Gen-Y Customers Reward Responsiveness With Dollars

Customer Experience
Customer Experience

Generation-Y online retailer
Karmaloop lives the urban-hipster lifestyle it touts, with 90 percent of its employees aged 30 or younger. Its people refer to the "artists" whose casual clothing they sell, as opposed to "designers" or "manufacturers." The company's relationship with its customers is uniquely intimate -- 50 percent of its staff started out as Karmaloop groupies.

"They'd write us letters and make suggestions and give all these great ideas, and ask, 'What do you think?' We'd
always be like, 'Come over!' They started as interns and stuck around," says Anand Shah, Karmaloop's vice president of operations.

Yet as customer-centric as the company appeared to be, Karmaloop execs feared that they were missing opportunities to connect with its teen and twenty-something customers on a regular basis. Karmaloop worried that it wasn't taking full enough advantage of its customers' eagerness for regular and in-depth interaction.

Give them what they want
The retailer had been blasting its entire list of customers with offers and related news twice a week. While the Gen-Y audience had no issues with the frequency -- "it might seem high for other audiences, but this group lives online," Shah notes -- feedback suggested they wanted more in the way of specificity and timeliness. "When a new Puma item arrives, they want to know that very minute," he adds.

Complicating matters further was Karmaloop's extensive inventory, which includes about 85 brands, many of them
small and independent. Placing them on the site and in email missives next to big brands like Adidas and Puma
would make it difficult for them to attract notice, no matter how brand-fanatic certain customers might be.

To solve this problem, the company created the Karmaloop Kasbah, a microsite that sells only small or independent
apparel brands that it calls "underground brands." Currently the site sells 12 of these niche brands. "Customers wanted these brands and they wanted them in one place where they'd stand out. That's what we did," Shah says.

And for the more pressing email delivery and segmentation issue, Karmaloop partnered with behavioral e-marketing
firm MyBuys in December 2006 to drive personalization through email interactions, as well as the Web site and
RSS feeds. Now Karmaloop can make product recommendations not only based on previous purchases, but also individual behavior and preferences that customers provide when they login to the site.

The changes were made to better accommodate the company's Gen-Y audience, which prizes personal relationships on the Web more than any other group does. "What we've gotten from them [in feedback] is that they don't want a typical clothing retail site. They're different from the people who would buy at Abercrombie [& Fitch]," Shah notes. "They care about our brand and what it stands for." In addition, the company has a daily blog that discusses fashion and music, and has a presence on Myspace.

The newly differentiated emails, which tap brand affinities more than their predecessors, have been well received. Customers have responded positively to the more specific, more consistent messaging within them, resulting in an immediate 3 percent jump in sales. Karmaloop's site analytics push has paid off as well, with a spike in traffic and positive user feedback. Shah notes, however, that both efforts continue and that the seller won't be able to give more detailed numbers or results until their conclusion.

As for the future, Karmaloop will continue to tap its customers' preferences via the expansion of its
longstanding rep program, called the KRP Street Team. The company boasts 8,000 customers who chime in with
input on a regular basis. "They're like an army," Shah says with admiration in his voice. "Every company should
be so lucky to have people like this on their side."