Why Companies Will Benefit from Encouraging Social Engagement
Lee is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I recently looked at a retail company in an article linked here and was struck by its expansion plans with a new store concept and how they were tailored towards social engagement and creating a sense of community. It’s an interesting theme which I think has legs. Let’s be clear here. I’m not talking about corporate social responsibility or some PR-laden activities. I’m interested in how companies can profit by tapping into consumers' desire to engage in social activity. I think there is a clear and growing need for this kind of thing and companies would be well advised to seek to profit from it.
Internet Killed the Video Star
The great paradox is that in a world seeing an exponential rise in technological social networking, it is possibly becoming harder for people to interact with one another on a personal basis. Indeed, these days even human interaction seems to be subjugated to social media. I’ve lost count of the times I see people out and one or the other is tapping away on a mobile device. My suggestion is to cut a date short if anyone does this with you.
Don’t date anyone that can’t hold a conversation or spends his or her days making inane comments on Facebook while waiting to see how many ‘likes’ the latest picture or moronic meme generates. Just because you misquote Gandhi or put an ‘unhappy face’ emoticon up next to a link about an atrocity taking place somewhere (of which you know nothing about) it doesn’t make you an educated or interesting person.
In with the In Crowd
On a more serious note, Charles Murray makes some excellent points on the subject of the increasing bifurcation of American life. He talks about the divergence from a common set of values that has taken place since the 50’s between wealthier and poorer communities in the US. It’s hard for me to comment on these issues as a European and, anyway, my main interest here is how this might affect social interaction.
If Murray is right and there is a trend towards gated communities in the US where the wealthy concentrate, then the consequences are clear. An increase in disparate micro-communities will, in my opinion, tend to break down a common culture and threaten a sense of community. After all, culture is what is formed when people interact. No interaction, no culture.
Another aspect is the increasingly prevalence of online shopping being driven by the ubiquitous Amazon (NASDAQ: AMZN) and others. I’m not criticizing Amazon for this. On the contrary, it is only doing what its customers want. The challenge for other parts of retail is to adapt to this and start to offer a retail experience that offers the opportunity for the kind of social interaction that online shopping is taking away.
So What Difference Does it Make?
Well my point here is that if these points are tangible and trending then there will be an opportunity for companies to step in and offer a sense of community as part of the unique selling point of their product or service. I’d argue that this is already happening, and it’s a good idea for investors to strongly consider the companies that could benefit.
Coffee in the Community
With this in mind, I’m tired of how many times I’ve seen people discuss Starbucks (NASDAQ: SBUX) in terms of its coffee or products etc. If you want to see how these things are really done then I suggest going to a Central European café in perhaps Vienna, Milan or Budapest. I don’t think this is the way to think of Starbucks at all. The fact is that it offers a focal point for the kind of social interaction that is elsewhere affected by the forces discussed above. It is no accident that the coffee shop featured heavily as a center of interaction in the tv show Friends. Starbucks is getting this right, and I think other companies should follow.
In a similar vein, I think something like Barnes & Noble (NYSE: BKS) could be positioned to benefit. Saying it is a structurally challenged business is something of an understatement. Amazon truly has damaged this business, but I’m not sure if its idea of fighting back in the digital space with things like the Nook device is the right strategy. Why doesn't it push the idea of offering more of a social focal point for its customers?
A New Retail Experience
The pressure to introduce more experience into retail has led to the popularity of outlets like Abercrombie & Fitch (NYSE: ANF). It offers a kind of ‘nightclub-like’ experience to its shoppers, but my problem with this is that I think it is somewhat gimmicky and its appeal may prove transient. It’s all very well being served by a shop assistant that looks like a model, but at some point the people that go there will realize that it isn’t actually a night club and the staff aren’t actually choosing to go there to meet you.
On a more positive note, Wal-Mart (NYSE: WMT) is not a name that immediately springs to mind when discussing local communities. In fact, it is often seen as the antithesis. However, it is actively expanding its neighborhood market stores. In effect this will encourage local interaction with grocery purchasing (by some individuals) to take place in more frequent but less intensive trips. This is hugely different to a 15 minute drive to an out-of-suburb supercenter where an impersonal, mammoth once-a-week trip takes place.
The Bottom Line
I happen to think that this trend in society is one that companies can step in and take advantage of. Social interaction is changing dramatically, and unfortunately many companies are caught up in this trend rather than looking at exploiting the gaps being created. In my opinion creating social engagement doesn’t mean jazzing up your Facebook page or using gimmicky sales tactics. On the contrary, it means offering something that people are missing, which is the human interchange that constitutes culture. I think the companies that do this will be rewarded, and I am looking out for opportunities.
SaintGermain has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Amazon.com and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!