Speed Summary | Forbes on Social Commerce

Forbes has just published a useful introductory ‘birds-eye’ overview of social commerce (archived below) – explaining how social commerce is driving the fortunes and future of e-commerce. It’s a useful teaser/primer for management, social media marketers and e-commerce teams thinking about social commerce.

Along with SEO, Patricia Nakache, partner at venture capital firm Trinity Ventures, argues that social commerce boosts customer acquisition effectively – but it does more than that – it boosts customer retention, by delivering fresh (user generated) content and tapping into existing communities (social networks); thus fulfilling the holy 3C e-commerce grail of content, community and commerce.

Top factoids from the article:

• Over the last decade, e-commerce sales have grown on average 19% per year, far faster than offline retail.
• Even during the dark days of 2009 when retail sales shrank 2%, e-commerce vendors grew sales 1.4%, .
• Facebook now boasts 500 million active worldwide users (150 million in the U.S.), and 56% of online shoppers use Facebook.
• Social marketing alternatives [to SEO] are emerging, including allowing customers to post their purchases or their “likes” to their Facebook walls, or encouraging them to invite friends to participate in a discounted group purchase.
• Though many retailers have not yet been able to drive meaningful traffic from social media, 11% of them consider social media to be their most effective acquisition tactic, and that number is likely to grow.
• Private sale sites such as Gilt.com, RueLaLa and Zulily create a perception of scarcity, to boost e-mail open rates tenfold or more from 2%-3% historically.
• Interesting hybrid offline/online social retail models are emerging such as Stella & Dot, which melds multi-level marketing home-based “jewelry parties” with online shopping.
• Today, the 3C’s (content, community, commerce) is emerging as a viable model because sites can rely on free user-generated content and can capitalize on existing social networks to grow viable communities.
• Woot!, the trailblazer in the “one deal at a time” space recently acquired by Amazon, has more than 1 million visits each day but employs no e-mail. Instead, Woot! broadcasts through Twitter each daily deal and now has 1.6 million followers, the second most among retailers.
• Many sites are introducing game-like loyalty programs or “book-of-the-month” subscription models to drive retention. For $39.95 a month, ShoeDazzle delivers its members a pair of shoes, though members can opt out any given month.

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Article Archive

Why E-Commerce Is Flourishing

by Patricia Nakache, 08.03.10

Archived from http://www.forbes.com/2010/08/02/groupon-facebook-shopstyle-technology-ecommerce-social-media.html

Recent headlines that retail sales shrank in June for the second straight month were a grim reminder of how the Great Recession has torpedoed traditional retailers. Thousands of stores closed last year, and chains ranging from Circuit City to Filene’s Basement declared bankruptcy. But shopping is flourishing someplace else: the Internet.

Over the last decade, e-commerce sales have grown on average 19% per year, far faster than offline retail. Even during the dark days of 2009 when retail sales shrank 2%, e-commerce vendors grew sales 1.4%, capitalizing on price-sensitive and increasingly Web-savvy consumers to continue to gain market share. So while traditional retailers have been struggling to survive, forward-thinking online merchants have unleashed a wave of innovation that is improving the economics of e-commerce.

Until recently, when it came to landing new shoppers, e-tailers had fallen into a rut. They relied heavily on search engine marketing. It’s popular because it delivers customers reliably, but there is a marginal cost associated with each new customer. That cost can grow at periods of peak demand.

Online merchants, emulating their online media counterparts, have gradually recognized the value of search engine optimization to drive free users to their sites through natural search. Amazon.com and shopping search sites like TheFind.com and ShopStyle have led the way. TheFind.com now has 16 million visitors each month, almost entirely from search engine optimization. In an Internet Retailer survey, 73% of e-commerce vendors cited better search engine optimization as a website design priority in 2009.

Meanwhile, social media has burst on the scene with the promise of more free (aka viral) traffic. Facebook now boasts 500 million active worldwide users (150 million in the U.S.), and 56% of online shoppers use Facebook. Social marketing alternatives are emerging, including allowing customers to post their purchases or their “likes” to their Facebook walls, or encouraging them to invite friends to participate in a discounted group purchase. Groupon presents to its subscribers a deal of the day from a local business, such as a restaurant or spa, but the deal does not “tip” until enough people have signed up for it, creating an incentive for users to tell their friends about the deal.

Though many retailers have not yet been able to drive meaningful traffic from social media, 11% of them consider social media to be their most effective acquisition tactic, and that number is likely to grow.

Once visitors are browsing the site, the next challenge is to convert them to buyers. Traditionally, online retailers have focused on landing page optimization (ensuring that the messaging and layout of the first page that visitors see entices them to buy), streamlining the checkout process, and deep, relevant content, such as product specifications, photos, and reviews that can help shoppers make decisions.

Many online merchants have injected an additional conversion-boosting element into the Web shopping experience: fun. They have begun to adopt techniques that are tried and true drivers of impulse shopping in the bricks and mortar world: limited time or limited quantity offers (think Home Shopping Network or Kmart’s Blue Light Specials), brand or product discovery, and product “story-telling.”

Private sale sites such as Gilt.com, RueLaLa and Zulily offer members-only access to limited quantities of deeply discounted designer goods. By creating a perception of scarcity, e-tailers have been able to boost e-mail open rates tenfold or more from 2%-3% historically. Techniques such as game play are unique to the online environment with, for example, Swoopo and BigDeal introducing the concept of penny auctions to e-commerce. Interesting hybrid offline/online models are emerging such as Stella & Dot, which melds multi-level marketing home-based “jewelry parties” with online shopping.

Perhaps the most disruptive innovation is occurring on the customer retention front. When e-commerce first emerged, pundits spoke of the 3C’s of successful e-commerce sites: content, community and commerce. The model failed because content was expensive to produce and individual e-commerce sites had a difficult time sustaining true communities. Today, however, 3C’s is emerging as a viable model because sites can rely on free user-generated content and can capitalize on existing social networks to grow viable communities.

Woot!, the trailblazer in the “one deal at a time” space recently acquired by Amazon, has more than 1 million visits each day but employs no e-mail. Instead, Woot! broadcasts through Twitter each daily deal and now has 1.6 million followers, the second most among retailers.

Many sites are introducing game-like loyalty programs or “book-of-the-month” subscription models to drive retention. For $39.95 a month, ShoeDazzle delivers its members a pair of shoes, though members can opt out any given month.

The generation that grew up with the Internet is now in its first jobs and has spending power. These individuals are comfortable buying online, but they also have high expectations for a compelling online experience. The good news for e-tailers is that the pillars of a great consumer experience–friend referrals and recommendations, a fun shopping environment and a vibrant community–can also translate into superior customer economics. No wonder e-tailing is flourishing.

Patricia Nakache is a partner at venture capital firm Trinity Ventures in Menlo Park, Calif. where she focuses on business and consumer services and software companies.