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Retailer: Informed humans still the hottest e-commerce trend

Sweetwater, the largest online audio gear and musical instrument retailer, uses AI to augment -- not replace -- its agents. Mike Clem, chief growth officer, explains why.

Retailers -- digital and physical -- still struggle with supply chain challenges. To overcome these issues at scale takes a mix of tech and human know-how for large retailers.

Mike Clem, chief growth officer and executive vice president at Sweetwater Sound, the largest digital retailer of sound reinforcement gear and musical instruments, discusses e-commerce trends coming out of the pandemic and how technology can supplement -- not replace -- sales and service agents. His role is to make Sweetwater's human and digital interactions with customers into long-term relationships, and not just one-off transactions.

Describe the scale of Sweetwater Sound's e-commerce operation.

Mike Clem: Sweetwater is a 43-year-old company. Chuck Surack quite literally founded it out of the back of his VW bus as a mobile recording studio. It's now a billion-and-a-half-dollar [annual revenue] online seller of musical instruments and pro audio. We have 9 million customers, from beginners to hobbyists, to church volunteers to professional musicians. If you name a rock star, we very likely work with them -- but also with recording studios, churches and schools.

Mike Clem, chief growth officer and executive vice president, Sweetwater SoundMike Clem

Our real differentiation is a relationship-based, consultative selling model. Most of our interactions get funneled to a 'sales engineer': 550 highly trained people who come in with a pretty prestigious music background -- you have a degree, or toured with a band, or worked in a recording studio. They go through 13 weeks of intense product training at our Sweetwater University before you talk to a customer. Customers get paired up with one of these sales engineers. Over time, you truly develop a relationship, keeping careful track of your musical journey.

This business model spins off loyalty and retention, because it's a true relationship, and we invest in nurturing that relationship. We don't just wait for the phone to ring; we make outbound calls, and check in and help proactively. The amount of rich customer information that gives us -- I'm learning all of your goals and ambitions -- we feed back through our CRM system and send it out through the website as personalization, or making your marketing more valuable and relevant.

We get this really holistic view of the customer and do optimization that adds value for them.

What have the last two years been like? E-commerce sectors such as home renovations and recreation rapidly expanded, which aligns with musicians who enjoy playing in their spare time at home. But also, the concerts and touring shut down for your pro audience.

Clem: The pandemic created a real challenge for some industries and a real blessing for others. We happen to be in the better half of that. For us, customers were at home, had time on their hands and money in the form of stimulus checks. People picked up an instrument for the first time because it's a bucket list item, or reinvigorated a hobby. We had an entire group of customers who rediscovered their passion in music and invested in new gear or upgraded their gear.

We also sell the kind of equipment that individuals, churches and schools need to livestream. We were selling entire video streaming systems to some of our church customers. That was a real acceleration of our business.

Live music dried up. Musicians need to make a living, and so now they have to pivot into a different revenue stream, buying the different kinds of equipment that you would buy to play live and stream over the internet. These live musicians are now buying a different kind of gear through the pandemic, becoming an influencer or a YouTube personality.

What other technology initiatives did you launch to enhance your long-term customer relationships?

Clem: Supply chain challenges very much affect us -- chip shortages and electronics -- but also, guitar factories being shut down. They are a handcrafted instrument. We're still feeling some of the effects of that. This is where that relationship business model really kicks in. Because if I can bring a human into that digital shopping journey, we can talk about replacement items. Often, there's an entire channel outage -- if it's out of stock, it's out of stock for everybody. This is where our loyalty kicks in: We can get you connected with what is available and make sure that's serving your needs.

One of the most unique things we did was we came up with what we call a 'switchability score' for every product in our 50,000-item catalog. It ranks how likely you would take a replacement if something is out of stock. If it's a 10-foot microphone cable, I probably could sell you a different brand, but if it's a boutique amplifier or guitar effect, you probably wanted that exact item. We came up with scores to guide our marketing. When things were out of stock -- and not switchable -- that helped us optimize which products we could push or not. That was incredibly successful, bringing the sales engineer voice into that process and saying, 'Hey, this one really is worth the wait. Here's why,' and then re-sorting search results to really favor things that are in stock and available. Everything you're hearing me say about relationships with customers -- we value relationships with manufacturers in the same way. We partnered closely with manufacturers to make sure we had allocation on the things that matter most.

[Sweetwater also recently launched a new automated financing program with Synchrony to enable musicians to pay for gear over time.] Synchrony has been a great partner for many years. In difficult economic times, it becomes hard to get approved for credit. What we've been able to do together with Synchrony is say, 'Hey, here's these really great Sweetwater customers that we know because of this relationship, and we can essentially vouch for that customer.' We pass along customer information that says, 'They've been a customer for a long time -- they have a strong history with us.' We're able to pass along that understanding of the customer and get more customers approved for credit. That's the power of joining the data together.

What kind of technologies can enhance customer loyalty in your digital stack?

Clem: If you're playing guitar, you tend to continue to add either more guitars and accessories, or upgrade the amp. There's a tremendous opportunity for us to find follow-on sales as we continue enhancing our experience. There's a tremendous amount of data science that goes into 'customers who bought this might be interested in that -- or these kind of upgrades or accessories -- next,' as new products become available. We're doing the same type of data science that many retailers are, but we have the unique advantage of using our sales engineers to communicate the insights.

We use AI to augment -- as opposed to replace -- humans.
Mike ClemChief growth officer and executive vice president, Sweetwater Sound

Instead of shotgunning ads across the internet, we're able to pick up the phone and say, 'Hey, I thought of you today,' or 'Here's a really interesting new product that you might be interested in.' So we have this really unique ability to weave a customer through an online and offline journey, and really use these humans -- especially in a privacy-sensitive future as the cookie degrades and the ability to reach these customers through traditional digital ads starts to erode a little bit. This is the power of having durable relationships with customers where we can talk to you over the phone.

The human touch is baked into the Sweetwater business model. Where does AI come in?

Clem: We use AI to augment -- as opposed to replace -- humans. It's useful for product recommendations, or 'Here's a behavior of the customer: They keep looking at these $10,000 guitars, so they might be a guitar collector.' It really is about bringing the right sales engineers to the right customers, at the right time, so that we can add value.

What are the limits of AI?

Clem: AI is good at scaling ideas. It's not good at creating ideas. We sort of chuckle about how all these retailers talk about using analytics and AI to predict what the customer is going to do next. At Sweetwater, we have this unique ability to just pick up the phone and ask.

So we both value AI and believe it has a place, but we're interested in being the most human brand, the most authentic brand, and a sincere brand. Every time I hear a retailer saying, 'We're strategically going to become customer-first,' I think of us and our 43-year head start on this concept, truly engaging with customers at the one-to-one level and then letting AI amplify -- or scale -- that relationship, but not replace it.

Editor's note: This Q&A was edited for clarity and brevity.

Don Fluckinger covers enterprise content management, CRM, marketing automation, e-commerce, customer service and enabling technologies for TechTarget.

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