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How Will Facebook’s E-Commerce Push Affect Retail?

Nov. 1, 2012
Shopping, Shopping News
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Facebook has recently developed two new e-commerce strategies to connect retailers and consumers over the incredibly powerful Facebook social network. The first, Facebook Gifts, launched at the end of September and is a revival of Karma, the gift app Facebook acquired in May. Gifts allows users to purchase presents for their friends; the recipient then gets a notification about his or her gift and receives options on where to ship the item.

Facebook Collections, on the other hand, is still in its testing phase. Facebook is experimenting with partnerships with retailers – among them Pottery Barn, Fab and Neiman Marcus – that allow the retailers to add “want” or “collect” buttons to the retailer’s own news feed. Users can then save these buttons on their own profiles in a “Wishlist” that enables users to click through to the retailer’s online site through a “Buy” button on Facebook.

Does any of this sound familiar? Collections is very similar to Pinterest and some in the industry believe Collections is designed as a direct competitor. Gifts, as well, is poised to tap into the $38 billion a year online gifting market.

Where Facebook Stands in the E-Commerce Space

The big money in the intersection between social media and e-commerce isn’t new news, however. According to Paul Dunay, Vice President of Marketing for Maxymiser, a customer experience optimization firm, and author of Facebook Marketing for Dummies, Facebook has been trying to figure out e-commerce on its site since as early as 2008 but Facebook hasn’t been successful so far. “Brands like Brooks Brothers, JC Penney and Victoria’s Secret have had ecommerce engines integrated into their Facebook pages but taken them down when they realized that people weren’t buying,” Dunay says.

Part of the problem with Facebook’s old e-commerce strategies was that Facebook couldn’t target users in the right phase of the purchase process. “Facebook [is] taking many different approaches; the key around all of them is that they are trying to insert themselves ‘down the funnel’, closer to when a purchase decision is made (which is where Google is, and how it makes so much money)” says Josh March, co-founder and CEO of Conversocial, a social customer service website.

Facebook Gifts seems to perfectly fit this “down the tunnel” approach – just place the ability to buy gifts right next to notifications about a friend’s birthday and wait for forgetful users to make belated birthday impulse buys. In this way, Facebook is becoming a “super-affiliate,” as Ethan Giffin, CEO of Groove Commerce, a creative e-commerce solutions agency, calls the conduit aspect of Facebook’s e-commerce.

With Facebook’s recent IPO and new investors hungry to tap into retailers’ social desires, now might be the perfect time for Facebook to seriously revisit e-commerce with multiple strategies. I think Facebook is eagerly trying a variety of different technologies in order to increase the overall user experience while beefing up their bottom line,” states Maciej Fita, SEO (Search Engine Optimization) Director of Brandignity, an Internet marketing firm. “Shopping and social have a direct connection. Online influence has become a very important component for many retailers,” Fita notes.

While online influence is surely important for retailers, social impact might be also important as well for the other key player in e-commerce – the consumer. Shoppers are more plugged in than ever before and privacy issues seem to have taken a backseat to users branching out with multiple profiles on multiple social platforms. Facebook profiles, in fact, have become a defining personal record of sorts. “In five years your customers will probably ALL have the same facebook ID; but most of them will have changed email address or phone numbers,” says March.

This growing deftness with social media might mean easier adoption of Facebook Collections and Gifts. “Facebook has so many users that many will find the e-commerce interface easy and they will naturally gravitate towards using it. Certainly, there will be some segment of the Facebook population that will have issues with privacy, but many others will thoroughly enjoy the ability to make these purchases based upon how frictionless the transactions are,” says Giffin.

Dunay agrees that the easy interface will encourage use, at least by retailers, but he isn’t convinced that rapid adoption of Facebook Gifts and Collections is on the horizon. “If I were a retailer I would give it a try. Any additional sales would be a blessing. But frankly I don’t think this is going to be a huge sales driver for retailers/etailers. I think the traffic and sales will be a trickle. The reason I say this is as a Facebook user I know what I want to do on their site; engage with friends, look at some pictures, post an update, like a few things, etc,” Dunay says.

Lessons for Retailers

Dunay’s point highlights one of the simple truths that retailers can’t seem to understand – users don’t go to social media to buy things or get bombarded with coupons and discounts.  The solution for retailers? Build one’s brand over social media and make sure that one’s content is interesting and relevant. “I think retailers should try to link rich content pieces that connect to a particular product to help promote through social media channels as one option,” Fita says. This helps retailers avoid the biggest social media mistake – “too much self promotion,” according to Fita.

So how might merchants actually go about this process of optimizing their social media channels with smart content and avoiding overselling? First, approach Facebook Gifts and Facebook Collections like anything else – with research and crafting. “As with anything new, we recommend that retailers start by experimenting on a limited scale. Figure out what works and then grow it incrementally based on what’s realistic,” says Giffin, whose company offers social media marketing services.

Learn from others’ experiments as well. Since Facebook Collections is still in its testing phase, track the changes Facebook makes between its current trial versions and its final product. If something wasn’t working for Pottery Barn or Neiman Marcus during the testing phase, it might not be worth pursuing.

Second, merchants shouldn’t use Facebook Gifts or Collections just because everyone else seems to be doing so. “I think a business should think about their product and identify if it is something that someone would want to purchase for someone else on [Facebook]. I suspect novelty items will work great along with small electronics as well,” Fita states.

Third, retailers should make sure branding is internally consistent. “If there’s no stylistic connection between a company’s Facebook page and its main Web site, visitors may not trust that the page is legit. Brands often spend a disproportionate amount of time, money and effort on Web site branding efforts, in comparison to the relative pittance reserved for complementary Facebook efforts,” Dunay says. “A successful Facebook page must have concise, engaging text that’s relevant to both the brand and the fans’ interests. Overly long, humdrum copy will fail to capture fans’ attention. Crisp, eye-catching, hi-resolution visuals (photos, videos, illustrations) that clearly speak to those things visitors like about the brand in the first place will draw them in for more,” Dunay notes.

This is certainly true with Facebook Collections, where users will be probably unlikely to “want” or “collect” anything in a grainy photo. Ultimately, however, Facebook’s e-commerce push will depend on how users and brands interact. “Commerce has still not become ‘social’ in any major way,” says March. “Group buying has emerged as a solid trend, with lots of successful start-ups in that space, but retailers in general haven’t worked out how to really make the most of social data; and Facebook [hasn’t] quite worked out yet how to get to the bottom of the funnel where purchasing decisions are being made,” he notes.

According to March, this could all soon change. “Expect a lot more coming over the next 18 month as Facebook has revenue pressure, retailers are looking for the best innovations to compete, and consumers become more and more open to use of their social data by third parties,” March advises.