Social Commerce: Who’s Turning Visits into Cash?

‘Tis the season to be shopping, and retailers have their fingers crossed that this year’s sales will shine a little brighter in comparison to the last two years. This article is Part Two of my piece on social commerce that was published in last month’s Lydian Journal. This article is a survey of how retailers are using Facebook to drive commerce.

Social commerce is about helping people connect where they buy and to buy where they connect. The point made in my prior piece is that a whole lot of the “connecting” is happening now on Facebook, even cannibalizing other online activities like e-mail and gaming since they can be done within the platform itself. (Related Article: S-Commerce- A Fourth Retail Channel: An Overview of Social Commerce and What’s Fueling its Growth)

From my perspective, social commerce initiatives today can be grouped into three categories:

1. Viral campaigns on Facebook that drive traffic to brand websites off Facebook. Likely made famous by the Neiman Marcus Midday Dash and other promotions like this, these initiatives are classic social media promotional campaigns that use this channel as an advertising outlet for those offers. People who “like” these merchants are notified of these offers, which are then purchased on the merchant websites themselves.

2. Deal sites that drive purchases on behalf of merchants to their own deal sites. The granddaddy of this form of advertising is Groupon, which uses social media plug-ins so that buyers can share with their friends purchases made on Groupon’s site on Facebook or Twitter.

3. Facebook fan page storefronts. Payvment (powered by PayPal) and Alvenda both paved the way for what is essentially a shopping cart that creates a storefront on fan page tabs that enables merchants to sell products on their fan pages. Merchants can decide how to promote items for sale on those tabs to their fans and Facebook visitors.

With that as context, here is a representative sample of some of the more interesting and creative social commerce initiatives that are taking place on, but mostly off, social networks. These examples do not include gaming, which will be the subject of another Lydian Journal article, since it clearly drives commerce on these social networks. (Related Article: Is 2011 the Year for Social Commerce?)

As this piece goes to press, the granddaddy of group buying, Groupon, is being courted by Google for something north of $5 billion, which is solid evidence that social commerce drives sales and the fortunes of those who saw the opportunity early and invested. Starting with an e-mail base from its days as “The Point,” nearly all Groupon offers “tip” since the service now has 25 million subscribers worldwide, including 15 million in North America. While it advertises on Facebook and encourages its buyers to share deals there and spark viral sharing (and makes it easy for customers to post on the Groupon site), it is not operating on social networks. Groupon goes after the long-tail of local merchants and at last count has roughly 175 knockoffs in the United States alone.

LivingSocial offers a deal a day for services at local restaurants, bars, spas, theaters and more. After purchase, like Groupon, the buyer gets a voucher to use at the business for the merchant service that they purchased. LivingSocial started with a network of buyers. This was the company that popularized a series of fun “quizzes” on Facebook, querying users about their favorite shoes, TV shows and other likes and dislikes. They parlayed that list into a commerce application off Facebook that competes today with Groupon in roughly the same space of long-tail local merchants.

The granddaddy of retail was an early social network adopter. On MySpace around the holiday season, it operates its holiday gift store and gives visitors a chance to post wish lists and share favorite holiday items. In October 2010, Wal-Mart began running Facebook ads promoting a new service called CrowdSaver. This offer gives discounts off of current goods if a certain threshold of people “like” the offer (e.g. 18 percent off a plasma TV if 5,000 people like it). The move is a new and a more Facebook-centric twist on the Groupon model, which offers steep discounts on goods and services only if a critical mass of people say they like the product being offered.

Founded in 2008, Lolligift taps into the notion of “group gifting.” Anyone who wants to organize a group gift simply goes to the Lolligift website, selects the gift-giving occasion, creates a gift pool by estimating the gift cost and invites others to participate and make a contribution. Participants can chat with friends on the gift pool page, make a payment by credit card or PayPal and sign an e-card that will be delivered when the target goal has been reached.

In what is less social commerce and more PR/media hype, Macy’s has launched what it’s calling a “Magic Fitting Room.” This fitting room is in its New York Herald Square location and is equipped with a Facebook-connected, camera-enhanced mirror. Participants try on clothes and can then snap a photo and “Friend Source” feedback. This application also hopes to boost sales by enabling people to scroll through to Macy’s product inventory and virtually try on clothes, sharing those images with friends, who then insist you buy them (or not).

Following on the heels of its success with its (Kmart’s social community launched a few years ago) Sears has given its own site a social commerce layer by allowing visitors to “message” and “follow” other users, see their profiles and their onsite social activity, like products (as well as dislike, want and own them) and join groups based on common purchases and interests.

Described by some as a social version of PayPal, Rightcliq is a social bookmarking service with an image/price grabber that makes comparison shopping easy, using those product images to populate “wishspaces” that people set up on the site. Its autofill credit card payment feature streamlines purchases of offers presented on the Rightcliq site by a number of online retailers that provide users of Rightcliq special discounts (and also offers tracking services for online purchases).

Pikaba describes itself as a social shopping marketplace. It connects buyers and sellers by matching sellers with buying requests for products or services created by buyers. When merchants receive these requests (i.e. leads), they can give a direct quote to the buyer or simply get in communication with the buyer. Merchants also can put their products or services directly for sale at Pikaba.

Amazon has made it easy for users to click on the recommendations link on their Amazon homepage, share those recommendations with their friends and to see what their Facebook friends also like. When shoppers connect their Amazon and Facebook accounts, they see their Facebook profile photo on Amazon’s site. They also see which of their Facebook friends have upcoming birthdays and can receive gift suggestions based on the music, books and movies those friends have said they like on Facebook and on their Amazon wish lists. At the same time, they see recommendations on what to buy for themselves, based on what their friends like.

Delta’s Facebook Ticket Window
Powered by Alvenda, a social shopping cart on Facebook, Facebook users are now able to book flights with their friends directly on Facebook and many other websites. It allows people to share flight information and arrival details with friends from the confirmation page and represents the first time that travel can be booked on Facebook. Future releases will further leverage the social graph so that people can coordinate group travel more easily.

Set up in 2009, registered users can now order all kinds of floral products from this Internet-based florist without ever leaving the social network. When the store was launched in 2009, it had less than 2,000 fans and struggled initially to make sales. More than a year later, it has 48,000+ fans and sales.

RetailMeNot is a site that provides links to and information about online coupons and discounts for a variety of retailers. It is a place for people across the Web to share deals and e-mail those deals to their friends. Established in 2006, people have contributed more than 300,000 discounts for sharing at more than 40,000 online stores. What makes it “social” is that every single coupon is rated and ordered by its usefulness, and every store is categorized and ordered by its popularity within that category. Users determine the “ranking” of the deals. The best deals quickly rise to the top, and expired or superseded coupons quickly drop down the list.

Payvment is a free Facebook application that allows businesses, organizations and individuals to quickly set up virtual storefronts on their Facebook fan pages using PayPal as the payment back-end. It launched just a year ago (November 2009) and claims to have roughly 30,000 businesses and individuals who have used the app, with more than 500,000 Facebook users who have shopped for products in stores using it. It is a pure-technology play and provides a shopping cart, the ability to offer fan discounts, a search tool and the ability for customers to add comments and reviews.

Moms who love wine
In an interesting twist of “Facebook-fan-page-finds-commerce,” this group boasts more than 350,000 women who are bound by two common criteria: They are moms, and they like wine. Yet rather than monetize this group by advertising, it has decided to sell the product that keeps the group together – wine – by the box, the bottle or by the case.

In 2009, JetBlue launched JetBlue Cheeps, a weekly Twitter promotion that features “cheap” fares for popular segments. JetBlue’s has roughly 1.6 million followers and started by engaging its customers in conversations and a running dialogue around key messages, including using it as a monitoring tool to hear real-time thoughts from customers on how to improve services. Their research suggests that their Twitter followers, in general, were more likely to complete other bookings with the carrier than visitors who did not visit Twitter.

Best Buy
Best Buy has taken its social commerce initiatives with Facebook an interesting step in another direction. It, along with Target and Wal-Mart, announced that it will sell Facebook Credits in the store right in time for the holiday shopping season. It is selling these prepaid cards in denominations of $10, $25 and $50, and they can be used anywhere on Facebook where Credits are now accepted (including gaming sites and virtual gifts).

With 4 million users worldwide (according to its website), the Foursquare mobile app enables people who use it to check into a place and to tell their friends, which includes posting that status to their Facebook newsfeed. Merchants, like Starbucks, provide incentives for users to visit, tell their friends and invite them to join them there.

Facebook Deals
In an effort to stymie the growth of Foursquare’s mobile social network, Facebook Deals was launched several months ago as a way for businesses to offer bargains and discounts to drive traffic and build customer loyalty via mobile offers. Merchants create deals, which are then promoted on their Facebook pages. Anyone who “likes” that merchant will be notified of that offer. Facebook Deals will also push notifications to the Facebook mobile app when a user is near a location offering one. (Related Briefing Room: Mobile Payment Apps)

YouTube/Old Spice Campaign
The famous “Smell like a Man, Man” video campaign received almost 6 million views (that’s more than Obama’s victory speech) the day it was launched on YouTube. Day 2 had eight of the most popular 11 videos online. By the end of the first week, it had over 40 million views, and it has become the all-time most viewed channel. The campaign increased sales by 27 percent over six months since launching (year-on-year), and Old Spice is now the No. 1 body wash brand for men.

In beta on Facebook since August 2010, this social buying platform enables group commerce directly on merchant fan pages (without ever leaving that page) and messages fans when a deal is running. getta! has positioned itself as a “curator” of products that people see in stores and buy today, but that are also interesting, unique and a great value. getta! also taps into existing communities of interest on Facebook, drives them to the offers (bringing the merchant new fans and customers) and helps to create new groups around common interests (for example, the “I Love to Ski” buying group) on Facebook.

Although many merchants are keen to the idea of using social networks as platforms for conducting commerce, only a small number of them actually transact on those platforms, and fewer still have tapped into the “mother lode” of group dynamics that these networks can foster. A quick (and non-scientific) review of retailer sites shows scant few offering the ability to transact on their fan pages. Yet nearly all promote offers and incentives to shop either online or in-store. For the holiday season, most of the larger national brands motivated their fans to “like” them as a way to get a preview of Black Friday/Cyber Monday sales, for example. However, we’re still in the early days, and the amount of activity in this space by merchants and entrepreneurs alike is evidence of the opportunity that is about to be unleashed.

My observation is that most social commerce activities have not harnessed the potential of the platform to leverage the social graph for the benefit of not just one person – but for many at the same time, which is where the opportunity for merchants, consumers and social networks lie. At the moment, simply powering “deals,” even if they are on Facebook, is a strategy that is untenable over the long term for merchants. This plan relegates retail and any channel in which it is conducted to one big commodity-price driven environment, frankly where Amazon and large big box merchants win most of the time. That may be what retail needs now to survive the current economic malaise, but it won’t be how they grow their way back to prosperity.

The multi-billion dollar opportunity that will define the future of this fourth retail channel is the one that will help merchants use it to create long-term profitable relationships with their customers in much the same way the Internet did in the late 1990s. There were lots of well-funded startups back then that evaporated because they failed to recognize the long-run potential of the channel and built businesses on the fads that were created by the Internet Bubble (remember Beenz, and Webvan?) But that was also when a lot of smart new concepts – much less sexy but no less powerful – were started and quietly honed. Bill Me Later, to take one example, was started right around that time as a way to shop online without having to enter card information – something that was a big hindrance for consumers buying online at that time, obviously crimping merchant sales. They had no sock puppet mascot but built a business that sold to PayPal for nearly $1 billion in the midst of the financial crisis. My prediction is that the social commerce winners will evolve in much the same way – platforms and applications that simply help people connect where they buy and buy where they connect, sock puppets not included.

Related Lydian Journal Content


Accelerating Deployment of Open NFC Mobile Commerce Applications

Is the PIN Mightier Than the Sword in Fighting Fraud?

(Outside-In)novation: The Changing Paradigm for Driving Payment Platform Growth

Making Sense of Ever-Changing Payment Technologies: The Year of APIs and the Reshaping of the Payment Ecosystem

S-Commerce- A Fourth Retail Channel: An Overview of Social Commerce and What’s Fueling its Growth