Social commerce to surge

21 January 2011

NEW YORK: Social commerce sales will rise dramatically during the next five years, encouraging brands and retailers to enhance their presence on sites like Facebook, Booz & Co has argued.

In a new report, the consultancy stated marketers must shift the terms of engagement with consumers using Web 2.0 properties from "like" to "buy".

"The market for social commerce has been embryonic to date, but that will change over the next five years as companies race to establish stores," it said.

"Trendsetting companies are focused on products and services that benefit from the unique characteristics of social media, including the opportunity to get quick feedback from multiple friends and family members."

The study praised 1-800-Flowers, which boasts a fully-functioning Facebook store allowing customers to complete purchases without leaving the network's pages.

It has also implemented other innovative strategies, for example linking Facebook's calendar and "group gifting" features to its Mother's Day campaign.

"We are going to continue to invest in certain areas to help drive future growth," Bill Shea, 1-800-Flowers' chief financial officer, said in late 2010.

"Whether it be franchising efforts for both the consumer floral and our food group, investments in mobile and social commerce [or] floral supply chain in, we are going to continue to invest."

Dell was cited as another pioneering early-adopter, having earned millions of dollars in revenue through Twitter.

The IT specialist is becoming increasingly active in the smartphone and tablet segments, which the organisation believes will transform the retail sector.

"It used to be 'We're going to tell you how you're going to experience our store,'" said Brian Slaughter, Dell's director, end-user solutions, large enterprises.

"Now the consumer is walking in and saying: 'No, I'm going to tell you how I'm going to use your store to give me more information.' The tools they have at their disposal are very cool."

Similarly, Quidsi, owned by Amazon, recently set up Facebook outlets for its and platforms, although the ability to make purchases is limited to members of these two portals.

"No one has yet cracked the nut on Facebook e-commerce," said Josh Himwich, Quidsi's vp, ecommerce.

Overall, Booz estimated sales of physical goods via social channels would hit $5bn (€3.7bn; £3.1bn) globally in 2011, with the US contributing 20% of this total.

Revenues were pegged to reach $9bn by the close of 2012, incorporating $3bn generated by American internet users.

Such figures should achieve $14bn and $5bn respectively for 2013, while US customers deliver nearly half of the $20bn returns yielded in 2014.

By 2015, the worldwide expenditure attributable to this medium is anticipated to come in at $30bn, housing $14bn from the world's biggest economy.

A previous Booz survey of netizens dedicating one hour or more a month to social networks, and who bought at least one product online in the last year, found 20% proved willing to pay for items through these sites.

Elsewhere, 10% suggested this spending would be incremental to their current outlay, but 71% added "liking" a brand on Facebook did not improve the probability of buying it.

The consultancy predicted that social media will have the greatest impact on consideration, conversion, loyalty and customer service.

Facebook's chief executive Mark Zuckerburg certainly supported such as optimistic reading when rolling out the Places geo-location system last year.

"If I had to guess, social commerce is the next area to really blow up," he said in August.

Data sourced from Booz & Co, Seeking Alpha, Daily Finance; additional content by Warc staff