Can You Judge a Retailer by Social Media?

By Stephanie Taylor Christensen  JAN 12, 2012 4:45 PM

A look at "retail standouts" according to online and social media experts, and their reality, based on holiday sales figures.

 


There's little debate that retailers who embrace Facebook, Twitter or Google+ (GOOG) can get a "leg up” on the competition. Customers love shopping with social media since being a friend, fan, or member often translates to early notice of promotions and exclusive sales. Retailers love the relationship-building that comes from such customer engagement, especially now that evidence suggests people are more likely to "like" a brand once they see a friend is already on the bandwagon.

But does a company’s social media success reveal insight for investors looking to spot a company’s potential and future trends? You be the judge.

Here’s a look at “retail standouts” according to online and social media experts, and their reality, based on holiday sales figures.
 
According to Klout, measurer of so-called “online influence,” Amazon (AMZN) was the top dog this holiday season—at least based on social media buzz. Amazon currently has nearly 2.3 million Facebook users who ”like” its brand page. The retailer used that base to build buzz around its Amazon Kindle Fire, offering those who would also “like” the new product’s Facebook page a chance to win a free $200 gift card. 

Investors won’t know exactly how effective Amazon’s efforts were until the official Q4 2011 earnings announcement at the end of January, but it released a statement after the holidays concluding that “2011 was the best holiday ever for the Kindle family," and that “Kindle Fire is the No. 1 best-selling, most gifted, and most wished for product across the millions of items available on Amazon.com.”  However, one key measure of m-commerce success is the amount of time it takes for a retail site to load. According to Internet Retailer, Amazon.com, which once topped the "Internet Retailer MobileCommerce Top 300” list, actually dropped to number 10, because “both the load time and the success rate of the e-retailer’s m-commerce site home page increased significantly.”
 
Victoria’s Secret is another retailer at the top of its social media game. Its Facebook page has more than 16.5 million “likes,” and Victoria’s Secret Direct is ranked No. 1 on the performance index by Internet Retailer for quick site load times. According to the Klout list, it’s also the second most influential online retailer. It will likely gain investor fans as well after this holiday season.  Its parent company, Limited Brands (LTD) outpaced analysts' estimates when it reported a same-store sales increase of 7% for the five weeks ending December 31, 2011.
 
But, social media strategies can’t overcome a lackluster shopper experience, or merchandise mix. Though also ranked as a site with one of the fastest load times in December 2011, along with Apple (AAPL), JCPenney (JCP), the third most influential retailer according to Klout, posted a disappointing .3% gain in comparable store sales this holiday a season. Analysts blame a need for “more compelling brands,” beyond its recent partnership with high-end beauty brand, Sephora. (The company also recently announced that Myron E. Ullman III will step down as chairman.)
 
Though a drugstore chain may not be an instinctive fit for social media activity, Walgreens (WAG) has nearly 1.5 million Facebook fans, and was also recognized on the Klout list. The customer engagement may prove powerful in the company’s latest venture of offering a higher-end merchandise mix that includes fine wines and sushi -- and in mitigating any fall out from its exit from the “Express Scripts” pharmacy network, which went into effect at the start of the new year.
 
Best Buy (BBY), Target (TGT) and Macy’s (M) also claimed spots on the Klout online influence list, thanks to high volume of promotions, giveaways and topical questions intended to increase user interaction -- but Macy’s is the only one that successfully translated that buzz into sales. The company has improved its focus on customer service in terms of store experience, and attention; its social media strategy includes responding to most customers individually. Its online business  (which includes bloomingdales.com), saw a boost of 35.8% in December 2011.

Despite nearly 8 million “likes” for its Facebook page, Target’s holiday performance came in below analyst expectations, due in part to “softness” in the electronics, movies, books and music categories.
 
With more than 5.5 million Facebook fans, Best Buy represents the conundrum of social media: Customer engagement doesn’t equate to happy customers. Though its online sales were a bright spot this holiday sales season, it committed a major ecommerce “oops” by failing to fulfill some orders before Christmas. Whether the retailer can regain trust of its customers remains to be seen. (Check out some of the “fan” comments on Best Buy’s Facebook wall; the company has some social media image repairing to do.)

Twitter: @WellnessOnLess
No positions in stocks mentioned.

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