Friending e-commerce

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Facebook's ubiquitous reach now extends into the social commerce arena
Facebook's ubiquitous reach now extends into the social commerce arena

It's no secret that since its launch in 2003, Facebook has grown into a behemoth of social marketing and data. With nearly 1 billion users, Facebook has a wealth of information about customers and potential customers, including what they buy, how they share information, who they're friends with and, of course, what they “like.”

Next on tap for the social media giant is f-commerce, or e-commerce conducted through Facebook. Like direct marketing itself, depending on who's talking, f-commerce refers to a very wide variety of strategies. While just about every company has a company page on Facebook, in many instances, it's simply for branding purposes.

True f-commerce happens when Facebook is used as a conduit to drive sales, either through a Facebook store, or directly to a company's own e-commerce site. F-commerce is e-commerce, with Facebook as the catalyst. However, because the field is so new, definitions of the term differ depending on which analyst one asks.

Susan Etlinger, a social media analyst with Altimeter Group, says she sees “Facebook commerce as more of a continuum from an experience to a transaction.” In other words, Facebook often serves as a vehicle that facilitates the customer's initial impression to buy. It's branding, she says, as well as actual transactions.

The ways in which Facebook can directly initiate a commerce transaction vary. In some cases, Facebook is a platform where online shops run through third-party applications like Payvment and Buddy Media. It has also been used as a referral service, harnessing its social data to drive e-commerce off-site, to a brand's online sales portal.

Several big companies, including JCPenney and GameStop, shuttered their Facebook stores after finding that their e-commerce sites were more effective at driving sales. Some relatively new online retailers, like Gilt Groupe, the popular luxe brand discount site, no longer use Facebook because other social initiatives worked better at driving sales, and therefore were more worthy of the company's resources.

“Stores on Facebook for large brands just aren't the way to go,” says Sucharita Mulpuru, VP and principal analyst at Forrester Research. “People don't shop on Facebook, not for items from known sites. Sharing links on Facebook is much more effective for these retailers,” Mulpuru adds.

Christian Taylor, founder and CEO of Payvment, a company that builds stores on Facebook for small and mid-size companies, says the same. JCPenney, he points out, didn't build a Facebook store that created a seamless experience from browsing to purchasing within the “fabric of Facebook,” which is why it failed.

But companies as diverse as deals site Fab.com, multinational product manufacturer Procter & Gamble and Virginia-based baby clothes retailer Tutu Cute LLC have invested in f-commerce strategies. And they claim they've got the returns to prove that it was worth their initial investments. Or, at least, that it's worth continuing to try to find ways to use Facebook as part of a larger e-commerce strategy.

F-commerce in action

Many companies use Facebook to drive customers to their e-commerce platform outside of the social networking site. Procter & Gamble and Fab.com are two of the many businesses trying out the strategy.

Pantene, a subsidiary of Procter & Gamble, uses Facebook to promote and test new hair products with its fans. On its Facebook page, the company has a “Make a Swisssh!” section, which includes photos of several women tossing their hair back and forth as part of the company's latest campaign — a pure branding initiative on Facebook. Fans can also use the page to share products with their friends and request a free sample through Pantene's e-commerce site. Pantene requires users to input information and “like” the company before offering hair care products.

Pantene's Facebook page also includes links, via posts, to an “eStore featuring P&G brands,” an online marketplace where customers can purchase Pantene and other P&G products, like Tide, Gillette and Pampers.

“We have been successful in getting fans to engage in conversation with us on Facebook, and now we are ready to make the link between social conversation platform and online purchasing,” says Chris Talbot, North America Pantene digital marketing manager. Talbot claims f-commerce is working for Pantene, and that he sees this strategy being stretched across other P&G brands in the future. “We saw Facebook as a platform where we could create demand for new launches, engage with interested hair care shoppers, give them a reason to buy,” he says.

In July, Talbot says, Pantene will truly test its f-commerce chops with the launch of a new collection of products, which will be marketed through Facebook wherein the social network will continue to be used as a driver for sales. So far, social sharing has been a big part of Pantene's f-commerce strategy, he says, and being agile in the future to get the most out of f-commerce will be crucial.

Fab.com's CMO, Scott Ballantyne, says Facebook has been a part of the company's strategy even before Fab.com launched — it was how the brand built a fan base before going live online. Given that sharing among friends is at the core of Fab.com's marketing strategy, it makes sense that social would take center stage.

Fab.com largely built its base on incentives and sharing. When a member invites someone to join Fab.com, he or she receives a $25 bonus if the invitee makes a Fab.com purchase within the next 30 days. Fab.com also relies heavily on high-end photographs to entice social buyers, something Timeline for Facebook allows marketers to do.

Ballantyne, previously CMO at Vonage, joined Fab.com in March to become the company's first global CMO and claims that about 50% of all of the website's members joined through Facebook. When Fab.com began focusing its efforts on f-commerce in January, its membership doubled from 1.8 million to 3.5 million during the first four months of 2012. When Timeline launched, enhancing sharing capabilities, Fab.com saw its “likes” nearly double, Ballantyne says.

“It's obviously a vehicle through which we're getting new members,” he adds. “It's also a place where people are sharing discoverable daily design. They go tell their Facebook friends, the circle starts again.”

Although Fab.com doesn't have a store directly on Facebook (and Ballantyne says they may never have one), social sharing is a crucial part of the company's overall strategy. “We're building a brand for decades to come,” he says, adding that they're playing the long game with f-commerce. Fab.com uses Facebook as a driver to its own e-commerce site, a form of f-commerce. “Our membership is growing,” he says. “We have a very loyal base.”

 

If true, other similarly positioned companies could learn from Fab.com's strategy. Forbes reported that Fab.com may do $100 million in sales this year. And given its meteoric growth during the past few months, it's hard to deny that Facebook hasn't played a role in Fab.com's e-commerce development.

Dislike for f-commerce

Some analysts believe that Facebook might be forcing an e-commerce agenda, simply because the social network has to continuously introduce new capabilities in order to stay competitive. Despite Procter & Gamble and Fab.com's f-commerce initiatives, Jake Wengroff, global director of social media strategy and research at Frost & Sullivan, insists that Facebook developed f-commerce tools like Timeline, which allows companies to create a narrative to attract customers, because it had to. “I don't think it's a successful platform at all from a value perspective,” Wengroff adds. “[Facebook] had to evolve. [Timeline] had to come out. It's no surprise Facebook rolled out e-commerce.”

One serious impediment to f-commerce, Wengroff says, is that large brands have invested so many resources in their e-commerce sites that using Facebook as an intermediary doesn't make sense. “They've just done so much. For them to now have to build something on Facebook, I think they're just tapped out.”

That's partly why startups like Fab.com might have more success with f-commerce than large, established companies, he says. They simply have less to lose and more to gain from the get-go. Facebook is free, but setting up your own e-commerce website isn't.

One important question companies engaged in f-commerce should ask, Wengroff says, is about the true value of the data they collect. For example, even if a company knows its core demographic, it might not be possible to measure what percentage of that demographic is actually active on Facebook. “It's not that the high-end female shopper doesn't use Facebook,” Wengroff adds, “but does she want to shop on Facebook? Probably not.”

“Consumers love Facebook commenting, sharing and ‘liking', but I think they're a little resistant about entering in their credit card numbers on Facebook,” he says. “It's an issue of trust. Shoppers today are savvier than ever. I think they know that Facebook has data [and] they know it sells data.”

A Ponemon Institute and ThreatMetrix September 2011 study showed that 53% of consumers surveyed don't think stores on Facebook are committed to protecting their information, underscoring Wengroff's point. Perhaps a way around this is for f-commerce to include interactions that have a seamless connection back to an e-commerce site or an invitation to buy in-store — as Pantene and Fab.com's strategies do.

On the surface, f-commerce is like any other successful business strategy: Find customers already on Facebook, market to them and build trust and loyalty to maintain or expand upon that relationship.

Although Facebook, which as of this writing has a looming IPO, declined to comment on the record for this story, it's clear the company has tried to sell itself to businesses as a place to drive their e-commerce strategies. Just a few of the apps Facebook has developed for businesses include building Pages (for branding) and Facebook Offers, designed for businesses to give deals to fans.

Though Facebook has not issued a public statement on the matter, the network seems prepared to work with businesses and developers. In addition, to Offers and Pages, Facebook recently announced the launch of a new App Center, a kind of showcase for paid apps.

Facebook is an open forum — a platform upon which developers of e-commerce can build. Facebook is fostering f-commerce by allowing third-party companies to produce actual stores on the Facebook platform.

F-stores work

While big businesses in general struggle to find a foothold in f-commerce, small businesses are building Facebook stores — and claiming to see results.

Facebook stores resemble regular e-commerce stores: a listing of clickable products that lead to a point-of-sale. They can either be run through the social network itself, or lead a customer to the company's own website, outside of Facebook.

The most direct example of this is Tutu Cute LLC. Tutu Cute's Facebook home page allows users to click a “Shop Now” button that leads to a page, “Shop Tutu Cute LLC,” that looks like any other e-commerce store with product photos and listed prices. Customers complete transactions by adding items to a shopping cart and logging in through Payvment, the two-year-old company that designed Tutu Cute's Facebook store.

Christian Taylor, founder and CEO of Payvment, claims his company makes up 80% or more of the f-commerce that takes place directly through Facebook on Facebook stores. The company reached this percentage by counting the total number of Facebook stores on the social media platform, and measuring their footprint. Payvment's clients are small or mid-sized businesses that have a store set up on Facebook.

“In short, social commerce, for us, means discovery,” Taylor says, adding that even he is hesitant to use the term f-commerce because a truly successful online marketing program is all-encompassing and does not exist solely on Facebook. “Our sellers are  entrepreneurs. They're not coming to Facebook because they have millions and millions of fans that they want to add a store, too.” Payvment builds about 1,500 new Facebook stores every week, and those include brands that aren't even close to the mainstream. Payvment has worked with several up-and-coming brands, including College Hautees, a company that makes college T-shirts for women, and ManGlaze, a nail polish made for and marketed toward men.

Joe Ciarallo, VP of communications at social marketing company Buddy Media, says his company focuses on s-commerce, or social commerce — an umbrella term for all e-commerce conducted on social media sites (Twitter, Facebook, Pinterest) beneath which f-commerce is a sub-category. Buddy Media designs applications intended to create stores on company Facebook pages, he says, as well as drive e-commerce on a company's website, using Facebook as a seamless conduit.

“Right now, a majority of people aren't on Facebook to shop, but they are definitely on your online store to shop,” he says. “Your social media program is like any other marketing. This is another channel … It's important to look at new channels for retail, but you can't forget what you already have going.”

J Brand, a clothing retailer, used the company's interface to build a store on Facebook. “At J Brand, social commerce is a high priority,” says Zora Huculak, marketing manager at J Brand. “Since implementing our Facebook Shop store with Buddy Media, it has been a significant traffic driver to our website and is consistently a top traffic source.” J Brand declined to say how much traffic actually comes from Facebook.

Payvment's Taylor notes engagement drives purchasing. A large number of fans, as many big brands have, isn't enough to drive purchasing on Facebook. “If I'm already on your Facebook page, why wouldn't I just go to your e-commerce site and buy?” However, Taylor notes: “Our smaller sellers are doing insanely great.”

Small business owner Deann Kump of Tutu Cute LLC says Facebook with Payvment allowed her to build her business in the first place. Kump launched Tutu Cute out of her home in November 2011 and realized quickly that she'd need to invest in a marketing strategy. The problem: she had little capital to do so.

In December, at the urging of her friends, she opened her company's Facebook page. In January, she started using Payvment. Kump says her business, which now has 900 “likes” on Facebook, wouldn't have grown much at all without f-commerce.

“We went from doing five to 10 orders per day to sometimes doing 25 per day,” she says. “Once I started doing the Facebook shop, my sales were increasing like crazy.” Part of what makes Facebook valuable, she says, is her ability to search the site for possible customers. The next goal, she says, is to start a brick-and-mortar shop near her home in Dinwiddie County, Virginia.

Facebook also influenced Kump's inventory, she says, referring to a Facebook survey she conducted that found many of her fans wanted her to sell bathing suits. She started carrying them, and got 42 orders in one day — a large order for her in-home business. “On my website they're just seeing my merchandise. On Facebook, they get to see me as a person. I get to talk to them,” she says. “Facebook is just more personable. Once they get to know me, they're gonna come back.”

She says that because of her modest Facebook reach, she has shipped orders around the U.S. and Canada. Kump says that she's betting her e-commerce growth will occur mainly through Facebook — not from her own website — because Facebook allows her to create a business persona and engage her fans daily.

Can fans become customers?

At the core of any f-commerce campaign's success, Etlinger says, is the blurring of “business and pleasure.” People aren't yet trained to go to Facebook to buy, the Altimeter Group analyst says. They're trained to come and look at their friends' pictures and share personal news and stories.

According to an April 2012 Forrester Research study, “The Facebook Factor,” fans of large brands — Best Buy, Coca-Cola, Walmart — are more likely to make a purchase than non-Facebook fans. The study showed that fans of Best Buy were 5.3 times more likely to buy from the brand than nonfans.

At Best Buy, for example, Facebook fans spent an average of $368 at the store versus $150 spent by nonfans. Walmart fans, the study found, spent nearly twice as much at the store during the past 12 months: $1,103 for fans and $598 for nonfans.

“You're seeing that your Facebook fans are more likely to have brand interactions,” says Gina Sverdlov, a Forrester Research analyst. “Social media just houses brand advocates.” And if a business knows where to find them by targeting fans on its Facebook page, it truly doesn't matter which came first. “The most important takeaway is that locating your brand advocates has become easier,” Sverdlov says. Thus, brands should market to them to operate sales conversions.

This has implications for how consumers will buy on websites via e-commerce, too. One online retailer, Hari Mari, a Texas-based flip flop company whose Facebook page teases to its e-commerce site, says 40% of all traffic to its website comes from Facebook. Because Facebook is part of the company's path to purchase, Timeline and “likes” are ultra valuable, the company says. Only people who “like” Hari Mari can see the Facebook store that connects back to Hari Mari's site.

“We actually launched our Facebook page in advance of our e-commerce website. We had about a four-week head start,” says Hari Mari founder Jeremy Stewart. “It helped build momentum and excitement for the brand,” which then translated into traffic to the site. Hari Mari launched in March, Stewart says, and has grown through Facebook since then.

However, Sverdlov says only about 2% of all adults who update a social profile or visit a social networking site regularly report having spent money on Facebook recently. As such, Sverdlov warns against relying on f-commerce too much. It's an amazing driver of e-commerce, but Facebook is not necessarily the best location to put an online store, she says.

To “like” or not to “like”

How a company uses Facebook is largely dependent on its size, line of business (retail, food, services), age and past experience with its customer base. For small businesses like Tutu Cute, Facebook stores are beneficial. For large brands, customer engagement and driving seamlessly to an e-commerce site outside of Facebook is key. Either way, it's clear that f-commerce will continue to evolve and play an important role in e-commerce

strategies during the next couple of years.

Facebook commerce is here to stay. And, ready or not, it's time to “like” it.

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