Online retailers are building social nets into their e-commerce to turn their customers into their new sales people.
Online retail was once seen as revolutionary for its circumventing the need for a bricks-and-mortar outlet. However, the last year has seen a maturing of the e-tailer's relationship with its customers, this time side-stepping the traditional advertising media.
Viral marketing campaigns – with their wildly unpredictable success rates – have been with us for years now, but the marriage of social media with e-commerce marked the emergence of a more rational route to market, where online customers are encouraged to 'sell' available products directly to other customers.
Most businesses, even those adept at selling products and services online, have been slow to realise the potential of social networking sites to extend brand awareness, communicate with customers and, most importantly, drive sales. Now, however, they are looking to super-charge the social network's purchasing power.
Social networking, to the average consumer, means Facebook, Twitter, YouTube, LinkedIn. These portals, now leading brands in their own right, cluster common-interest groups and encourage the exchange of peer-to-peer recommendations – and just so happen to generate online purchases. E-tailers have spied an opportunity on these platforms to promote brand identity and bring in new customers. However, canny companies want to take things a step further. One new trend that's emerged over the last year is for businesses to devise their own social media platforms.
A 2011 report on Social Media Strategies in Global Retailing by analyst Datamonitor reveals that "although e-commerce and social media are separate entities for retailers, those that recognise the potential of combing the two will reap the rewards". It adds: "social media has revolutionised consumers' relationship with the Internet and retailers... Retailers [are now using] social media to encourage social selling." One key aspect of social sales is that existing customers act to recommend products and services to other participants in a given social network.
It differs from established e-tail models where consumers are able to publish a view or opinion about a product, which may (or may not) include a recommendation for others to buy. Customers who are instrumental in prompting additional purchases may receive rewards or inducements.
Businesses utilising this 'social e-commerce' are still in the minority, but, according to Charlotte Woods, analyst at market-watcher Verdict, many more are evaluating the approach through trials. "Most retailers have recognised the value of social media, but by running two operations separately, retailers aren't realising the full power of social media," Woods says. "Retailers have the ability to attract increased levels of traffic to their online stores by using social media to create entertainment destinations."
According to analyst Forrester Research, meanwhile, though hundreds of millions of people use Facebook, the ability of social network sites to drive revenue through traditional e-commerce continues to struggle. This may be the reason why businesses are building their own social media platforms to bring e-commerce and entertainment together.
The impact on the big social networking players that retailers going it alone will have is still difficult to estimate at this stage, believes Stephen DiMarco, vice president at digital intelligence firm Compete. Eventually more businesses will see the benefits of building their own social media platform to increase sales and slowly withdraw their profiles from Facebook and Twitter.
"It is stupid to just advertise on the popular social networking sites and assume that you are a social marketer," DiMarco argues. "It is better for businesses to build online forums on to their own sites so customers are associated with the brand instead of using social networks and finding other businesses."
Amazon is renowned for e-commerce, though the direct Amazon-to-buyer sales approach is no different from other online retailers, Amazon was one step ahead. In 1996 added the Associates Programme to its multi-leveled e-commerce strategy. Anyone with a website can post a link to Amazon or to the direct product from Amazon databases and write reviews and recommendations. From any sale directly made through that link, the associate can earn from a 4 per cent to 7.5 per cent cut. According to reports, Amazon receives around 40 per cent of its sales from the Amazon Associates programme.
Coffee chain Starbucks was among the earliest to spot the potential of social e-commerce. In 2008 it launched the 'My Starbucks Idea' (MSI) website: its purpose is for customers to pitch ideas on products and services to improve the Starbucks 'experience'. With already over 23 million Facebook fans, and over a million followers on Twitter, Starbucks created its own social network which generated over 70,000 ideas in six months. MSI has four main features: 'share', 'vote', 'discuss', and 'see ideas in action'. Ideas can vary from coffee ice cubes to reducing prices.
And the online activity has, crucially, been translated into real-world action. Starbucks introduced nutritional brochures in store, showing the caloric intake in drinks and food. Among the ideas, the most popular are bringing back seasonal foods and drinks; these included gingerbread biscotti and mocha coconut frappuccinos. Starbucks also launched the Starbucks Android application, allowing customers to pay using their mobile phones. Customers can also check their monetary balance, top-up, and find the location of the nearest Starbucks branch.
Domino's Pizza partnered with location-based mobile application Foursquare to boost its e-commerce sales which, it claims, generated a 29 per cent surge in profits over the last 12 months. Foursquare is a social media tool which allows users to 'check in' via a smartphone app or SMS, and share their location with friends, etc. In 2010, Domino's launched a nationwide promotion using Foursquare. When customers 'checked in' at a Domino's store and spent £10, they received a free garlic bread. "Domino's has led the way with social media initiatives such as affiliate marketing and the development with Foursquare," says the company's chief executive Chris Moore. "The Web-based activity has afforded it the dual benefit of driving pizza sales and building customer loyalty."
In April, fashion store New Look has introduced New Look Daily, a social networking platform for members to interact, post interpretations of high street fashion and purchase and recommend New Look products. The clothes retailer claims that New Look Daily members spend an average of 30 per cent more on products than those who visit its primary online store.
New Look is already had a presence on Facebook, Twitter, and YouTube, but its aim was to create one hub where all different audiences could come together. New Look used Facebook and Twitter more as a marketing tool for its own social networks, to see comments and feedback left by customers, regarding products and service.
"Our customers were frequently using all the social media platforms, but we wanted a single destination, giving the brand its own platform," says New Look digital marketing manager, Melissa Loddo. "A recent survey showed 54 per cent of our customers are influenced to purchase our products because of New Look Daily." New Look utilises its in-house IT team to analyse NL Daily's growth, but also work with content agency Seven Squared.
Last May supermarket giant Tesco purchased US social media marketing and analysis company BzzAgent reportedly for $60m (£37.4m). The idea is to work alongside Dunnhumby, which was acquired by Tesco first and handles Tesco Clubcard operations. BzzAgent is a word of mouth agent and uses 800,000 BzzAgents who volunteer to sample products, build awareness and make recommendations to influence shopping behaviour, which in turn, the retailer expect, will drives sales.
Combining the data from Dunnhumby and the social influence from BzzAgent, Tesco has made a significant investment toward boosting returns from social media deployment on its own online platforms. "Together we think we have a huge opportunity to connect the dots between shopper marketing and social media," says BzzAgent CEO Dave Balter. "Consumers, who habitually talk about brands they love, are 83 per cent more likely to share information about products and 50 per cent more likely to persuade others to make purchases."