Why Social Commerce Has Failed, and What Can Make It Work

Social commerce entered the digital scene much like springtime weather; lion-like claims of grandeur were followed by meek, lamb-like success. But social commerce’s early stumbles don’t mean that the concept is completely broken. It just needs to evolve.

Social commerce is e-commerce conducted via social media channels. Its first wave, which I like to refer to as Social Commerce 1.0, hasn’t proven to be very social – or very successful. While 12% of the top 500 retailers have Facebook applications that enable shopping, none has registered significant sales activity as a result. In fact, within the past year, Gap Inc., Nordstrom, J.C. Penney and GameStop have all opened and closed Facebook stores.

Social Commerce 1.0 has, thus far, failed because retailers have not recognized and leveraged an important Facebook fact: Visitors aren’t there to shop; they are there to socialize (Facebook is, after all, defined as a social networking utility).

By simply adding a shopping tab to their profile page without offering value beyond that of a traditional e-commerce site, these retailers are creating the virtual equivalent of a pop-up store, which is momentarily “cool” but doesn’t provide any long-term value to customers.

Even worse, these virtual pop-up stores have proved more futile than facilitating. Why would the average consumer take the extra step to go to a retailer’s Facebook page instead of going directly to the retailer’s e-commerce site, especially when there is no compelling reason or benefit to do so?

So, what’s missing? The truly social elements that make Facebook a success – the site marries offline and online behaviors and overlays the social graph of the user’s friends. For example, people were able to view photos via Flicker or traditional, physical photo albums long before Facebook’s inception. But Facebook made it more intrinsically social. When creating Facebook photo albums, a user can tag, comment, and link to others, turning the album into a robust social system.

What is social about clicking on a tab and buying your jeans on Facebook versus some other online site? Why would you share with your Facebook friends that you bought jeans online? Understandably, Facebook users have turned their collective backs on the concept.

It’s time for retailers to shop around for consumer-engagement strategies that can help Social Commerce 2.0 succeed where its predecessor failed. Go to the next page for five potential approaches.

Look off-line to grow on-line
Retailers should examine the social interactions they (and others in their category) have with consumers who visit their brick-and-mortar stores and identify ways to enhance those experiences online.

For example, Whole Foods Market advertises its weekly Friday deal on its national and local store Facebook pages. One week the special is a pound of organic peaches. Instead of just announcing the special, wouldn’t it be more empowering to allow fans to buy the special directly within Facebook via a voucher to be redeemed in store? Wouldn’t it be even more meaningful if fans could purchase that same voucher for their friends and deliver the deal via Facebook?

Such a transaction provides two ways for recipients to engage with the retailer: they go online to receive their peaches “voucher,” and they go to the store to pick up the peaches, where they experience positive, in-store brand impressions and opportunities for additional purchases.

Turn gift cards into gifts
Most retailers sell gift cards on their e-commerce sites; some even sell them on their Facebook page. When users buy a gift card via Facebook, they can send it to the recipient as a message and can post the activity into their news feed. Even more powerful is the new trend of turning a gift card transaction into an actual gift.

For example, in 2010, Cold Stone Creamery became the first merchant to launch a gifting program using the eGift SocialSM solution, which allows Cold Stone fans to buy an actual ice cream treat (versus a gift card, which is just money to buy a treat) and send the e-gift instantly to a friend or loved one’s Facebook or email account.

Linking the online transaction to a specific, SKU-level item makes the transaction more tangible and personal. With both pre-set-value gift cards and SKU-level vouchers, retailers are likely to enjoy a consumer lift because 72 percent of gift card recipients spend above the card’s original value.

Think “affordable”
It’s the thought – and the social interaction – that counts in social commerce, not the price tag. Retailers should consider offering lower-priced items in their social commerce channels because consumers are already trained to purchase “micropayment” merchandise online (e.g., 99-cent music downloads).

For example, create the same impulsive, spontaneous purchase behavior that occurs in a check-out lane by having a relevant selection of small items (in both unit size and price) available for purchase online. This taps into existing consumer behavior and allows more people to make more purchases for themselves and friends.

Host a flash sale
Online flash sales were once used to quickly offload excess inventory. Today’s retailers can re-innovate flash sales by strategically and purposely hosting them within Facebook. A well-timed, consumer-centric Facebook flash sale can increase sales on an off-peak day or month, reward current fans, expand the fan base and excite fans with exclusive product launches.

Consumers can receive coupons and discounts virtually anywhere but a purposeful flash sale creates real social engagement. No one knows your tastes and preferences like your friends, and the timeliness of the sale creates an urgency to share—this gives fans the opportunity be a “shopping hero” for their friends.

Make it a group effort
Group gifting is an extremely social purchase behavior in which friends and family combine forces to buy gifts. The days of chipping in cash for the big purchase at your cousin’s baby shower are gone.

With group gifting, people can create a gifting occasion online (or within Facebook) and invite others to participate in the group. Everyone contributes his or her portion electronically and a simple-to-redeem group gift is ready to share with the lucky recipient.

Just because the first iteration of social commerce wasn’t successful doesn’t mean it is a lost cause. Despite its lamb-like beginnings, social commerce has the potential to achieve roaring success. To increase social commerce’s popularity and ROI, retailers and marketers should forego the predictable vehicle of a virtual pop-up store and follow the steps outlined here to make their channel more relevant and intrinsically social for consumers.

Allison Bradley is director of client leadership at Hyperquake.