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Social Commerce: The New Era Of E-Commerce -Part I

  • Written by Lorna Pappas, Contributing Writer


scommThe following article is Part I of a two-part series covering Social Commerce: what it is, why it is important to the retail industry and how leading merchants are using it.  Part II will appear in the February 14 Newsletter.

As mobile technology and social media rapidly converge, retailers are faced with a seemingly infinite number of ways to unite with customers who are continually connected, browsing, comparing and buying.

This convergence has facilitated the development of the next evolution of online shopping: social commerce. Retailers selling through social media may generate as much as $3 billion in the U.S. by the end of 2012 ― but that’s loose change compared to the $14 billion projected by 2015. Worldwide, social commerce is expected to explode from $9 billion in 2012 to a whopping $30 billion by 2015, according to Booz & Company, a global management consulting firm.

Social Commerce is a relatively young strategy for most retailers ― in fact, “embryonic,” according to a January 2011 Booz & Co. report titled: "Turning 'Like' to 'Buy:' Social Media Emerges as a Commerce Channel." The report noted that the market for social commerce will change over the next [few] years as companies race to establish stores, pushing up social commerce revenues six fold, to $30 billion globally [in 2015]. As this growth surge happens, social commerce will take its place alongside stores, telesales and the more traditional web to emerge as an additional sales channel.

Mark Zuckerberg, founder of Facebook, may have been one of the first to predict the social commerce explosion, at the time of the Facebook Places launch in August 2010. He stated: “If I had to guess, social commerce is the next area to really blow up.”

Additional industry statistics are moving retailers in the direction of social commerce. According to the Shop.org 2011 Social Commerce Study, 42% of online consumers have “followed” a retailer proactively through Facebook, Twitter, or a retailer’s blog, and the average person follows about six retailers. Most importantly for many retailers, the appetite for buying directly through social networks appears strong, with one-third (+33%) of surveyed shoppers stating that they would be likely to make a purchase directly from Facebook or Twitter. Beyond the sale, the power of joining and contributing to the conversations in the social sphere has proved to differentiate and empower some of the most successful retail brands in the world.

A number of forward-thinking retailers have dully noted the potential for social commerce, including Walmart. “[The industry is] entering a new era of e-Commerce where the online world and the world of retail stores will connect together through social networking to give shoppers a seamless experience,” noted Ravi Raj, VP of @WalmartLabs. Raj is responsible for the social commerce initiatives at @WalmartLabs, Walmart’s digital technology division, whose mission is to innovate on retail at the intersection of social and mobile.

Raj said that he believes the industry is at an inflection point in e-Commerce: “The first generation of e-Commerce sites brought the store to the web. We think the next generation will be about building a multichannel experience that integrates the store, the web and mobile seamlessly, with social identity being the glue.”

Social Commerce Defined

As social commerce develops, so does its definition. Industry executives, analysts and experts are working to come to terms with the new concept. According to Paula Rosenblum, Partner at RSR Research, social commerce is “commerce driven through social media, whether or not the sale is consummated on that media. That makes it difficult to quantify ― it’s part of the path to purchase.”

Another industry analyst, Deena Amato-McCoy, Research Analyst for Aberdeen Group’s Retail and Banking practice, noted: “To me, social commerce is when a retailer uses its social networking site as a commerce platform; it’s the merging of online interaction from social media, with a call to action, allowing retailers to transact business directly through the site.”

In the “Social Retailing Blueprint” report published in January 2012, NRF’s Association for Retail Technology Standards (ARTS) defined social commerce as: the use of social media in retail to increase sales and create communities of shoppers with similar interests. This includes adding social aspects to e-Commerce sites (e.g., product reviews, ratings, lists); creating standalone sites (e.g., Groupon, ShopSocially, Blippy); and incorporating retail into existing social sites (e.g. Facebook, Twitter, YouTube).

Why Is Social Commerce Important To The Retail Industry Now?

Put simply, retailers must keep pace with consumers’ activities and channels of choice. "Retailers and brands are realizing that social commerce is becoming a significant element in the sphere of factors that influence purchases across multiple channels," stated Fiona Swerdlow, Head of Research for Shop.org, a division of the NRF. “Add to that the increasing importance of smartphones and tablet devices in the shopping process, and you’ve got a potent mix. Social commerce is young and the industry is still experimenting with it, but smart retailers will manage it deftly to benefit all of their channels and customer touch points." 

Leading retail executives agree that now is the time to embrace social commerce.  GNC and Ice.com are just two retail companies that are leading the pack in terms of social commerce strategies. Jeffrey Hennion, EVP, Chief Marketing Officer & e-Commerce at GNC noted: “The convergence of mobile and social presents opportunities to engage with the customer who is constantly connected, searching, comparing and seeking a competitive edge that have never been more important. Social commerce allows us to take the same kind of personalized service we provide in each of our stores and offer it to customers wherever they exhibit a point of need online. In addition, we can reach those same customers with information and exclusive offers that only can be found by engaging with us online.”

In 2011, GNC was one of the first retailers to pilot a Facebook commerce widget that allowed customers to order a daily deal directly from the company’s Facebook news feeds. At the same time, the retailer tested flash sales and loyalty deals through other means, including social vehicles, such as Foursquare and Twitter. Based on the learnings from this pilot, GNC is optimizing its offers in terms of how they are communicated and which shoppers the deals are targeted to. “By consistently providing opportunities to connect with GNC online, we intend to become more intimate with our shoppers and extend that great customer experience even further,” Hennion said.

At Ice.com, one of the first companies to turn a jewelry store into an online shopping experience, social commerce is key ― it’s all about understanding how humans engage with each other socially then determining and acting upon how that engagement relates to their online shopping behaviors. Ice maintains and continually advances an extensive online toolbox ― which includes several niche social networks such as Polyvore ― to best leverage the way consumers connect and shop online today.

Like many retailers, Ice.com drives potential customers to its Facebook Page through targeted Facebook ads. “We don’t have Facebook tunnel vision ― it’s one of several social vehicles we use ― but increasingly is becoming the destination of choice for online users, who are becoming more accustomed to connecting with brands in the Facebook environment,” stated Dave Haber, Senior Director of Social Media for Ice.com.

(Part II will appear in the February 14 Newsletter.)

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