Facebook Commerce: From F to Phi Beta Kappa

CEO, Market Platform Dynamics
2:32 PM EDT February 27th, 2012

The web was buzzing last week with the news of Facebook’s failing grade for generating sales for merchants on its social platform. The case examples cited were J.C. Penney, Gamestop and Gap, all of whom said that they were closing down shop because there wasn’t much that their customers couldn’t do on their own sites that they were offering for them to do on Facebook.

If you ask me, and they didn’t, that’s exactly why they failed.

I’m not saying that selling stuff on Facebook is easy or a slam dunk – yet — but if all merchants are doing is putting the same old, same old experience on their Facebook fan pages, then it’s no wonder people aren’t impressed. And, while I can’t speak for the experience of the others mentioned in the article, the J.C. Penney experience was absolutely dreadful. Sure, you could pick from a selection of stuff (that was of course, identical to what was on their web site) but the user experience was clunky and slow (no back button?). No wonder it bombed. Fan pages are not web sites and the same functionality and experience shouldn’t be expected of them. It is a puzzle why anyone designing commerce on Facebook would think otherwise.

So, what will turn Facebook as a commerce platform from what some have cast as a failure to Phi Beta Kappa? Here are my thoughts, based on having gotten my hands pretty dirty over the last two years in the area of social commerce.

Know the Landlord

First, you have to understand what Facebook is before you can actually formulate a plan to use it to sell stuff. Facebook is a place where friends connect. That’s even what they say in their boilerplate so it’s not like that part is a big secret. It’s not a place where friends — or even people — come to shop right now. Shopping is what is what friends do (a) at the mall on a Saturday or Sunday or weeknight evenings as part of a social outing or (b) what people do online because it is convenient or (c) or what people do in physical stores because they want to look around and possibly buy stuff.

So, assuming that people are coming to Facebook to buy right now is just plain wrong. They come to Facebook to see what their friends are up to, to share updates and photos with them and to play games. That said, many are increasingly using their status updates to query friends for product recommendations, spontaneous invites to join them at a bar after work for a drink, or reviewing a recent product purchase or an experience.

And that’s exactly why merchants are so interested in Facebook. They are seeing how the News Feed has morphed from just a series of inane comments about nothing in particular, to a robust Word of Mouth channel for product referrals and recommendations. And with 845M people on the platform, that is a very powerful and concentrated network of referral sources for merchants. It’s just that, at least for now, not many have figured out how to turn news feeds into leads that convert to sales. As the article inferred, most merchants are seen as interlopers – butting into personal space to hawk their products, sort of like having someone pull up a chair at your table at a restaurant and trying to sell you stuff. Eww.

Know Yourself

What surprised me the most about the article was the merchants’ admissions that there wasn’t much — if any — distinction between what people could buy on its Facebook fan page and what they could buy on its web site. This is surprising, because retailers are, well, all about merchandising their products and adapting their products to the channels available to them. Many retailers operate several channels – their physical store, their online store, and their outlet stores. Very often, more like 99.99% of the time, there is stuff available in the physical store that isn’t available online (and vice versa) and the outlet stores have totally different merchandise too. Why? To get people to shop across all three channels. So, the notion that these same retailers would think that success on this 4th commerce channel would happen like magic just by sticking the same stuff that is available on line on their fan pages does.not.compute.

But let’s just assume for a moment that Facebookers were coming to the property with the sole intention of buying. That merchandising strategy still probably wouldn’t move the sales needle much, if at all. People embraced online shopping because it offered them a convenient and safe alternative to going to a physical store. People embraced outlet shopping because they could get a better deal. People still shop in physical stores because they want a bigger selection and they want to see, feel, and experience the product before buying. Merchants using Facebook as a commerce platform have to embrace the very essence of why people are on Facebook in the first place – to be social – in order to ring the register. The trick, of course, is to do this in a replicable and scalable way. That’s harder, not impossible, but requires more thinking than just sticking random products on a fan page and hoping they will sell.

Do the Math

Facebook may have 845M people as customers, but that doesn’t mean that all 845M of them are prospects for what merchants have to sell. There are a few ways to get the attention of customers (or potential customers) on Facebook. You can communicate to fans, you can advertise to people with the characteristics that fit your product attributes or you can do both. Communicating with fans is huge, because it is, by and large, free. Anything that a merchant posts in its news feed is displayed in those fans’ news feeds, and visible to any friend of that fan who goes to that friend’s wall or sees a comment that a fan made to that merchant’s post. That’s why there has been such a huge rush to get fans – instant prospect base.

But, unless you have a zillion fans (well, not maybe that many, but enough), conversions will be teeny. Most merchants have less than 10k fans, and a 1% conversion on an action in a news feed and a 2% conversion to a sale does not amount to much of a sales presence. The funnel gets even smaller if you are selling into local merchants. The real play here is to create a call to action that is appealing to enough fans that enough of them share with enough of their friends who share with enough of their friends, and so on. There are some great examples of this on Facebook – Red Bull, Diapers.com – but these campaigns were built around a whole lot more than just “click here to buy diapers.” P&G sold 1000 packs of Pampers in less than an hour (for $9.99) because it was how it launched a new product and that new product was available only to Facebook fans and in limited quantities. The flip side is that devising campaigns that ignite and sustain that sort of viral pass around power is more difficult. But, it is that campaign element and call to action that will ultimately fuel Facebook as a commerce platform.

Get contagious

Viral used to be a bad word – the consequence of getting sick with something that an antibiotic could not get rid of. How times have changed! It’s become the most coveted concept on the web and the real magic of social networks. It’s also what will propel commerce on Facebook.

The grousing about a lack of sales on Facebook is really a tale of two extremes: consumers having no real way to engage with the merchant or having nothing of any real value to do on a merchant’s fan page. If Facebook is the platform for friends to connect and share, then merchants have to sort out what about their product and offer will incent those friends to share. Is it something that will help them be better friends, make friends, or add value to an existing friend’s relationship? Is it something that a friend will feel good about sharing or will it improve that friend’s status or standing within their friend’s network? Merchants have to keep in mind that Facebook is a very social, but very transparent platform. What friends like, dislike, share is all seen by their networks. What they share – and therefore what merchants offer – becomes a reflection of them. Will a product that is shared make a person look smarter, more stylish, more empathetic, and more influential to their network? The key to Facebook commerce success isn’t just about getting one person to buy; it is about getting enough of them to share what they bought (or intend to buy) with their network and having some large percentage of their friends network do the same.

Okay, so where does this all leave us? I think at the very, very beginning.

According to the same article that trashed Facebook as a commerce platform, there are still a whole lot of retailers that are planning to launch social commerce initiatives this year and there are many efforts underway, even with Facebook itself, to turn friends and fans into customers on its platform. As I have said before, it is too big a platform for commerce not to happen on it. It is just a matter of time, technique and, of course, persistence. It is also a time of experimentation and those early adopters and innovators who are tinkering away now will gain a knowledge base that will be invaluable IP moving forward.

In this very digital and mobile age, it’s easy to forget how long it took for the internet to, itself, evolve as a commerce channel. As powerful as it is, it accounts for only ~7% of all retail sales today. Here is a pretty cool infographic that documents its history. The commercial internet came into being around 1995. Amazon was there pretty much at the beginning. There were many failed attempts – remember eToys, Pets.com, Boo.com, Webvan? It took a while to get traction, really until the early 2000’s. And, it took almost another decade for most of the major brands to have commerce capabilities on their web sites – amazingly, some still don’t or didn’t until a year or so ago. Commerce online has evolved and gained hold, as the user experience and selection and utility associated with shopping online has improved. Looking back, for those of us who are old enough to have a little perspective of shopping online, it’s come a long way baby. And, with mobile, and the convergence of the on and offline experience, it will go even farther, even faster.

But at the beginning, a lot of people wrote it off too. Newsweek in 1995 had a famous cover story entitled “The Internet? Blah!” in which the author proclaimed that there was absolutely no reason for anyone to even consider shopping online (or reading the paper or sending money or many other things that are now quite commonplace) because there were no salespeople online and salespeople were what defined the shopping experience.

Maybe that was true in the 1990s, but it isn’t that way anymore. Friends and our social circle increasingly define our shopping experience – helping us decide what to buy, when to buy it and where to do the deed. Facebook makes it that much easier and efficient for friends – and friends of friends – to share that information in ways that even email and the mobile phone just can’t, don’t or won’t.

As I said, it’s a matter of time, technique and of course persistence.

I’ll have more to share on some of those techniques in a later post. In the meantime, I’d love to hear more about your views on this topic, who’s doing great stuff, who’s bombed and why. It’s a great topic – as important as mobile’s influence on commerce, in my view, and I’d love to hear what you think.


Karen Webster is the CEO of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries.
More information on Karen Webster.

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