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Consumers, Do You Know How Powerful You Are?

Power to the people.

The rapid rise of social networks and mobile commerce has put consumers in the driver’s seat when it comes to their retail purchases like never before.

With sites like Facebook and Twitter, shoppers—not retailers—are now becoming the critical influencers over what their peers buy.

And they are increasingly shopping where they want for what they want for a price they want from their mobile phones.

Google has found that searches conducted on mobile phones have soared 500 percent over the past three years, said Daniel Schock, retail industry director for Google , during a panel discussion by Financo, the investment firm, amid the National Retail Federation’s annual show here this week.

And “it’s just getting bigger.”

Merchants are now grappling to keep pace with an increasingly digitally connected consumer.

Today, retailers have to share control of their brands with the customers, “Which is a new world for marketers who were used to holding their brands close to their chests and communicating what they want the brand to be,” Schock said.

The panel, moderated by CNBC’s Nicole Lapin, also included Ben Fischman, chief executive officer of Rue La La, the invitation-only, flash-sale Web site; Chip Wilson, founder, chairman and chief innovation and branding officer for Lululemon , the yoga specialty chain; and Stephen Zangre, director of media sales for Facebook.

The line-up of presenters from new digital retail and social networking platforms marks a deliberate departure for Financo’s annual forum, which is usually paneled by established retail chains and veteran merchants, Financo chairman Gilbert Harrison noted. That’s because “social networks and digital media are going to drive sales and profits” at retail, Harrison said.

Indeed, “This incredible new [digital] highway has opened up, and it has forced us to innovate” at a mind-boggling speed that is foreign to many old-school retailers, Rue La La’s Fischman said.

The private-sale Web site prides itself on a model that offers its members, who are devoted loyalists, “unique theater online” with exclusive, daily offers.

“We email members everyday; if they don’t get an email, they freak out,” he said. “It’s an emotional relationship.”

'Social Advocacy' Changing the Game

Panel members agreed that what Facebook’s Zangre dubbed, “social advocacy,” is emerging as a seminal game changer for the retail industry.

For example, when shoppers’ Facebook “friends” recommend a retailer on the social network, that kind of endorsement is fast becoming a more powerful marketing tool than traditional advertising, panelists said.

It’s “a tremendous opportunity for us to build brand advocates and deliver this new word-of-mouth at scale,” Zangre said.

Facebook
Facebook

“Consumers are finding out what they want to buy and need by listening to their friends,” he said.

And the proof is in the numbers.

Advertisements for brands on Facebook that imbed “social advocacy,” meaning, they show which users’ friends “like” the brand, are four-times more likely to result in a purchase, Zangre said.

Facebook works with retailers and manufactures to determine what their Facebook objectives are, and “makes recommendations of how to be advocates in the space,” Zangre said.

'Make-up Sex'

The notion of customer service also is being rewritten, panelists said.

Shoppers are becoming increasingly demanding. They are armed with the power of social networks, which facilitate a fluid dialogue between consumers as well as between consumers and brands, and they are airing their complaints about brands on social networks.

But this era of the open-dialogue presents an opportunity for retailers, as they can win shoppers over again with fast responsiveness and outstanding service, retailers said.

“We call it make-up sex,” Fischman said. “Once we fix a problem, boy they fall in love with us.”

Lululemon’s Wilson agreed. “We have to have an instant reply to a customer that has a complaint,” he said. “We turn it into a good experience and a good branding experience.”

For Lululemon, it’s all about building a community. And sites like Facebook are far more effective than a “$30,000 ad in a magazine” for the brand, Wilson said.

Google’s most pressing work with retailers now is to come up with an effective online advertising model that will supplement merchants’ circular advertising in newspapers, a model with dwindling returns, Schock told CNBC.

Panel members singled out mobile as the fastest-growing retail opportunity as smartphones go mainstream.

At Rue La La, mobile grew from one percent of sales to 16.9 percent of sales recently.

“I’ve never seen adoption faster,” Fischman said.

Mobile retailing is also enabling merchants to tap local markets like never before, panelists said.

Facebook is starting to own the space in location-based mobile offers with features such as Facebook Deals, which brings shoppers special offers when they check into Facebook Places on their smartphones upon entering certain retail stores, Fischman noted.

That’s giving sites such asFoursquarea run for their money, he said.

Today, retailers “need to have a mobile strategy,” Schock.

Questions? Comments? Email us at consumernation@cnbc.com

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