Salesforce Connections - how PacSun connects to Generation Z consumers, and stands out amidst retail giants

(Shirley Gao of PacSun at Connections '23)

Readers know I cringe at buzzwords - and there were a few of them at last week's Salesforce Connections. Or, the funtastic buzzword combo, such as: "Generative AI for 1:1 personalization" - I'll get to that one. But there are buzzwords I don't object to. Exhibit A: "omni-channel." 

Choose a different word if you like, but modern retailers are in the pressure cooker, with the Amazon/Walmart/Alibaba giants on the one hand, and fickle, inflation-conscious consumers on the other. Brand loyalty is no small achievement.

PacSun - a digital transformation imperative for a Gen Z consumer

But it's not just omni-channel - it's the fluidity to serve customers across channels that gets my attention (see: Salesforce Connections - customers react to generative AI news). In the case of Salesforce customer PacSun, there is an added twist: serve the needs of digitally-savvy Generation Z consumers.

PacSun has survived volatile economics in the past, and lived to tell. But as I learned from PacSun CIO Shirley Gao, PacSun is not just surviving. They're pushing ahead with fresh retail concepts, such as a gender-free shop of unisex apparel, and livestreaming talk-and-shop with influencers - an approach with massive economic impact in China that has yet to take hold in the US.

(PacSun livestreaming at Connections '23)

In fact, PacSun conducted a live fashion stream on the show floor of SalesForce Connections. But PacSun's livestream commerce isn't a one-off inspiration.

As Gao explains, this all stems from a multi-year digital transformation, with their Gen Z  consumers as the focal point:

There are multiple areas in the information technology world for a merchant company. We're a fashion retailer - our collection of name brands, also our private labels, our customers, our primary Gen Z customers - the young customers are very technology-savvy. They are highly comfortable with technology, very comfortable with social platforms.

As Gao says, a conventional shift to digital commerce isn't going to cut it for PacSun:

Digital transformation in such an organization really means from every perspective, enterprise-wide: automation, improve the processes to leverage technology to reduce operational costs, increase operational efficiency - and also there's a huge area of digital cybersecurity.

And yes, for PacSun's customers, omni-channel fluidity is everything. And yes, that is part of a modern CIO's purview. At least, it is for Gao:

Most importantly nowadays is the omni-channel - how, in my role, do I facilitate digital growth? Our e-commerce pretty much doubled during the pandemic, while retailers were closed and malls were locked.

Compete with retail giants? Connect to your consumers in new ways

Those pandemic lessons paid off; PacSun turned their stores into digital hubs.

We were able to put together ship-from-store, optimize digital fulfillment, and improve the customer return and refund experience. Our customers felt this is a brand that takes them as the priority. We listen to them; we provide for their needs with their preference.

When it comes to social engagement, the Gen Z customer has a different level of expectation:

Our Gen Z customers spend many hours on social media, so we're there. We see the increasing desire for digital currency. So we offer checkout through digital currency [PacSun started accepting cryptocurrency in 2021].

Web3 was very big; NFTs etc. So we launched our Pac Mall Rats NFT, and we donated the profits to charity. We also launched a Los Angeles Tycoon Roblox game; we are hitting about ten million visitors in the next couple of weeks. Wherever our customers are, we put a lot of effort to create this authentic engagement and connection with them.

For PacSun, brand loyalty is about creating connection with imaginative events - and powerful partnerships like Formula 1:

People are afraid of spending. So with that reality, we're utilizing technology to unlock the opportunities to empower the business. But also, as the entire leadership team, we also focus on bringing in the best brands, such as Formula 1. You saw the keynote yesterday - PacSun also became a Formula 1 outfit retailer [Formula 1 was a featured Salesforce customer in the Connections opening keynote]. We also did a New York Metropolitan Museum Art outfit collection, which launched on June 1, just a couple of days ago.

Compete with retail giants? Yes, it can be done:  

In multiple consecutive years, PacSun was voted by the teens as one of the top ten favorable apparel brands. It is amazing that PacSun is on the top ten list with the bigger ones like Nike and Adidas. So I think our customers do recognize our efforts, and they reward that. It's a combination of business initiatives and technology support.

Serving the modern customer is a data problem

Salesforce plays an underlying role here: PacSun runs on the Salesforce Commerce Cloud. Gao:

Yesterday in the keynote, Salesforce talked a lot about their Data Cloud. We use the Salesforce Commerce Cloud. We also have our data from digital fulfillment, from point of sale in-store sales. And you know, all the marketing outreach, and the returns, and the customer service calls, etc. So we've put together a customer data cloud... We were able to quickly put together a solution in about six months time. We were able to aggregate all the customer-centric data on single platform, with almost a 360 view of any customer.

One huge payoff from integrated customer data: better personalization.

We're able to segment the customers to create a cohort to tailor the more relevant messages when we reach out to them. I don't wear high heels, but if you keep on pushing high heels recommendations, I'm going to feel I have nothing to do with this, and then I probably eventually unsubscribe from the brand. If you keep on recommending relevant things, your create this addiction to the brand - that's where the loyalty comes in, with relevant and engaging messages.

Next up? Livestream shopping - such as the Salesforce Connections live stream with PacSun.

In China, livestream shopping revenue on Douyin was $218 billion. Amazon's 2022 revenue was $510 billion. And it's only been five years; Amazon has been there for 15 years at least. We started our livestream simultaneously in China on Douyin, as well in the United States on TikTok. We did our first livestreaming by a very big influencer in the United States.

The cool part is: through system integration, we pin the product on-screen. So while you're watching it, it just appears there. You click it, and it checks out immediately with your Apple Pay - double click, and you're done. And then we get the order into our system, in our warehouse or stores. We fulfill it with shipping; we put in the package and we ship it. Three days later, it appears at your door.

For PacSun, this plays right into their early adoption of social platforms.

You know our core customers' urgency; Gen Z's are known for technology savvy... PacSun was an early adopter of increasing our followers. PacSun has grown 2 million followers, and has one of the largest retail followings on TikTok.

With that kind of traction, PacSun made it official:

We became a strategic partner with TikTok... We were one of the first two retailers that launched our TikTok shop.

Generative AI for retailers - what's next?

I'm getting the strong impression Gao likes to stay ahead on things.  So what does she think of Salesforce's generative AI announcements, including Commerce GPT?

Generative AI predictive - to leverage what Salesforce leaders talked about yesterday, to automate tons of merchandising. Item descriptions, translating to multiple languages - before, you had to reach out to multiple technology partners, and pay them for implementation and integration; it's been painful. But now, everything Salesforce has put together for you. I was talking to my AE. They said, 'When do you want to talk about it?' I said, 'Yesterday!'

What other generative AI use cases does Gao anticipate?

Itemized attribution [product and item tagging]. And then the generative interactions. Different customers have different communication preferences, different backgrounds.

Your generative AI will be dependent on the quality of your data infrastructure; PacSun's progress on their customer data platform should serve them well. Gao liked what she heard about Salesforce's generative AI/Large Language Model partnerships:

We also have this data, the traffic, the clicks, that we've collected through Google. I was happy to see that Salesforce has this partnership with Google data, and with Open AI. Simultaneously, I've been working with Google on generative AI to really leverage the data that we've been collecting for years - tons of rich information about the customer interaction on the website, how long they stay, why they add to the cart, why they abandon the cart before checkout.

The wrap - on Commerce GPT and 1:1 personalization with AI

We've all heard plenty of glowing pronouncements about the impact of customer data and social commerce on retail. The chance to see a retailer apply this as PacSun has - and punch above their weight with these tactics - reinforces exactly why this matters. I asked Gao if Salesforce Data Cloud is relevant to her customer data integration pursuits. She says it is, but I get the sense that the next conversation she'll be having with Salesforce will be about Commerce GPT.

Speaking of which, I've been a stickler for nailing down exactly what generative AI can do, and what the limits are. At Connections, I heard a couple of references to revolutionizing 1:1 personalization, which I believe is an overreach. Salesforce has been diligent about ensuring a level of human supervision to any AI outputs that might need vetting, but I don't think a human would spot the kinds of personalization errors generative AI is certain to occasionally make.

Example: a hotel sends a generative AI "1:1 message" to a high-value customer, re: "We can't wait to see you and your wife back at the resort soon." Meanwhile, the wife is in the hospital in serious condition. These are the kinds of over-personalizations you can't walk back. So during our interview, I asked Salesforce GM of Commerce Cloud Michael Affronti about that. Affronti responded:

I literally talked about this with the CEO of one of our customers last night. I think about it as the evolution of segments. The semantic part of that I think is really important, because one-on-one personalization; I agree with you - I don't know if we'll ever quite get to being 1,000% on. But what we will get to is: your segments are going to get more and more specific.

That makes sense - and warrants a longer discussion. But that's another article for another time. For now, I'll leave it with Gao, who is not your traditional inward-facing CIO. But if you're going to change how IT teams impact the business, you better have buy-in. Gao says she has that:

I really appreciate the company has the mindset to commit to embracing technology innovation. I do have a seat at the table, and I'm part of the executive leadership team... The company does appreciate using technology to unlock business opportunities. Data is the new currency, right?