyst". Her response to my proclamation was "That's what every respondent says."

Somewhere between the strategy our leaders ask us to implement, and all the tactics we employ to drive sales and profit, we have a gaping pothole on the multichannel marketing turnpike that needs to be filled with an immediate infusion of talent.

We give Google responsibility for driving fifteen percent of our online business. In the process, we give all the intelligence of knowing why our business works to Google. We hire internal staff and vendors to be subject matter experts at manipulating Google.

Half of UK businesses fail to adequately measure the performance of their e-mail campaigns.

Maybe it's ok that we don't measure the ROI of e-mail campaigns, given that the performance of e-mail continues to free fall. As mentioned yesterday, we celebrate a medium where we sell something to one customer in five hundred. My father sold vacuum cleaners door-to-door in the 1960s. Do you think he would have celebrated one sale in five hundred visits?

In the past ten years, I observed at least three trends that resulted in a dearth of talent.

• Demographics: There are far fewer thirty to forty year old employees than there were ten years ago, as Gen-X moves into their prime earning years.
• Algorithms: We learned how to manage computers, or we learned how to manage businesses that managed technology. We spent less time understanding why our businesses worked. We spent more time managing the technology that made our businesses work. Now, we're a slave to technology. We need to be slaves to understanding why customers purchase from our businesses.
• Strategy vs. Tactics: The time we spend on tactics, especially those tactics that allow us to manage algorithms, takes away from the time we need to spend developing strategies. Take an honest look at the company you work for. Can you identify the three strategies your company is working on in 2007 --- and do you know which tactics you can use to make your strategy happen?

We need to spend time developing humans (not algorithms), teaching the skills humans need to be effective in a world dominated by real-time algorithms.

Where you can, spend more money developing your employees, and spend less money outsourcing your key functions to vendors. Obviously, there is a balance to be achieved in outsourcing key functions. Where possible, invest in your own people.

Use today to develop tomorrow's leaders.

E-Mail Marketing: Success Or Apathy?

Assume that your average e-mail marketing program has the following metrics:

• An open rate of 26%.
• Among those who open the e-mail, 30% clicked-through the e-mail to your website.
• Among those who clicked-through to your website, 2.8% purchase something.

When we multiply the metrics together, we learn that 0.26 * 0.30 * 0.028 = 1 in 458 customers who received the e-mail decided to purchase something on your website.

Considering that the marketing cost of e-mail is virtually free, the ROI of your e-mail campaign is utterly spectacular. Woo-hoo!

Let's take a second look at the metrics of your campaign:

• Nearly three out of four of the people who received your e-mail didn't even bother to open it.
• Only 0.26 * 0.30 = 7.8% of your list cared enough to visit your website.
• Just 1 in 458 customers purchased something, a 0.2% response rate.

Do you consider your campaigns a success, if it had a spectacular ROI, but was completely ignored by three out of four recipients, and only harvested one purchase among four hundred and fifty eight of your loyal customers?

What do you pay more attention to, the outstanding ROI, or the complete apathy of your customer base?

Virtual CEO: Coldwater Creek and Inventory Management

Through comments and e-mail, many loyal readers of The MineThatData Blog voiced their opinion on creating a good customer experience when items are sold-out on a website. This discussion started when Becky Carroll talked about items being pulled from her shopping cart during a recent online shopping experience at Coldwater Creek.

What has been discussed can be summarized around at least four key constituents.

First, you have the customer, who rewards outstanding shopping experiences with loyalty and word-of-mouth.

Second, you have the inventory executive, responsible for the unforgiving task of not buying too much merchandise (requiring markdowns, and less profit), while at the same time not buying too little merchandise (causing lost sales, less profit, and a reduction in customer loyalty).

Third, you have a management team that prioritizes the work of the information technology folks, ultimately determining what the online customer experience looks like to the consumer.

Fourth, you have the Chief Executive Officer, responsible for determining an incentive plan for her leaders, an incentive plan that rewards leaders for accomplishing company objectives.

In most direct-to-consumer businesses, one of the primary objectives is to maximize fulfillment while minimizing markdowns. There is a sweet spot where profit is maximized. When too much merchandise is purchased, markdowns occur.

Markdowns are horrible for a business, because the business freely gives up profit to pay for mistakes in execution and anticipation of fashion. A $100 item that has a $50 cost of goods yields $50 of profit. Marking the item down to $69 to clear it reduces profit on that item from $50 to $19. Worse, the customers who buy the item are often discount-oriented customers, meaning there are fewer loyal customers willing to pay for something at full price.

Lost sales are also horrible for a business, as evidenced by Becky's post. Lost sales can create a bad experience if not executed correctly, and can reduce customer loyalty.

CEOs like to provide incentives to Inventory Executives, incentives that protect the profit of the overall business. An Inventory Executive might receive a larger bonus payout if he hits the 'sweet spot' between lost sales and markdowns. An Inventory Executive quickly loses his job when he fails to hit the sweet spot.

As a result, the Inventory Executive has a significant incentive to endorse any strategy that protects the profitability of the business, and the long-term prospects of keeping a well-paying job. This person could encourage any activity that is, theoretically, not a great customer experience, if it means that more data is collected on items where the Inventory Executive makes a mistake.

I am not saying this is what happens at Coldwater Creek. I am saying that seventeen years in this industry help me understand what the business is up against.

So here is a challenge for all of my readers who responded via comments and e-mail on behalf of the customer (I have yet to receive one response supporting the leaders of a business).

Pretend you are the CEO of Coldwater Creek. Knowing what you now know about managing inventory, how would you set up a bonus plan for your leadership team that achieves the following:

• Protects the 'sweet spot' where your inventory team doesn't purchase too little merchandise, or too much merchandise.
• Provides incentives for your creative or online marketing team to write language that is customer friendly when merchandise is not available, or is about to run out.
• Provides incentives for your IT staff to work outside of company-stated priorities to fix problems like the shopping cart issue that frustrated Becky, while still addressing company-stated priorities.
  
• Provides incentives for your analytical folks to develop analytical tools to correctly forecast potential sales when items run out.

What would your bonus plan look like for your leadership team, to accomplish these objectives?

An even more intriguing question to consider --- what do you do when your CEO and Inventory VP don't have a passion for the customer experience, won't allocate resources to fix the problem, are not likely to be fired in the next few years, and are delivering outstanding sales and profits? Now what?

Is An Item Profitable?

So many of us in multichannel retailing are asked to quantify how individual marketing activities perform.

We measure the effectiveness of an e-mail campaign. We prove that catalogs and direct mail drive business to the online channel.

Congratulations, we demonstrated that advertising works! Maybe.

Now it is time for us to measure how advertising influences the sales of individual items. I don't sense that our industry is doing the best job of measuring the profitability of an individual item, after factoring in the effect of advertising.

At the end of this post, I include a template for measuring the overall profitability of a specific item. In this case, we advertise the item through catalogs, through e-mail campaigns, and through online advertising (search, portals). During the course of an eight week period of time, we total the sales of the item, both online and over the phone. We also sum all advertising of that item.

What follows is a multichannel profit and loss statement for an item. This exercise should be replicated for every item sold by your business. Yeah, that's a lot of work. But how else are you going to know what sells, what sells because it is advertised, and what doesn't drive profit?

Quite honestly, the advent of the online channel has reduced our industry's zeal to understand the profitability of items. In catalog, it is easy to measure profitability. We need to have a passion for understanding which items truly work, across all channels.

Here, then, is a mocked-up template for the multichannel profitability of a single item. If you work for a business that also has a retail channel, simply add an additional section to the template for the retail channel.

Multichannel Merchandise Profit And Loss
Catalog Metrics
Catalogs Mailed		1,000,000
Total Pages in Catalog		124
Total Book Cost	$1.00	$1,000,000
Percent of Page Allocated		33.0%
Cost To Advertise This Item		$2,661
Total Responses		225
Response Rate		0.02%
Response per 000 Pages		0.07%
Units per Order		1.15
Total Units Sold		259
Price per Unit		$65.00
Total Demand		$16,819
Fulfillment Rate	88.0%	$14,801
Return Rate	25.0%	$3,700
Net Sales	66.0%	$11,100
Online Metrics
Total Visits To The Website		1,483,005
Total Visits, This Item		4,593
Total Website Cost, Non Adv.		$800,000
Cost Allocated To This Item		$2,478
Placed In Shopping Cart	25.0%	1,148
Total Responses	55.0%	632
Units per Order		1.08
Total Units Sold		682
Price per Unit		$65.00
Total Demand		$44,334
Fulfillment Rate	94.0%	$41,674
Return Rate	25.0%	$10,418
Net Sales	70.5%	$31,255
Multichannel Profit And Loss Statement
Multichannel Net Sales		$42,356
Gross Profit	48.0%	$20,331
Less: Book Cost		$2,661
Less: Website Cost		$2,478
Less: E-Mail Cost		$1,500
Less: Online Marketing Cost		$3,550
Less: Pick, Pack, Ship	11.5%	$4,871
Variable Operating Profit		$5,271
Profit as a % of Net Sales		12.4%

J.C. Penney CEO, Web 2.0, And Multichannel Forensics

DMNews reports that "multichannel" is the key theme at Shop.org's FirstLook show.

Of interest is the comment from J.C. Penney Chairman/CEO Mike Ullman, who says of direct marketing, "We see the three channels getting more and more blurred. The big book is becoming less important, because the big book is online."

Small businesses and growing businesses need catalogs, because the print version of advertising is still the most cost-effective way to grow a direct-to-consumer business.

However, large businesses like J.C. Penney are going through two dramatic transformations that we all need to keep an eye on.

The first transformation is the death of the telephone/paper relationship, being replaced by e-commerce. This has been happening in earnest since about 1999. J.C. Penney's direct business transitioned this year to more than fifty percent online. Once the online channel is more than fifty percent of the direct business, CFO's become very curious about all those dollars being spent on paper.

The first transformation (telephone/paper to e-commerce) impacted catalogers the most.

The second transformation is just beginning to happen, and may change our businesses far more than e-commerce. The second transformation is the shift in the online channel from e-commerce to experience.

The second transformation (e-commerce to experience) will impact retailers and online pureplays the most. Just because we can purchase merchandise online doesn't mean we want to purchase merchandise online. Retailers who can, in some way, re-create the in-store experience, or significantly complement the in-store experience in a virtual world, will have a huge advantage over online pureplays and online/catalog businesses, who do not have an experience-based channel to please customers with.

The recent bare-knuckled, bloody fist fight between Endless.com and Zappos.com illustrates the desperation online pureplays are feeling. As the second transformation (e-commerce to experience) integrates with the retail experience, businesses like Zappos compete the only logical way they can --- by offering free shipping. Endless trumps Zappos by offering free next-day shipping. Zappos matches Endless, then, Endless trumps Zappos by offering free next-day shipping along with a five dollar rebate.

Websites were constructed to be static, read-only experiences. We built a ton of infrastructure to make e-commerce possible. Over the next decade, this read-only experience will likely be replaced by an experience-based channel. Web 2.0, blogs, wikis, YouTube et.al are the embryonic representation of this transformation.

This is really going to be fun to watch!

This transformation really requires the implementation of multichannel forensics. All businesses with a website must have intimate knowledge of how their customers interact with products, brands and channels.