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Finally: Strong Financial Results From Social Media

Social media is increasingly important for retailers and brands; soon it will touch and benefit every significant metric of a retail organization.

Why is social relevant? Consider a few data points that demonstrate the power of social media:

  • It took Amazon.com five years to reach $500 million in revenues.
  • Using social effectively, Gilt Groupe did so in less than three years.
  • Groupon reported over $700 million in revenues in less than two years.

Furthermore, according to research from Forrester, more than 60% of Gilt shoppers say they now spend less at traditional retailers. Bain & Company also conducted a study of 3,000 consumers and found that customers who engage with companies via social media spend 20% to 40% more money with those companies. They also demonstrate a deeper emotional commitment to those companies, granting them an average of 33 points higher, based on a Net Promoter score, a common measure of customer loyalty.

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At the same time, according to the Bain & Company study, the average billion-dollar company’s spend on social media is $750,000 per year. 

The speed of growth is increasing for companies that use social media effectively. Fab.com, a curated home décor site which launches daily events and provides incentives for  sharing purchases on Facebook, hit one million members within five months, and two million within seven months. Zulily, a flash sale site for moms that was launched last year, now has more than four million members. Zulily reportedly reached $100 million in revenues the past 12 months.

How New Social Media Models Capture Consumer Excitement

New_Model_Create_ExcitementHow do you create the sense of exclusivity and excitement from private sales, limited event access, and limited SKUs for which companies like Gilt, Rue La La and Haute Look are known?

New models in product and brand discovery use self-identified customer preferences and social graph data to provide curated, personalized selections. Curation, a term borrowed by retail from experts within the art world, refers to the process of identifying works of museum quality. Today retailers curate by filtering through millions of possible products for those most relevant and interesting. Social filtering opens that curation to communities that are interacting with products and brands in new ways, and help crowd-source what is of interest.

Companies such as foursquare and shopKick use the highly influential mobile device to show both the consumer’s and retailer’s willingness to experiment with new models. Others, such as Fab.com, blend many social models.

However, mobile can be an Achilles heel for retailers: it brings into stores the complexity of price comparison as well as the power of the social graph, when used properly.  Value will always be a driver of group buys, deals of the day and other new models. However, to be sustainable for retailers, the business model of many retailers will need to change.

How The Purchase Funnel Is Evolving

New sources of information and influence, as well as new channels such as social and mobile, provide additional opportunity for continued relationships with consumers and their friends. By using techniques such as personalization and localization, based on the measurable data and proximity information we have about customers and their ability to influence others ― these sources also offer greater opportunity to be relevant. In fact, this “funnel” can be re-characterized as the “purchasing fountain,” given the increasing flow of knowledge now available about your customer.

PACT Flash Sale Drives 60% More Revenue

Change_Starts_With_Your_UnderwearPACT, a SkuLoop client, is a provider of organic, sustainable boxers, briefs, and socks carried by retailers including Nordstrom. Skuloop helped PACT raise funds for the Sierra Club by creating a successful charity flash sale that was mentioned in the club’s newsletter that reaches one million subscribers. The event drove 60% more revenue than a similar campaign on Gilt and two times as many orders as PACT’s Groupon promotion. The campaign represented over 95% new customer acquisitions. Most importantly, PACT retained control of the data and ongoing ability to market to these customers.

Another SkuLoop client, a large multi-channel women’s work wear apparel retailer, wanted to grow its Facebook audience and drive sales. We offered its fan base an exclusive and saw the majority of redemptions, almost 70%, take place in the brick-and-mortar stores. These transactions were 75% higher than the retailer’s average in-store transaction.  In addition, 15% of customers were new or non-loyalty-card members; this suggests a burst of Facebook activity and the viral nature of the offer to motivate friends of friends to become new fans and customers.

Facebook Promotions, Capabilities Are In The First Inning

Facebook has filed to go public and is on track to hit one billion users this year. The impact and value of the channel will continue to grow for retailers. For Facebook, 85% of revenues are from advertising to 483 million daily active users, who visit or use Facebook, via Facebook directly, or via third party apps and sites that use Facebook’s platform, including open graph and Facebook log-in. The distributed nature of Facebook captures potential new revenue opportunities and strengthens the site by providing more points of contact and more sources of data.

Approximately 15% of Facebook’s revenues are from credits, used largely for digital goods, while 30% of each transaction contributes to those revenues.  But clearly Facebook will need new models to be relevant to commerce around real goods and services. Mobile increasingly is important for Facebook as well, and we predict new mobile ad opportunities. With Facebook’s teams focused on these opportunities, we can be sure that some of the $5 billion in IPO proceeds will go towards making retailers’ programs more effective. 

The Best Examples Of Social Commerce Come From Making Commerce Social

FabcomWith Facebook’s launch of Timeline applications, retailers and brands have new opportunities to connect with consumers in a lasting way. Fab.com, for example, provides customers with a $5 monthly credit in exchange for publishing their Fab purchases to Timeline. This allows Fab to socialize product-level feeds on Facebook.

For retailers, Timeline represents an opportunity to tell a rich story, especially thanks to stronger visuals and longer histories. Expect to see archives of retro ads and fashion shoots as a rich source for this content.

Brands will be able to interact with Facebook in new ways, creating and communicating new stories with verbs.

For example, actions that post on a user’s Facebook page now can include verbs such as “Want” and “Buy.” Shown here is an example of SkuLoop’s gift guide product, which we rolled out with a number of retailers during the 2011 holiday season. The product utilizes Facebook’s news ticker, newsfeed and verbs by publishing when a consumer “wanted” something from a wish list. Without paid adverting, effective Timeline applications and consumer interest stemming from well-curated content, many companies will struggle with being noticed, or even included, in regular newsfeeds.

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Pinterest: The Newest Social Darling

Pinterest_10MSkuLoop, which holds a series of monthly webinars for retailers about social, recently offered a deep dive into Pinterest. You may be hearing about Pinterest, an online pinboard which enables users to organize and share, or “pin,” images more frequently. We believe Pinterest matters to retailers. The graphic above shows Pinterest’s traffic growth; the independent site reportedly was the fastest in history to reach 10 million unique visitors. Pinterest’s demographic is largely female; TechCrunch, a web publication offering technology news and analysis, used a hair dryer to illustrate hockey stick growth.

What is also interesting about the Pinterest demo is the physical location of the user base. Pinterest’s users are largely concentrated in the Midwest, which shows it has gone mainstream quickly ― it’s not an early adopter demo like those observed using apps like FourSquare. We believe Pinterest shows the power of combining strong like-minded community around SKU-level products and content.

Monetate, a marketing strategy firm, offered an infographic about how Pinterest is growing as a driver of same store referral traffic to five specialty apparel retailers, with online traffic rising at these stores 389% from July to December 2011. These sites report 3.83% of their referral traffic came from Pinterest in December 2011. The picture shows the conversation around a West Elm owl lamp. West Elm is an early adopter of Pinterest and is gaining a foothold there. A single user’s pin resulted in 245 repins of the same image.

Nordstrom also is using Pinterest effectively. Unlike Nordstrom’s own site, which is organized around brands and departments, Pinterest can be structured by events, trends and other lifestyle-driven hierarchies adopted by the community.

These tools enable social to help consumers curate millions of items to the ones most relevant to them. They also allow consumers to dialogue with retailers about their choices. Mapping against their Facebook information, we can learn about corresponding demographics, location and other customer data.

The use of social media is here and growing. That bubble won’t burst. New models such as group buys, flash sales, private sales, and event-driven commerce are here to stay, and retailers can benefit.


Michelle Crames is Founder and CEO of SkuLoop, a provider of technology tools that ties together social, mobile, web and email digital assets to create content that delivers omni-channel traffic and purchases. Crames founded giiv.com, a mobile service for retailers designed to help on-the-go women send gifts to friends and family anytime and anywhere. She also helped launch and acquire mobile and digital media companies in the U.S. and Asia. Crames previously served as CEO of Lean Forward Media LLC, an interactive media and entertainment company. She also held positions at Warner Bros., The Walt Disney Studios and McKinsey & Company.

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