Collaborative technology remains vital to the performance of retail leaders. This category of innovation, which includes social media, analytics, and Big Data, represents significant challenges to traditional retailers but also the opportunity for a huge competitive advantage.

Some observers may question the value of social media, especially with the valuations of high profile sites like Facebook, Zynga, and Groupon nearing all time lows. Does this mean that the sheen is off these companies? The fact that people were originally too optimistic towards the valuations of these companies does not mean that technology is not radically changing the industry.

Amazon and Apple, on the other hand, are enjoying healthy rises in their valuations and continue to challenge traditional retailers. Amazon is threatening bricks and mortar competitors in a brand new way, by offering same day delivery. The company is investing more than $500 million and hiring 10,000 people in California alone. Apple stores generate more than $5,647 sales per square foot, seventeen times that of the national retail average. In fact, the sales figure is such an outlier that malls report average sales as two line items; one with and one without the Apple Store.

One of the alarming trends for traditional retailers is consumers coming to stores to evaluate products, and then using their smartphones to search for the cheapest price – a process called “showrooming”. There are apps available that will make this process easier by scanning the bar code then diverting to a website with a “buy it now” button.  In this case, the retail store has provided the space, employees, and inventory but receives no financial benefit. In fact, showrooming was one of the key reasons why Best Buy recently reported disappointing quarterly returns.

Here are some trends that illustrate ways that technology is positively impacting the retail industry:

1.      Click and Collect

Companies like Tesco are implementing “click and connect”, a concept where customers use a smartphone to select products from a virtual wall and have their orders delivered to their home. This process allows for retailers to adjust assortment and price in real-time, reduce inventory by consolidating operations and operating from less expensive real estate.  A recent trial by well.ca was covered in our previous blog.

2.      Social Shopping

Customers shopping together using social technology is becoming more common especially in markets like fast fashion where consumers are predisposed to sharing data about themselves via platforms such as Facebook. Organizations like polyvore, ThisNext, and Kazowie allow customers to shop together online as well as share their purchases for comments from the community.

3.      Gamification in Retail

The concept of gamification which refers to the use of game design techniques, game thinking and game mechanics to enhance non-game contexts is appearing more often in retail contexts. One good example is Fantasy Shopper, which lets users create virtual wardrobes from real retailers and share them on social media platforms. Often the wardrobes are highly aspirational – made up of clothes that cost well above the budget of that of the user, but public discussions about the products still develop the brand.

4.      Customer-Created Content

Innovative start-ups like Threadless allow users to become clothes designers. The website allows people to design clothes (originally t-shirts but the assortment has expanded), which the community then votes on; the most popular designs are prominently promoted on the home page. Threadless then arranges the sale and handles the fulfillment, paying commission to the designer.

5.      Building Community, not just Commerce

The most effective users of Twitter do not regard the platform as simply a means to broadcast marketing information; in fact, companies that try that route will find that it generates very little engagement. The best users, including Whole Foods (2.8 million followers) and Zappos (2.5 million followers), succeed because they talk about lifestyle and philosophy not just their products. When building robust communities, customers will welcome an occasional marketing message.