Six months ago, Kembrel, an online discount retailer serving college students, added promotional features and a shopping cart to its Facebook page. Today, Kembrel’s Facebook page drives 20 percent of all sales. Students stuff up to 10 percent more goods into the Facebook shopping cart than they do at Kembrel’s e-commerce Web site.
“Social promotion technology is becoming a very important customer acquisition and retention enabler,” says Kembrel founder Cherif Habib. “Shopping is often a social activity in the physical world, so it is only natural that it is becoming much more social online.”
Kembrel is quickly learning about new tools and practices driving the latest evolution in social networking: social commerce. Most companies have thrown up a Facebook page or jumped on the Twitter bandwagon with little thought behind it. Their social activities morphed into interactive marketing. With social commerce, however, the opportunity for real revenue is emerging.
In a recent survey of 123 large retailers and consumer manufacturers, market researcher Altimeter Group found that only 20 percent have a social commerce strategy. But a whopping 86 percent said they plan to have a strategy in place next year, with many making significant investments in these initiatives. “It’ll be a watershed year for social commerce,” says analyst Lora Cecere, author of the Altimeter report entitled Rise of Social Commerce.
What Is Social Commerce?
To understand social commerce, one must first accept what it is not. Just because your Facebook page sells goods or services doesn’t mean it is social-commerce savvy. That is, social commerce isn’t about turning Facebook into the great mall of the Internet. “No one sticks a product catalog in front of 500 Facebook fans,” says CEO Matt Compton of ShopIgniter, which offers a social promotion software engine for Facebook pages.
Social commerce is about tapping into a community of enthusiasts, building relationships, anticipating their needs, and promoting products with special deals for the community’s members. There might be shareable coupons, refer-a-friend programs, loyalty incentives, group promotions and even time-sensitive deals. A sale is merely a result of all this hard work.
Take, for example, a runner who visits Nike’s social network. She can share the amount of hours and miles logged on the pavement with the runner community. In turn, she can receive special offers for shoes based on how much she’s running. She can also tap the social community for purchasing advice, just like she would with her real-life social network. “I really trust my community when they have similar interests,” Cecere says.
The biggest advantage social commerce has over traditional e-commerce and even Google Search is the ability to predict buying habits based on real-time information, not historical data. “Google Search can’t really anticipate my needs,” Cecere says, whereas in a social network “my friends know that I’m going to be a grandmother for the first time and will be looking for baby stuff.”
Social networking is clearly changing how we find things on the Web. Along these lines, social commerce puts the focus back on people, one-to-one relationships, and optimized information flow instead of “Google algorithms and SEO,” Compton says.
Jumping on the Social Commerce Bandwagon
The social commerce game is in its early adopter stage, according to Altimeter. The survey found that some industries are further along than others, such as hospitality, finance and consumer electronics, followed by traditional consumer package goods and health and wellness. Trailblazing companies include Amazon, Best Buy, Dell, Hallmark, Starbucks, JC Penny, Kohl’s, Disney and Delta Airlines.
Like Kembrel, many companies report social networking shopping carts being anywhere from 10 to 15 percent fuller than the shopping carts on their Web sites. Another social commerce advantage: By analyzing relationships and interactions within the social community, companies have a better chance at bringing to market exciting new products. “I would look at the new product launch success and the management of the long-tail supply chain,” Cecere says.
Given social commerce’s benefits, you’d think most retailers would be champing at the bit to adopt technologies and practices—but that’s not always the case. The Altimeter survey uncovered looming barriers to adoption, the most cited of which centered on the traditional definition of marketing. Many companies have tightly controlled product marketing messages that are pushed out to the consumer. With social commerce, though, communities drive the message, and companies have a hard time giving up product-message control.
Another barrier to adoption: the large array of immature technologies, according to Altimeter. “We have different vendors that are growing up, but it’s all very new,” Cecere says. “These vendors have names that you don’t necessarily read about.”
Money in the Metrics
Case-in-point: ShopIgniter was founded only last year as a hosted service to help companies get on the social commerce bandwagon quickly. The service lets companies launch coupon programs, social review features, programs that reward friend referrals with store credit, and other social commerce functions.
ShopIgniter is “unique,” says Cecere, because the service works in both social network and Web site settings and thus can measure and compare buying metrics on these channels. Down the road, Cecere says, it will be important for companies to understand how social commerce, traditional e-commerce and even mobile commerce work together.
Right now, companies are trying to figure out the best recipe for social commerce. Some use social gaming as a way to draw in customers. Others hope the “like” button that’s so prevalent on social networks can lead to sales. Kembrel uses ShopIgniter’s service for social promotions, which has led to a refer-a-member incentive program, an ugly holiday sweater sale, and a limited-time sale for Facebook student members.
“The biggest challenge is to define and measure the right metrics and key performance indicators,” says Kembrel’s Habib. “It’s so important to stay level-headed and clearly differentiate between real results and hype.”
Tom Kaneshige covers Apple and Networking for CIO.com. Follow Tom on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline. Email Tom at firstname.lastname@example.org.
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Tom Kaneshige has been covering business and technology in Silicon Valley for two decades. As senior online writer at CIO.com, Tom covers Silicon Valley culture, BYOD and consumer tech in the enterprise.