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article imageMarketing consultancy explores next frontier: social commerce Special

By Michael Krebs     Apr 27, 2011 in Internet
A recent blog entry from the marketing and advertising consultancy SapientNitro asked if 'Social Commerce' was the next big thing, and in talking with the authors it may just be.
There have been numerous alerts on trends to watch in the rather large basket of deliverables in social media, but one of the more intriguing and potentially prosperous developments is that of "social commerce."
One recent and highly visible example of this can be found in Facebook's announcement that it is entering the Groupon game, as was explored in the report by Business Insider on Wednesday.
Marketing concern SapientNitro asked if "social commerce" is the next big thing in a blog entry posted last month.
I reached out to the authors of the SapientNitro analysis, Rekha Rajasekharan and Taposh Dutta Roy to get their take on where "social commerce" is and where it may be heading.
KREBS: How is SapientNitro defining social commerce?
RAJASEKHARAN/DUTTA ROY: The short answer: Social Commerce is commerce using Social Media.
Commerce is all about buying and selling. With smart phones & PDAs, the modern day consumer is always connected to the Internet. Shopping is not just about going to stores, comparing products and buying the one that meets your needs & budget. The research phase and consumer’s retail journey is much more extensive today than in the past.
For example, we search for information online, compare the same products offered by multiple brands/suppliers, compare prices, read reviews by other consumers and by experts, and we check with our friends.
With social networks, our circle of friends is a lot wider. We can get a lot of opinions in very little time. Social commerce taps into that wide network of “friends” to drive sales.
Instead of using social media as just a marketing platform, retailers have now extended their eCommerce stores to social networks too. Along with product information, they can now display user generated content, ratings, Likes, and even provide options to share or seek feedback from these networks. They can use social networks to showcase brand popularity & loyalty.
KREBS: Is Facebook the most important game in town in social commerce, or are others presenting solutions of equal or better caliber?
RAJASEKHARAN/DUTTA ROY: Based on Forrester forecasts, the eCommerce slice in the retail sales pie in the US will be 8% by 2014. In that small slice, Social Commerce forms a much smaller segment. These statistics influence the investments that retailers are willing to make towards Social Commerce ventures. Another deterrent is the fast changing social landscape - you never know if Facebook is going to become the next MySpace. Playing safe, most retailers use social media as a marketing channel to generate brand awareness, gather user feedback, and to lure consumers to the retail stores or website using promotions.
That being said, there are some key players who have taken a leap towards transactional social media. To get the biggest bang for the buck, it makes sense to invest in a platform that reaches the maximum audience. With more than 600 million active users, Facebook is the most popular social networking site. Top brands like Coca-Cola, Starbucks, and Disney make close to 20M in sales via their Facebook stores. Open Graph also enables retailers to integrate Facebook to other aspects of the selling process like personalization, recommendations, reviews, sharing, etc.
With Facebook’s recent foray into “deals,” partnership with PayPal, Facebook Credits, and new f-commerce sites being tested and rolled out, there are substantial opportunities. Currently, however, Facebook’s Social Commerce offerings are nascent – many are still in ‘early beta’ mode. We’ve found inconsistent user interfaces, and variable user experiences to be the rule more than the exception.
The other key players in social commerce are group shopping sites like Groupon, LivingSocial, BuyWithMe, etc. These sites combine two major retail strategies: threshold promotions and social media. They do not restrict themselves to any specific social network. The consumer has the freedom to use any network or media they choose to promote the deals - Facebook, Twitter, MySpace, email, SMS, and so on.
These are two different means to the same end. Selling is the key objective. A Facebook store is similar to adding a new channel for selling-- it is yet another eCommerce store with a different look and feel with additional social capabilities. A Groupon or LivingSocial deal is like running a major promotion without some of the overhead of a marketing campaign.
KREBS: E-commerce vendors have established security firewalls in place to nullify consumer hesitations with regard to online shopping. Are there security concerns that consumers should be aware of when participating in social commerce?
RAJASEKHARAN/DUTTA ROY: Social Commerce sites should follow same security guidelines as other eCommerce sites. They need to protect PCI & PII data. Most social commerce sites either implement secure checkout or integrate with the secure checkout of existing eCommerce sites. This addresses most of the security concerns.
A bigger concern and a potential deterrent for social commerce is privacy. The entire concept of Social Commerce is based on social media and the information that people share on social platforms. Most people are wary about sharing product & purchase details on social networks. It gives some insight into their spending - what a person can afford, how much they spend, etc. Liking a brand or sharing discount information is less revealing and hence more common.
In the end, both vendors and platforms need to give customers robust and transparent privacy options to help the consumer retain control of their information.
KREBS: What are the biggest obstacles to social commerce and how are the social networks working to overcome them?
RAJASEKHARAN/DUTTA ROY: In spite of the popularity of social networks and the millions of people who actively use these networks, its ability to drive sales has not been proven conclusively. Retailers are still experimenting with the different ways of using social networks in their selling process. The onus of overcoming this challenge lies more with the retailers than with the social networks. Based on the brand, customer base and the products being sold, each retailer going the social route will have to figure out the strategy that works best for them. The key focus areas for a successful social commerce strategy involves:
- Listening to customer comments, feedback, etc
- Linking social interactions with web analytics and CRM to extract intelligence on customer behavior, usage patterns and site performance
- Tracking additional conversion statistics (e.g., linking number of 'likes' to sales, sales due to purchase information posted by friends, etc)
- Alleviating any security or privacy concerns that consumers have
KREBS: What trends can we expect moving forward with social commerce in terms of sales volume relative to other shopping environments?
RAJASEKHARAN/DUTTA ROY: Market projections by SeeWhy, U.S. Department of Commerce, Booz & Company & CODA research show that by 2015, around 4% of digital commerce will be driven by social commerce. Social commerce is not a one size fits all strategy. Big brands with very large customer bases have started seeing revenue from their social commerce ventures. Areas like gaming, movies/digital video retailers, etc. have been successful with social commerce. For most other retailers, social commerce still acts as a conduit to drive more consumers to their online channel(s).
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