Innovation is more important than ever for retail businesses. So many retail sectors have been disrupted in the last decade by the effects of innovation. The music industry, for example: gone are the days of having Sanity and Brashes to buy your CDs. Amazon has completely changed the way we buy books and we’ve seen Red Group go under here in Australia. We’ve seen Google and Facebook change the way we look for products, with Facebook giving us easy access to what our friends are doing and purchasing, changing our research and buying habits. We’ve seen innovation in the warehouse and distribution space too. Diapers.com, for example, uses robots to take pallets all around the warehouse to systemise the picking process and cut labour costs. Then in Australia we’ve seen the big retailers come around to the importance of online retailing, and we’ve seen some other retailers - Gerry Harvey and Myer - with their ill-conceived campaign to lower the GST threshold on imports under $1,000. Obviously they’re seeing that online retail is changing the face of their business and unfortunately they’re pushing back against it instead of embracing it. The retailers who succeed over the next 10 or 20 years will be those who adopt innovation, bring that inside that business and create an innovative culture.
Among the technological trends going forward is mass customisation. Mass customisation is creating a product in conjunction with your customer that the customer then purchases. The retailer or the manufacturer uses some of the mass production methods to create that unique product for the customer. An example is Youtailer, which allows you to design your own suits and business shirts, based in Germany and doing extremely well. Nike iD allows you to design your own sneakers. Then of course there’s Shoes of Prey. We allow you to not only change the colour but the entire structure of the shoe using our online shoe designer. Then we hand make and ship the shoes to you within five weeks.
We see mass-customisation as a strong trend in retail and it’s our goal to really drive that space over the next five years in the women’s fashion accessory area.
There’s also social media, a rapidly evolving space. Facebook is less than 10 years old and has 700 million members and enormous valuations. We’ve seen LinkedIn’s IPO and their stock price do really well. We’ve seen Twitter also grow impressively in the last few years. What I love about social media is that rapid pace of change allows for retailers to do really innovative things because no-one’s really sure how the space is going to evolve, it’s changing so fast. There’s fantastic marketing opportunities in the space if you can be creative.
I’ll give you an example. Shoes of Prey partnered with some video bloggers on YouTube last year. One was Blair Fowler, 16-years-old, based in the US with a YouTube channel where she started out doing make-up how-to videos. She built this incredibly large audience – every video she posts to YouTube gets 600,000 – 700,000 views. To put that in perspective, A Current Affair, one of the top rating TV shoes in Australia, on a good night gets one million viewers.
She started doing fashion videos so we thought we’d see if she’d want to maybe do a video on Shoes of Prey. Her Hollywood agent wrote back to us and explained we could send some shoes. If Blair liked the shoes we could pay her a fee and then she’d do a video on us. So she designed some shoes, she loved the shoes and we did a video. We also ran a competition in which her viewers could come to our website and design a pair of shoes for themselves, then go back to YouTube and leave a comment describing the shoes they designed and an event they would wear those shoes to. It was really good branding.
At the time of doing this, in March 2010, our website had been live for five months and we’d had 200,000 people visit our website in those five months. We were happy with having had 200,000 visits in those five months.
The day this video went live, we had 200,000 people visit our website. The week the video went live, we had half a million people visit our website. For the competition, we had 90,000 people come to our site, design a pair of shoes and leave a comment on the YouTube video describing the shoes they designed. The video was the third most viewed video on YouTube worldwide that day, and it was the most commented on video on YouTube worldwide that day as well. So we had really good branding but unfortunately our sales didn’t spike in the same way and we quickly realised why.
At that time we had chat set up on our website so customers could chat in and suddenly we were getting all these 13-year-old girl type questions: ‘Hi, I want to be a shoe designer when I grow up, how can I become a shoe designer?’ All these questions that weren’t leading to sales. We realised these 500,000 people coming to our site were all 13 or 14-year-old girls. We had to work out how to capitalise on this traffic.
We made a few quick changes to our website. We put share buttons on our website to make it easier to share your shoe design on Facebook and Twitter. That encouraged all the 16-year-old girls to introduce our product to their older sisters, their older friends and their mums, who are all in our target audience. Then we wrote a post on our business blog about the experience. That blog post got picked up by a whole lot of people in the tech media and business media and we got a whole heap of coverage. We did some interviews on Sky Business News, The Wall Street Journal in the US wrote about us, The Courier Mail in Brisbane.
The end result of it all was that about three weeks after the video went live our sales had tripled and they stayed there – they never dropped back below that mark. As a point of comparison, A Current Affair did a story on us in September last year and gave us great results, but the sales uplift from the YouTube video and A Current Affair were on par: a 16-year-old girl is matching some of the highest rated TV shoes in the country.
We also use Facebook. We use it like a lot of businesses do, to talk to our customers and get customer feedback. We’ve got just over 23,000 fans on our page and it’s a very active fan base.
Something we did a couple of months ago that tripled the activity on our Facebook page was changing how we sign off our Facebook posts. Jodie, one of the other co-founders of Shoes of Prey, posts a lot of video on the Shoes of Prey website. Customers know who Jodie is. Meanwhile, Jodie was answering all the questions on Shoes of Prey’s Facebook page as an unidentified Shoes of Prey employee. Someone mentioned to us, ‘Why don’t you sign off with Jodie’s name?’ So we did. Immediately, the interaction on our Facebook page tripled. Customers were suddenly able to talk to the person who was in all the videos on our site. Then, they started asking questions. One of our best customers asked for a photo of someone wearing a particular peep toe style, so we came into the office the next day and posted a photo of this shoe. Over the next two days we sold 10 pairs of those wedges. Just adding that little personal touch of Jodie’s name made a big difference for our brand.
Blogging is another great tool for us within the social media space. We have a Shoes of Prey blog and we have a business blog. We’ve been posting on the latter three times a week over the last two years. We brand it separately to Shoes of Prey – we don’t necessarily encourage our Shoes of Prey customers to go there because we’re talking about the back end operations of the business – but it’s a fantastic tool on the business development side of things. Something a lot of people ask is, ‘Are you concerned that you’re too open about the business and that competitors might come along and take your ideas?’ That is a concern, but we’ve really had such little of that happen. The pros of hundreds of people brainstorming different ideas with us outweighs any negatives.
Next, there’s augmented reality. They’re still working this out but experiments thus far involve things like a customer moving around in front of a standard web cam using Xbox Kinnect as a means of ‘virtually’ trying things on. She can try on different handbags, change the background, change the colour of her handbag to see what it looks like with the actual outfit she’s wearing. One of the labs that’s developing this is the same lab in Silicon Valley that invented the mouse that we all use on the computer. I really think in 10 years’ time this sort of thing is going to become so ubiquitous.
Then there are innovations you can make to the back end of your business. We had a whole heap of questions in our business around where our customers are when they are buying our shoes. We’ve got all the addresses of where we send the shoes so we decided to map all of the purchases on Google Earth. We suspected there might be ladies all in the one office who had all seen Shoes of Prey and would use one person as a guinea pig, testing the site, shoes and service. If she had a great experience, her 10 colleagues would also place an order. And we were right, you can actually see that on the data. We’ll see one order happen at a particular workplace address, then four or five weeks later when they get the shoes there’ll be another little spurt of orders at that same address.
The final point I wanted to touch on was building a culture of innovation in your business. As an example, one of the things we do to build that innovative culture is hold series of tech talks in our office. This is a concept we borrowed from when I worked at Google. We’ll have Friday night drinks and invite somebody in the retail or tech industries – somebody who’s doing something exciting, innovative and interesting that might relate in some way to Shoes of Prey – to come and do a presentation. We actually open it up not just to our Shoes of Prey team but to anyone who wants to come along. Our last presenter was Posse, a music start-up. For a few hours, everyone was brainstorming about how what Posse does might apply in the retail space.
The key piece to building a culture of innovation in your business is to in-source innovative tasks. I think a lot of retail businesses get consultants to come in to set up this new project; they don’t develop those skills in house. I really think that’s a mistake. If you want to be a really good innovator, you need to build those skills within your business. Outsourcing can be great for a lot of different things and a lot of different reasons, but just make sure you’re not outsourcing your innovation.
In building a culture of innovation you’ll do new things and you’ll make mistakes and you need to be prepared for when that happens. You need to be prepared to review and adjust. Here’s an example: all of our shoes are made from leather and animal materials, and we had a person come onto our Facebook page who was very pro-animal rights. While she is welcome to her views, she was very disparaging of our business for using animal materials, and in a very public place, our Facebook page. We had a debate internally about what to do. We decided to leave a comment on Facebook in response, offering our email address and phone number. We said that while we could totally appreciate her concerns, if you want to talk about it let’s take it offline. It achieved a good result in the end – that response ended the conversation. But if you’re being innovative and you’re doing new things, you’ve got to be prepared for mistakes to be made. You don’t want to punish people in your team for making mistakes, because probably half of what you do will be a mistake and will fail and you need to encourage and still reward failure when innovation is happening.
Our view is that innovation is critical for retailers moving forward over the next 10 or 20 years. If we want the Australian retail industry to be a leader in the world we need to not be trying to run campaigns to lower the threshold on GST on imports and stop online retail so we can protect our businesses. We need to get out there and innovate and build an innovative culture within our retail businesses.