Recently, I came across a new trend – social commerce – where more and more businesses are providing discounts and other incentives to its customers in exchange for publicizing their purchases online. Social Commerce is the intersection of social media activity and eCommerce where sharing leads to real dollars. I learned of this phenomenon for the first time through an online shopping website Gilt.com. When I logged in on to the website using my iPad, Gilt offered me a discount to download their app and asked me for permission to make my purchases visible to my friends on facebook (Gilt promised some exceptions, however, gifts and intimates purchased would be excluded). At first, I thought: “What a genius marketing idea!” but then I started to doubt whether this idea was feasible and would get any customer buy-in. On the one hand, people I am friends with probably fit within my age and socio-economic group, thus purchases I make might be items my friends would be interested in buying. Ecommerce businesses by making my purchases public would be getting access to exactly the customers they want. Furthermore, the fact that I actually made the purchase as opposed to just liked the item (Pinterest allows users to simply share items they find appealing) might be a more powerful signal to my friends and might have a meaningful influence in driving transactions for any given ecommerce business. However, at the same time users might not be as excited about making their purchases (sometimes irrational, i.e. items of designer clothing that cost way more than they should) public. I, for one, thinking about that downside refused to become a member of this service despite the whooping 20% discount Gilt offered me). I imagine, there are many users like myself out there who would be worried about giving away the right to make their purchases public to online commerce website.

Social media democratized marketing for small businesses: successful promotion and distribution of products is no longer reserved for larger companies who can afford expensive media expenses such as TV ads, commercials during sporting events, etc. Companies like Facebook and Twitter have leveled the playing field – allowing participants to share events, products, and companies they are excited about with their friends by simply clicking the “like” button. Mass adoption of these platforms made it incredibly cheap for companies to reach a large subset of the population that might have a high likelihood of enjoying and purchasing their product.

EVENTBRITE CASE[1]:

Eventbrite is one of the companies that is very excited about social commerce and uses it extensively. The company allows users to share the event before they’ve purchased a ticket by featuring the Facebook “Like” button. On their order confirmation pages (after the ticket has been purchased), they placed a “Publish to Facebook” tool. They track event-sharing behavior carefully and have made few key discoveries from the data they collected between October 2010 and March 2011:

  • 40% of sharing through Facebook occurred on the event page (via the “Like” button) vs. 60% of sharing which occurred on the order confirmation page. This suggests that the motivation to share is higher once the purchase is made and the guest is confirmed to attend the event.
  • The company’s BSR (browsing share rate) is 1% — only 1% of people who are simply exploring the idea of going to the event share with their friends before purchasing a ticket to the actual event. Eventbrite’s TSR (transcation share rate), on the other hand, is 10%, which means 10 times more people share an event from the order confirmation page.
  • They’ve also found that post-purchase share on facebook drives 20% more sales than a pre-purchase share.

The Eventbrite case shows that social commerce is a very powerful tool that could be used to drive sales for a business. However, are all businesses created equal when it comes to social commerce? Or are some businesses meant to succeed in integrating their tool into their marketing strategy while others are doomed to fail?

I believe it is the latter. Although people feel more and more comfortable sharing many aspects of their lives online – e.g. music they listen to (Spotify), events they go to (Eventbrite), places they’ve attended (FourSquare) – products they buy might not be one of them. Firstly, because frequently purchases we make online (although frequently discounted) might be overpriced – an average price for a shirt on Gilt is around $100, which is significantly higher than the price of an average shirt an average American buys (partly due to the fact that items sold on Gilt are designer). Secondly, frequency of their purchases might be something people are ashamed of. If someone shops online every week feels embarrassed by their shopaholism, they might be uncomfortable by these public posts and thus, it could potentially hurt Gilt by discouraging to customers to make frequent purchases. Thirdly, many of us have facebook friends that we do not know much about, so perhaps I am not comfortable with those individuals finding out more about my spending patterns. For the reasons above, I can see how Gilt could fail at implementing a successful social commerce initiative. I believe to succeed, they should beta test it and incorporate a solution similar to that of Eventbrite, i.e. let customers choose which purchases they want to make public and which they prefer to keep private (as opposed to making every purchase public by default). This approach would allow Gilt to analyze their preliminary data and ensure that their customers are happy with this sharing and then consider making it a default feature.


[1] http://blog.eventbrite.com/social-commerce-2/

 


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