Reaching Shoppers Where They Socialise.

Is social commerce going to be retail’s biggest story in 2014 and beyond?

Contents

  • What is Social Commerce?
  • Social Commerce on Facebook
  • Facebooks View
  • Who’s Doing What
  • So Will Social Commerce Be Big?
  • Key Steps to Determine a F-Commerce Strategy 

For a FREE copy of this report, please e-mail: info@iorma.com

Many think of social commerce as primarily meaning Facebook commerce as this is the social media brand most active in this area.

WHAT IS SOCIAL COMMERCE?
But in fact it’s much more than that encompassing a variety of shopping activities, though because it’s new it can also be misapplied to all manner of activities. Amazon is social shopping? We think not even though that’s what Forbes recently wrote.  At the epitome, we see transaction capability on Facebook, the selling of products off the Facebook page without the shopper having to go off-site to complete the purchasing process.

However social shopping encompasses other activities:

That said, most of attention is being paid to Facebook commerce.

SOCIAL COMMERCE ON FACEBOOK
Currently, full transactional capability across Facebook is rare but uptake is increasing. Some retailers have implemented a half-way-house: a storefront page that links to their own e-commerce site. This is by no means a poor solution but, of course, the potential shopper has to leave Facebook, they’re in a longer path to purchase and therefore more prone to drop out even if the experience is enhanced by features such as delivering coupons, reviews, ‘likes’ and other community features.

It’s also a big move for Facebook who views itself as a demand generator rather than a demand fulfiller. This is reflected, for example, in the analytic tools it makes available. What we mean by demand generator is that it offers brands an environment to undertake activity that stimulate demand rather than lead to immediate fulfillment or purchase behaviour. This is a fundamental difference to Google Adwords where the expectation here is that when someone clicks on an ad they are closer to the point of making a purchase decision. Consequently, conversion rates for Facebook activity are significantly lower than Google despite the targeting parameters that can be applied.

Few retailers and brands are currently offering full transactional capability and those that do are mostly US based. However ASOS in the UK have now launched a fully functioning site on Facebook, with their complete catalogue and a fan base that is growing at 100,000 a month. French Connection, Delta Airlines, Heinz (selling ketchup), Max Factor, Pampers, Dove, Coca Cola (merchandise), Tesco (beta version), Barneys, Disney, 1800 Flowers and Heels are other brands and retailers who are in test. A recent entrant has been JC Penny in the US, and within months they were able to attract 2m fans.

At the beginning of 2012, Unilever gave away 100 special packs of Lynx through Facebook. This was described as f-commerce but in truth it would be better viewed as a sampling exercise.

In addition, a number of music and TV show sites have direct capability; and five major ticket sellers Ticketmaster, StubHub, ScoreBig, Eventbrite and TicketFly have launched online stores on Facebook, a move that makes sense with Facebook being increasingly the prime source for news about events and gigs.

However, for most of these brands and retailers, the number of transactions is currently miniscule compared to other channels. In fact to date, there is no evidence that this activity is transforming retail.

But most activity is not transactional; Facebook is used as a traditional media platform, albeit one that should be able to deliver efficient marketing tactics through targeting and in a way that is closer to the point-of-sale.

FACEBOOK’S VIEW
Facebook said in early 2012, ‘It’s really important we nail what we mean by social commerce. At Facebook, we do not equate social commerce with opening a store within the network.’ Indeed much of Facebook’s current activity is to encourage retailers to embed Facebook functionality within their own sites. This is a move away from an earlier statement made by David Fisch, Facebook’s director of business development, in June  2011. Facebook would make shopping online, previously a solitary experience, more social, he argued. “This is where people are hanging out,” Fisch said at the Internet Retailer Conference & Exhibition in San Diego.

WHO’S DOING WHAT ELSEWHERE
Currently some more interesting developments are beginning to emerge such as sneakpeeq.com a social shopping company who offer shoppers a multitude of unique experiences designed to encourage purchase. Payvment have opened a fully transactional shopping mall. It maybe the case that Facebook might provide an environment that is better suited to this type of retail experience.

Indeed, in Japan, Mixi has signed a deal with DeNA and the expectation is that a Mixi/DeNA shopping mall will be launched later this year.

And there is much buzz around Pinterest as the next social commerce game-changer with its ability to drive in-bound traffic.

Groupon is growing still and its early 2012 acquisition of Adku shows it want to get smarter on the data-side and improve its perception of worth to merchants. LivingSocial (one third owned by Amazon) is struggling suggesting that group deals don’t have an infinite appeal.

SO WILL SOCIAL COMMERCE BE BIG?
In a word: Yes but there is also a caveat that we’ll get on to. Perhaps $30 billion globally by 2015 according to Booz & Company although we think that’s optimistic.

Why will social commerce grow? Because this is simply bringing the store to the shopper rather than the shopper going to the store – more succinctly known as convenience – and why shoppers shop on the web in the first place. Facebook will invest heavily to make f-commerce happen in one form or another and they are already moving to an improved interface to make it easier. Better third-party technology, integrated payment and logistics systems are becoming increasingly available.

While we would expect the lead to be in the US growth in these early days is likely to be slow but the advantages of having marketing, promotions and shopping in one place will appeal to consumers. On top of this, the increasing adoption of the phone as a purchase channel might well be to Facebook’s advantage.

Currently, Facebook has a dedicated team who are developing ideas and capabilities with retailers. This is very much in beta mode as Facebook want to ensure they have something that works but this year we have seen already the launch of such tools as ‘Buy with friends.’

So what’s our caveat? Despite the clear desire of Facebook to develop f-commerce we’ve also seen offerings such as Facebook Deals being closed down – highlighting that it isn’t a given that Facebook users also want to get highly transactional. An argument goes that Facebook users are great browsers; Facebook is benign, an easy place to dip into, it’s very casual and undemanding. Users are happy to receive offers and marketing inputs but don’t want to convert their Facebook into something too demanding. This is reflected in data from the US that shows that in 2011, only 25% of users claim to visit a brand or retailer page more than once a month and only c. 12% say they use Facebook as a way of keeping tabs on sales and promotions. In the UK another survey says that less than 6% of Facebook users have ever bought something off Facebook.

In fact often online shopping is the antithesis of Facebook: the former can be boring, with some moments of excitement when a great price is found but also with real low moments when the check-out doesn’t work or users can’t find what you’re looking for. Conversely Facebook is about fun. Of course this is a generalisation but it might be true for a big segment of Facebook users meaning that true f-commerce will appeal to a more niche audience unless retailers tap into the zeitgeist of Facebook.

Hence, we’re already seeing some Facebook store fronts close down. In April 2010, Gamestop Corp. opened a store on Facebook to generate sales among the 3.5 million-plus customers who’d declared themselves “fans” of the video game retailer. Six months later, the store was shuttered. Gap has also discontinued selling direct from Facebook as has J C Penney.

In all instances the retailers found that their customers preferred to shop on the retailers own sites.

Still, Facebook will, in the short-term invest heavily to make f-commerce happen and they are already moving to an improved interface to make it easier.

KEY STEPS TO DETERMINE A SOCIAL COMMERCE STRATEGY
There was a time when a multi-channel strategy was assumed to be the only way that retailers could compete. To a degree this still holds true but the key question is how ‘multi’ does that strategy have to be? Should in fact retailers be present in all possible channels? To help answer that questions, a number of factors need to be understood including:

• Is this a new customer acquisitions strategy or is it giving existing customers more opportunity to shop anywhere any place anytime?

• Does a plethora of channels confuse rather than help? Visibility is one thing but it’s easy to create confusion.

• Can a consistent experience be delivered across channels? Reputations can be easily dented.

• Can Facebook and other channels deliver against the customer’s shopping needs?

• Will your customer service care cope with these different channels?

• Can systems integration be managed?

• Will trade marketing be consistent?

Graham Thomas, Digital Economy Director, IORMA 

For a FREE copy of this report, please e-mail: info@iorma.com