Monday, September 29, 2014

ModCloth – Social Media and Customer Engagement as Drivers of Online Retail


Over the course of the last few weeks, we have continually learned how variability is bad, yet can be a driver of innovation. Rettig’s article highlights this dichotomy quite well. On one hand, technological advances bring the hope of endless possibility and revenue, while the reality of incorporating change or superimposition of new systems on obsolete ones results in added expenses, human error and long lead times. While Rettig’s tone is on the negative side, I feel that she fails to take stock of companies such as ModCloth, who came to the table after the tech boom, and who seem to have harnessed the power of technological innovation.

ModCloth is an online retailer akin to Starbucks – they not only sell clothing, they sell a user experience. Not only do they allow the user to dictate what wares they stock, they have also created a sense of community and social responsibility (Adamzcyk) that caters to their target end-users:

















Casserly’s article, “ModCloth Hits $100 Million In Revenue, Gives Social All The Credit” highlights how leveraging social internet communities and analytics can translate into revenue. In part, this sense of community comes through peer quality assessment and sharing (photos of users wearing said merchandise), which ModCloth in terms monitors.

Using analytics to predict user behavior is, simply put, ingenious. Using the user input on what they want to purchase – ModCloth has an option where you can add out-of-stock merchandise to your cart, and subsequently be alerted when it is available - most likely cuts down on over-stock and the sense of stock-out. Similarly, keeping costs low by not having a physical location and having a pretty bare bones staff, probably keeps revenue high.

Clearly, tapping into the social media and user interaction/crowd-sourcing can be effective as Gandhi mentions.  However, from my own experience I still feel that Rettig’s concerns are well grounded, especially for companies who have been around for a while.

For example, Kaplan is a rather well-established test-prep company and one I used to work for. When I began as a front desk clerk in 2005, they had just begun transitioning over their DOS based purchasing System (DK Web) to a newer, simple interface system (Kaplan Business System or KBS), where purchasing  and class scheduling were integrated. The full transition took more than 5 years, with the first few years being quite bumpy, as employees were using both systems simultaneously. By the end of the changeover, KBS ran slowly a lot of the time and felt like it was due for an overhaul. Maybe it would have been cheaper and less frustrating to look at alternatives, which involved just starting over.

This brings me to the question week’s reading left me with. My question is whether the real problem is not that of mitigating technological obsolescence, but rather recognizing upfront when technology change will likely become obsolete at the end of the implementation phase and deciding to start over – a tabula rasa - even if the upfront cost is greater?   

References
Adamczyk, Alicia. "Not A Size 2? ModCloth Wants Your #FashionTruth." Forbes. Forbes Magazine, 4 Sept. 2014. Web. 28 Sept. 2014. <http://www.forbes.com/sites/aliciaadamczyk/2014/09/04/not-a-size-2-modcloth-wants-your-fashiontruth/>.

Casserly, Meghan. "ModCloth Hits $100 Million In Revenue, Gives Social All The Credit." Forbes. Forbes Magazine, 23 July 2013. Web. 28 Sept. 2014. <http://www.forbes.com/sites/meghancasserly/2013/07/23/modcloth-hits-100-million-in-revenue-gives-social-all-the-credit/>.

Gandhi, Anshuk et al. "How technology can drive the next wave of mass customization." McKinsey & Company. McKinsey & Company, 1 Feb. 2014. Web. 28 Sept. 2014. <http://www.mckinsey.com/insights/business_technology/how_technology_can_drive_the_next_wave_of_mass_customization>.

"ModCloth YouTube Case Study." YouTube. YouTube, 27 July 2012. Web. 28 Sept. 2014. <http://www.youtube.com/watch?v=05HcERLr98Q>.


Rettig, Cynthia. "The Trouble With Enterprise Software | MIT Sloan Management Review." MIT Sloan Management Review RSS. N.p., 1 Oct. 2007. Web. 28 Sept. 2014. <http://sloanreview.mit.edu/article/the-trouble-with-enterprise-software/>.

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