Just four years ago, retail executives scarcely thought about how social media could one day up-end the traditional way they engage with customers.

Just four years ago, retail executives scarcely thought about how social media could one day up-end the traditional way they engage with customers.

Today, with more than 500 million people on Facebook, and other platforms like Twitter and Groupon growing apace, retailers realise it is essential to create a dialogue with consumers through social media.

This seismic shift was summed up by Ben Fischman, chief executive of Rue La La, a members-only ecommerce retailer that has garnered 2.6 million users, at a recent Financo seminar attended by retailers including Wes Card from Jones Apparel, Kenneth Cole, Sir Philip Green and Philip House from Galeries Lafayette.

Fischman explained: “I think that Facebook has created this incredible new vehicle to acquire customers and drive them into stores.

“To me, what’s happened over the past 10 years is that this incredible new highway has opened up and it’s changed the way merchants, consumers, and store operators think about putting products in front of customers. It has forced people to innovate at a speed that would have made retailers very uncomfortable 10, 20 and 30 years ago.”

The pace of innovation makes many traditional retailers nervous, but they can no longer ignore social media and mobile strategies. To compete effectively, retailers must develop online communities to enhance customer relationships. Stores alone will no longer cut it.

Consumers are finding out about the things they want to buy on sites such as Facebook.

The social networking behemoth recently introduced social advocacy ads that show how many of a user’s friends buy or recommend a particular brand. Facebook data shows consumers are four times more likely to purchase something when they see ads that have brands their friends are interested in.

The social media phenomenon is not just about bringing in new customers, but allowing retailers to foster ongoing dialogue with highly engaged consumers. These new consumers are quick to identify problems with products and service. While criticism from disgruntled customers may be annoying, the open dialogue enables merchants to tackle potential negative issues before they get out of control.

Chip Wilson, chief executive of athletic retailer Lululemon Athletica, said: “We have to have an instant reply to a customer that’s got a complaint and we get on it immediately,” he said. “That may be a bad experience, but we turn it into a good one. If companies aren’t going to handle that complaint box at the rate at which they’re coming in, they’re probably losing an opportunity to turn a bad into a good.”

“We call it make-up sex,” said Fischman. “That customer is often ours forever. Once we fix a problem, boy do they fall in love with us.”

And let’s not forget that those types of conversations are increasingly taking place on mobile devices like tablets and smartphones.

For retailers, embracing social media and mobile technology is no longer just about keeping up with competitors, it’s essential for survival in this rapidly changing environment.

Gilbert Harrison chairman, Financo