Ready or not, we’re approaching the age of F-commerce: Facebook-based retailing.
It’s time for retailers around the world to prepare for the rise of the Facebook consumer, a new breed in convenience-seeking online shoppers. From shoes to plane tickets, it’s all right there on the social network.
Facebook now offers options for retailers to tailor their Facebook page layout to look less like the familiar profile page and more like a Web page. The simple click-and-pay option seems to be attracting more shoppers. And where shoppers flock, retailers follow.
One thing in particular that’s encouraging businesses to participate in F-commerce is the fact that the platform is completely free. There are no hosting or domain fees (yet), and Facebook isn’t keeping portions of your profits. As more and more people adopt social media, F-commerce will only grow and take on more retailers.
Facebook has more than 600 million members, a fat slice of the world’s online population. People want to be social, and shopping is a social act in itself. And retailers are paying attention to the changes taking place within the online shopping world.
When businesses post news or updates to their Facebook account, they hope that users “like” what they have to say. Now, instead of sharing thoughts, people can share discounts and products. “Sally now likes Delta and has purchased two tickets to Hawaii,” could show up in your news feed anytime. Delta, Coca-Cola and Barneys New York are just a few of the major brands that have added a Facebook shop to their fan page.
Best Buy is one retailer that wanted to offer more options for their customers, so they created a Facebook page that has a shop-and-share option. This is in addition to their e-commerce site; savvy sites are not switching but rather adding channels to their arsenal of outlets.
Now, disregard the fake profiles for newborns and people’s cats and go straight for the fastest growing demographic on Facebook: Women over 55. I’m thinking online shopping has a great deal to do with their interest in Facebook. And I couldn’t be more… right.
According to a survey conducted for Kirkland’s, a home decor specialty store with brick-and-mortar and online stores, that’s exactly what this growing audience wants. It’s important for retailers to recognize that they must prepare for F-commerce by engaging their Facebook audience first. With Kirkland’s specifically, coupons and discounts are their game.
Kirkland's was a virtually unknown retailer in the social commerce space that blew everyone away when they became the sixth-fastest growing fan page on Facebook. Just four days after launching their Cha-Ching! interactive game promotion, Kirkland’s went from 43,000 fans to 140,000. They have since surpassed their goal of 200,000 fans. Now, this is all without actually selling merchandise on their Facebook page. They are still in the engagement stage, working with their customers to make their Facebook site more fun and trustworthy at the same time.
The promotion included a $25,000 cash prize and a chance to win Kirkland’s merchandise in a swap game where people trade virtual merchandise with other players. And everyone who plays the game receives a coupon for future purchases.
This is a positive step into the direction of F-commerce. Interactive games will keep an audience interested, and will solidify pages in terms of getting sales. In the survey, Kirkland’s found a majority of their Facebook customers wanted to save money, and to see merchandise and prices alongside content such as decorating ideas.
After conducting the survey, they saw a purpose and direction for their Facebook page that was different from their online community,mykirklands.com, and they went for it. The survey clearly showed that more and more Facebook users want to engage on Facebook. Campaigns such as the Cha-Ching! promotion are driving users to the social media hub and retailers must quickly follow to meet the demands of the users.
With the Kirkland’s campaign, we saw that 36-45 year old females were more involved with the online community, and that 46-55 year olds were more engaged with the Facebook page (which squashes the belief that F-commerce is limited to young and hip brands). Another interesting find was that the online community members were generally not interested in Facebook. They went online for different reasons.
The critics of F-commerce have begged the question, if Facebook starts to overlap with more traditional means of online shopping, why have two touch points? As we learned from the success of Kirkland’s, it seems that it would be best practice to have multiple touch points because the consumers have the option of how they do their online shopping. There was little crossover between the online users at mykirklands.com and the Facebook users, which shows that there isn’t that universal preference just yet.
It’s no secret that people spend hours on their Facebook pages weekly or even daily, whether it’s on their smart phone, tablet or computer. This sort of accessibility is what’s driving retailers to set up shop on the social network. F-commerce is still in its early stages, but judging by the consumer response so far, many more retailers are sure to begin exploring it within the next few months.
COMMENTARY: Wait a minute. This is starting to confuse the hell out of me. As more consumers went online, brick-and-mortar stores setup "online shops" or "online stores". This method of selling things online came to be known "ecommerce".
In a blog post dated March 28, 2011, I wrote about a new emerging trend of brick-and-mortar stores setting up their online shops or stores on social networks like Facebook or LinkedIn. I thought the concept was novel, but also gave a number of reasons why this new method for selling things online might piss off social network users.
In a blog post dated April 19, 2011, I commented on SmartBlog on Social Media's article about "social commerce" or how brick-and-mortar stores could integrate or bury their regular ecommerce site right into Facebook and use Facebook credits as the standard currency or method of payment. Again, I criticized this type of ecommerce as intrusive and costly to the store operator because Facebook would take a 30% share of all sales.
In the above article, "social commerce" has evolved into "f-commerce", which I assume is short for "Facebook-commerce". It seems that the social media and ecommerce experts now believe that Facebook is destined to become the ecommerce standard of the future. Facebook no longer "helps you connect and share with the people in your life", but is moving away from Zuck's original vision and evolving into a sort of monstrous online bazaar or shopping mall, if you prefer.
In an article dated May 10, 2011, appearing in Social Commerce Today, Paul Marsden defines f-commerce as follows:
In the context of Facebook, the term ‘f-commerce’ is new, and an accepted industry-wide definition has yet to emerge. Nominally f-commerce describes the range of activities in which Facebook is used to assist in the buying and selling of products and services. In this sense f-commerce is a subset of social commerce – the use of social media, online media that supports social interaction and user contributions to assist in the buying and selling of products and services.
Like the term social commerce, f-commerce is used to describe a range of different activities, all related to buying and selling with Facebook. The useful distinction made in the infographic – on/off Facebook transactions, provides a way to organise everything that passes for f-commerce.
We’d propose extending off-Facebook f-commerce tools to include the range of developer tools that can be used to facilitate commerce – and we’d remove the ”Facebook in-store Retail” entry, because unlike the other five elements in the ‘ecosphere’ is not a tool itself, but a bundle of tools that can be used in the context of in-store retail – including Facebook Check-in Deals and the Facebook Open Graph.
Thus we’d be tempted to replace “Facebook in-store Retail” with “Facebook Storefronts” (that allow page visitors to browse but not buy on Facebook) as well as other developer tools for Facebook Assisted Commerce, including social plugins. Perhaps this messes messed up the pleasing visual symmetry of original infographic, but it’s a little more complete.
In short, Mr. Marsdren differentiates between selling that occurs on Facebook from selling that occurs with the help of Facebook as follows:
- F-Commerce: Selling on Facebook
- Facebook Assisted Commerce: Selling With Facebook
The following infographic hopefully provides a clearer distinction between F-Commerce (non-shaded) and Facebook Assisted Commerce (shaded):
With regards whether Facebook f-commerce is about to explode, I don't share Mr. Savitz enthusiasm about the future of f-commerce, and I am not the only one.
Forrester, published a report “Will Facebook Ever Drive eCommerce?” answering the question with a 'NO' and with analysis to support their scepticism about the viability of f-commerce. “Analyst slams Facebook’s e-commerce potential” screams the Wall Street Journal video (see below). According to Forrester’s research analyst Sucharita Mulpuri:
“In spite of the fact that hundreds of millions of people around the world have Facebook accounts, the ability of the social network to drive revenue for eCommerce businesses continues to remain elusive. eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook, and social networks overall trail far behind other customer acquisition and retention tactics like paid search and email in generating a return on investment. For some companies and brands, Facebook promises to support branding and awareness (i.e., “top of the (marketing) funnel”) efforts, but for most eBusiness companies in retail, Facebook is unlikely to correlate directly to near-term sales. A few pockets of success, however, have surfaced, and a cottage industry of vendors who can support these programs will inevitably burgeon”
In an article dated April 8, 2011 appearing in Social Commerce Today, makes a strong case against f-commerce, giving several reasons:
• Small Market - The market for selling on Facebook is tiny – even the most enthusiastic projections forecast a market size of only $1.8 billion or 1% of total ecommerce by the end of 2011 and a maximum of $13 billion or 4% of total ecommerce by 2015.
• Lack of Interest - Online shoppers don’t want to buy on Facebook – the Booz & Allen report on social commerce found that 73% of online shoppers would not purchase goods on Facebook or through other social networking sites.
• Questionable eCommerce Platform - Facebook's user growth is no longer exponential, and reaching saturation in the U.S., the UK and European markets, its ad-supported revenue model is greatly flawed and reached a Critical Inflection Point.
• Lack of Supporting Evidence - Very few major brands or retailers have provided compelling evidence that selling on Facebook unequivocally drives ROI or CLV (customer lifetime value).
• Poor Social Media ROI's - A recent WPP survey found that 23% of marketers said they were convinced that they were getting a good sales return on their social media investment, while 18% said they think their ROI is “average” and 9% described it as “poor.” (see slides below). Businesses find social networks to be the least effective new customer acquisition tool.
• Facebook Credits Is A Non-Starter For Most Retailers - This is the “currency” that consumers can use to buy, say, potatoes on Farmville. Facebook however has little to no credibility with respect to financial services among consumers and the same retailers reluctant to implement PayPal (which so many large merchants are) will be ten times more resistant to a less-tried, less-reliable, newer payment mark.
• Facebook Fails To Drive Traffic - In terms of driving e-commerce traffic, Facebook is failing, ads are getting more expensive yet driving ever less traffic.
• F-Commerce Detracts From Original Mision - Facebook CEO and founder Mark Zuckerberg's original mission was "Giving people the power to share and make the world more open and connected." Facebook is a people focused forum, not a brand focused forum. Facebook was designed for connecting people that share similar interests. F-commerce runs counter-productive to the the original mission. The original mission was never to "bring buyers and sellers together". Brands and businesses were introduced into the social network mix only after site monetization came into being, and it seemed appropriate to have brands and businesses open pages to "connect" with their customers.
f-commerce is a great example of the Facebook Halo Effect or infatuation with bigness. Facebook now has over 600 million users, and by some estimates the number could be closer to 700 million, but only Facebook nows for sure. When you have those kinds of numbers the Facebook Halo Effect overtakes good business reasoning.
We're already seeing the effect of the Facebook Halo Effect on the valuation of Facebook in the secondary market, which is based mostly on investor exhuberance, hype and a whole lot of future potential (the bigness factor). I even read over the weekend that Facebook could be the first company worth $1 trillion. Please, no more fantasy tales. Just because Facebook has 600 million users, and supposedly generated advertising revenues of $1.865 billion in 2010 (only Facebook knows for sure), doesn't mean that it can continue to grow ad revenues exponentially or that its business model is ideally suited for selling things.
I have shown that there are limits to Facebook's ad-supported revenue model (see above link). Even more importantly, trying to mold Facebook into a huge ecommerce site runs counter to its original mission and purpose: a social network that allows people to share and connect with each other. I am probably the first person to say this, but I really feel that Facebook was a "rush" job. Zuckerberg designed Facebook as a social network, he even wrote the code for the site over a weekend, without ever designing a site that was "structurally" for selling things. The fact that it has been somewhat successful at selling ads is a miracle in itself. But, when you look under the hood, Facebook's revenues per user are at the bottom of the chart. It's a real challenge getting adverterisers to advertise on Facebook. This is why I have always felt that Facebook's revenue model is highly flawed. It's not really well suited for monetization, if at all. Okay, kill me if you want, but I think history will bear this out.
In conclusion, it stands to reason that you can no more convert a shopping mall into a social network, so to my way of thinking its defeatest, and as Forrester Research said, "foolish", to try to convert Facebook into this gargantuan online retail bazaar. Any mention that Facebook will overtake Amazon in a year or two, is sheer folly. Amazon was designed specifically for selling things. It does that with great efficiency. Facebook wasn't designed to sell things. The above evidence certainly bears this out and builds a powerful case against Facebook ever becoming a huge commerce site, whether that commerce is assisted or non-assisted (f-commerce).
Courtesy of an article dated June 27, 2011 appearing in Forbes CIO Central
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