Retail TouchPoints: A Debate on the Pros and Cons of Investing in Facebook Commerce

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Jun 02, 2011
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Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.

A recent webinar presented by PowerReviews, entitled "The Case for (and Against) Facebook Commerce," concluded that the success of Facebook as a commerce channel is overshadowed by traditional web sites. The findings come as some industry insiders remain skeptical because they are unable to prove the business case for driving sales through social media.

According to The State of Retailing Research, a study conducted by Forrester Research, 62 percent of social marketing strategies are unclear because the benefits of social media have not been tangible. In fact, 68 percent of retailers surveyed said if Facebook no longer existed, there would be no negative effect on 2011 web sales.

During the webinar, Sucharita Mulpuru, an analyst at Forrester Research, compared four marketing tactics in terms of ROI for pure plays, multichannel and manufacturers. Among the four tactics, Facebook ranked the lowest, while email was considered the most effective for companies because it is inexpensive and delivers a high ROI.

To date, the most common retail-oriented activities on Facebook include product sharing and peer-to-peer interaction. As many as 20 percent of Facebook users are willing to share their purchases with their Facebook friends by posting the information on their personal page.

Following the post, "A fraction of those in that social network will see the post, resulting in a one percent click-through rate and a two percent conversion rate of those who clicked," said Ms. Mulpuru, referencing a 2010 online benchmark survey conducted by North American Technographics.

Another way retailers can take advantage of Facebook activity is by integrating Facebook data with website information. When the shopper is visiting a brand’s website, she is closer to a transaction. With Facebook data in hand, retailers can create a more relevant customer experience on their websites.

Based on research conducted by the 2010 Social Shopping Study, consumers use their Facebook profile as their profile for all web activities. Whenever a person shares content about a product on Facebook, retailers receive $15.72, according to Cathy Halligan, SVP of marketing and sales at PowerReviews.

Through the process of ratings, Facebook friends can relate to one another, causing a greater impact on purchase decisions, and in turn, emerge as a source of sales. The study also pointed out that 68 percent of Facebook users are more likely to buy a product or visit a retailer based on a positive Facebook friend referral.

Ms. Halligan shared four key points in driving sales:


  • Sharing with Facebook friends
  • Two-way "Like" button or shared content
  • Building profiles and verifying with Facebook
  • Personalization.

"E-business marketers and executives are overly focused on social media, or programs and service of brand development and have not developed the share of mind to social commerce," Ms. Halligan said.

Discussion Questions: Do you agree that “e-business marketers and executives are overly focused on social media”? Are retailers properly utilizing Facebook as a commerce tool? What retailers and/or brands do you think are making the wisest use of Facebook so far?

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14 Comments on "Retail TouchPoints: A Debate on the Pros and Cons of Investing in Facebook Commerce"


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Dr. Emmanuel Probst
Guest
Dr. Emmanuel Probst
9 years 11 months ago

Rather than ‘overly focused’, I would argue that e-business marketers are concerned with social media, as most of them have not yet figured out how to handle it. Facebook is not only about driving sales; it is primarly a powerful platform for creating a ‘tribe’ of brand advocates. From my standpoint, the most successfull brands on Facebook are the ones that focus on spreading content that is meaningful and relevant to their followers. For example, Lady Gaga does a great job at mobilizing its ‘little monsters’ community.

Max Goldberg
Guest
9 years 11 months ago

Social media is the hot topic. It’s disruptive and much of it is out of the control of marketers. Naturally, this worries marketers. Finally, there is no bible on how to effectively use social media. This is a headache for marketers. On the other hand, social media is inexpensive to test and open to limitless experimentation. Marketers should roll up their sleeves and dive in. Test the waters. See what works for a particular brand and what does not. Engage consumers. Isn’t that what marketing is supposed to be all about?

David Biernbaum
Guest
9 years 11 months ago

Companies are not overly focused on social media. Social media has almost unlimited power and influence. The real issue for many companies is that they do not yet understand how to approach this amazing medium in the best and most comprehensive way.

Ralph Jacobson
Guest
9 years 11 months ago

Before a retailer can fully leverage Fb or most any other social media outlet to monetize their efforts, they need to focus their time on building their brand value and awareness. There are tools available, both free and for a fee, that can put “tangibility” on the performance of social commerce activity.

I think we are in the midst of a “primordial soup” of social media that will congeal over time. Only a few years ago, MySpace was the “8th largest country in the world”, and now Fb has far overtaken it in size and scope. Who knows what will be the most popular outlet next year? Time will tell and retailers need to be agile to ride whatever wave is leading the trend.

Dan Frechtling
Guest
9 years 11 months ago

Marketers are overly focused on Facebook as a direct source of business. Study after study demonstrates search and email win hands down on the hard metrics:

*Low interaction rates. Facebook garners only 1% CTR and 2% conversion versus 11% and 4% for email (Forrester).

*Low sales. Only 2% of 2010 holiday sales were connected to social sites vs. 40-60% from email or search (2011 GSI).

*Weak perception. Facebook ROI is consistently last in ROI behind email, search and affiliates (2011 Shop.org).

68% of retailers wouldn’t care if Facebook disappeared. But because it exists, retailers are compelled to play. There will be a few winners like Kembrel, a flash site with 20% of commerce from FB. But the vast majority will end their experiments with weak hard metrics.

Facebook won’t be a DIRECT source of sales like peer tactics because it will never be a place where people want (or tolerate) being marketed to. This is fundamentally different from email and search. As Emmanuel suggests, how it works INDIRECTLY is a good topic for neuroscience.

Doug Stephens
Guest
Doug Stephens
9 years 11 months ago
Much of the problem lies with the expectations of performance for Facebook. Let’s not forget that only a few short years ago, the gates opened on what was and still largely IS a place for friends to share their personal lives. Now, marketers are storming the place and expecting consumers to fall all over themselves to transact. Let’s also not excuse the fact that a lot of brands aren’t very interesting. If you have a boring brand and a lousy product, Facebook won’t make you successful. It will only amplify how badly you stink! A lot of this comes down to trust and let’s face it, we’ve had mass media for over 100 years and we still don’t trust it. How can we expect consumers to blindly place their faith in a medium as new as social without brands first having to build a healthy degree of trust. There will come a day (not to far out) when we seamlessly move to conduct our shopping on social networks but marketers simply can’t expect Facebook to… Read more »
Larry Negrich
Guest
9 years 11 months ago

Most retailers seem to be evaluating how best to use Facebook and other social media in their marketing mix and not betting the farm on any one initiative. Wise. Retailers would also be wise to make sure they can harvest the information from their social media endeavors and do the very difficult behind-the-scenes systems integration work that will enable inventory visability, promotions, etc. to be seamless across channels.

Joel Rubinson
Guest
9 years 11 months ago

I like both Dan and Doug’s take on this. The great majority of people who “like” a brand never even revisit the brand page. I think the impact of social and mobile of driving sales will only come if the focus shifts to simplification (we don’t need no stinkin badges!). How will Facebook make it easier for me to buy something?

Paul R. Schottmiller
Guest
Paul R. Schottmiller
9 years 11 months ago

The two way integration including the recent examples of the social elements becoming part of the retail e-commerce web site is a natural evolution for retailers pursuing a one-channel strategy. This is driving increased customer relevance.

This is also innovation. It doesn’t fit traditional ROI models and it should not be constrained by them.

Anyone using e-mail’s “high ROI”, and the 68% saying there would be no impact on e-commerce sales if Facebook went away tomorrow as justification for constraining investment in this area, remind me of of Ken Olsen, the CEO of Digital in 1977 saying “there is no reason for any individual to have a computer in his home.”

Joan Treistman
Guest
9 years 11 months ago

Many companies overlook the hard facts about social media, i.e. how few people are actually involved. For sure consumer dynamics are changing and therefore it pays for retailers and marketers alike to plan ahead and keep up with the possibilities. The potential pitfall is to focus too much on social media while ignoring current methods of communication that are more prevalent.

I believe that many marketers believe social media is the Promised Land without objectively defining its current contribution to marketing effectiveness and revenue. Consequently, they are ignoring what could provide immediate and short term success.

Mark Burr
Guest
9 years 11 months ago

From a recent article, published by Internet Retailer: “61% of online consumers discuss automotive issues on social networks.” The study also shows that 49% follow automotive brand and/or retailers on Twitter. In addition, the report indicated “Users are most likely to make an automotive purchase (26%) as a result of a recommendation on a social networking site than for any other category examined.”

So, the results can be powerful…or not. The problem in an area where you are forced to play–a retailer may not know how. For the most part, social media remains like throwing a piece of pasta against the wall and seeing if it will stick. There’s no real formula and no real results that can be duplicated. “Gee, we have to–hope it works” sounds like the common strategy. Like anything, you have to pay to play. Right now I suspect there is a lot of good money being thrown after bad.

Bill Hanifin
Guest
9 years 11 months ago

Express posted its entire product line on its Facebook page, and enables purchase via the page. Establishing Facebook in this way constitutes an alternate channel that can only augment sales. I can’t see a downside to the strategy.

This is quite different from the discussion which implies giving up something existing or de-emphasizing and existing channel through budget shifts to favor Facebook. I don’t think the numbers are in to justify that move.

Cathy Briant
Guest
Cathy Briant
9 years 11 months ago

I’m beginning to think we need to adopt a few social media conventions here on the discussions…I wanted to “like” so many of the comments!

It’s difficult to compare social commerce ROI to other methods, because social media was not built to be a sales vehicle, and frankly, I’m turned off by those retailers that push a little too hard on FB. Their post amounted to spam on my wall and added no value (or entertainment) to my time on FB. Others, however, enable me to poll my friends on my choices for a new purchase, so you can guess whose store (or website) I’ll go to when I’ve decided. That’s a hard ROI to measure, but making it possible to buy via FB or reserve on FB and pick up in store makes the link possible.

Peter Leech
Guest
Peter Leech
9 years 9 months ago
I can’t say that I entirely agree with my good friend Dan’s points below. I agree that there’s been a ton of hype. But in actuality most companies investments in Facebook and Social Commerce are tiny compared to any other channel. Truly minuscule. There has been a tremendous focus on the “Facebook = 2% of sales” number from Forrester. The numbers I see in the market range as high as 7%. And more importantly, the share of visits can get over 13%. This is significant. No one is saying to stop optimizing search or email, right? In a competitive environment, if someone told me I could get even 1% incremental sales for the small investment that Facebook, Twitter and YouTube require… I’d add it to my suite of initiatives. I just don’t see this as a zero sum game. The real truth is that most companies have a very small percentage of their customers as fans or followers. These tend to be highly loyal customers and the benefits accruing to the brand are to be… Read more »
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