Customer Experience

Customer Experience

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

The Rise of Social Commerce: Re-designing the shopping experience

Social media as a commerce channel is emerging as a potentially significant sales channel alongside stores, telesales and more traditional web channels. It has been estimated that the volume of goods sold through social media will grow sixfold in the next five years, reaching $30 billion globally. According to Ovum, social commerce is set to be retail’s biggest story in 2011.

Shopping in the real world has always been a social activity. When I go clothes shopping, I usually walk around the store, pick out a few items to try on, show them to my friends and ask for their recommendations on which items they like best - then I make my purchase. I can now almost entirely replicate this end to end journey in a social networking site. Companies are no longer using social networks solely for marketing purposes e.g. to generate awareness, influence consumers and cultivate their loyalty (i.e. using Twitter Feeds and Facebook Fan Pages) - they are also beginning to use them as an integrated channel where consumers can purchase products too.

How does this work? For those of you unfamiliar with social commerce, check out the ASOS shop on Facebook which launched in January 2011. Within the shop users are able to browse the entire range of store items, ‘share’ them with friends, ‘like’ them, post an opinion to feature on their profile and add items to their shopping basket. Customers can also make transactions directly from the company without even leaving the Facebook environment.

Asos Shop on Facebook:

 

In the past, many companies have used Facebook as a shop-front, directing shoppers to their own website to complete the transaction. There is now a drive for companies to sell their products directly on social media sites. Indeed, French Connection has recently launched a fully transactional Facebook shop and are even allowing their Facebook ‘fans’ to buy directly from their newsfeed. The trend of selling through social media sites is not limited purely to retail companies. FMCG, travel and luxury goods companies are also increasingly selling their brands via social media sites.

Why would a customer want to engage in social commerce?  Just like physical shopping, social commerce has the potential to provide a compelling customer experience by integrating the social aspect with the transaction. First, the social aspect: If I am thinking of buying a dress, I can ask for quick feedback from multiple friends or view the word-of-mouth recommendation before I decide to make my purchase. Then, the transaction: Once I have decided to purchase the dress there are fewer clicks and barriers to complete my transaction meaning I save time and am less likely to drop out of the process.

What are the benefits for companies?  Facebook has more than 500 million active users worldwide and many people use it on a daily basis. After search engines, Facebook is reportedly the single biggest referrer of traffic to ASOS’s site. Companies are keen to harness the power of social media and leverage these online relationships for commercial gain. It gives them an additional channel for letting their customers spread the word about the products they are interested in purchasing and encouraging them to transact, leading to a potential increase in sales. From a measurement perspective, enabling consumers to move directly from social network communication to purchase will make it easier to gather data and develop insights to understand how social activity affects sales.

A meaningful new revenue stream for Facebook? Recent investment by Goldman Sachs into Facebook has given the company an implied valuation of about $50bn. There’s been much debate over whether Facebook is actually worth this much given that its 2010 revenues are estimated to have been only $2bn (i.e. valued at a whopping 25 times sales)! Many observers have questioned how Facebook will be able to monetize its unique platform and grow its revenues in order to justify this sky high valuation. If Ovum’s prediction proves accurate, providing a platform for social commerce where Facebook takes a commission might become a significant stream of revenue growth for the company.

A potentially significant sales channel?  Social commerce is still in its infancy and could be a risky investment for most companies to make given that there isn’t enough data available yet to prove its success. In order to be successful companies selling via such methods will need to be careful in their approach to attract and retain customers starting from the moment they are made aware of the product right through to purchase. That said there is growing evidence that more and more companies are already looking at social commerce as part of their multi-channel strategy. The benefits to these companies and to Facebook Inc. could be significant. From a customer’s perspective I can certainly see the appeal of using Facebook as a new and convenient channel where I can get my retail therapy fix!

I'd be interested to hear your take on social commerce.  Should companies invest in social commerce as part of their wider multi-channel strategy?  Do you think the market is mature enough for social commerce to properly take off?  Importantly, could you see yourself carrying out your own shopping and buying products through Facebook?

About the author

Jo Lewis

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