F-Commerce Future: Bulls, Bears, Fans or Five Blind Men and an Elephant


Last week, an article on financial news site Bloomberg.com took a derogatory tone when it reported on the future of f-commerce. Its case was built based on the number of companies that had closed the doors on their Facebook stores – Gamestop, J.C. Penney, Nordstrom, Gap and others.

Adding fuel to its fire, the article cited Forrester Research analyst, Sucharita Mulpuru, who said that retailers attempting to ply their wares on Facebook was like “trying to sell stuff to people while they’re hanging out with their friends at the bar.”

In an April 2011 blog post – Will Facebook Ever Drive eCommerce? – Mulpuru came right out and said she was bearish on f-commerce and that her bias against it was evident. In the year since, Mulpuru’s stance hasn’t changed that much. In a February 1, 2012 post – Why Facebook Is Still A Tough Sell For Retailers – she said, “As for commerce, don’t expect much.”

The Bloomberg piece also quoted Wade Gerten, CEO of social commerce provider 8thBridge, as saying that cracks in the model showed quickly and that clients have chosen to take a different approach. However, an 8thBridge spokesperson told me that Bloomberg took his comments and twisted them out of context. She referenced a guest post at Forbes where Gerten wrote a rebuttal.

Stating that Bloomberg was correct in that Facebook stores have failed to match retailer’s expectations, Gerten staunchly defended the use of f-commerce by saying that the article “failed to articulate what the REAL opportunity is for social commerce.” The best way to monetize social media, according to Gerten, is to “empower people to promote products to their friends, not for brands to spam you on Facebook.”

He reinforced that opinion by citing research based on his own clients and said that, “Almost 90% of the shopping activity we’ve tracked on Facebook over the last 6+ months has been between friends sharing things with other friends.”

Point/Counterpoint

So, who is correct, Mulpuru or Gerten? The answer, in my view, is both – to a point. To date, Facebook hasn’t proved itself to be a must-have commerce tool, not in a broad sense. But, the final story in the F-commerce “timeline” hasn’t been written either, even though Mulpuru opined in one of her posts that “the best of Facebook is already here.”

Gerten’s company, which works with major retailers to implement f-commerce strategies, may have found a key. Rather than brands promoting products/services (let’s call that F-commerce 1.0), how much better to let users do it. (That’s a much less interruptive and much more social approach, don’t you think?) Gerten has such as wholesale belief in that philosophy that he led his company to change its business model to reflect it.

Facebook is About Discovery

In an hour-long interview I conducted with Christian Taylor, founder and CEO of Facebook shopping cart provider Payvment, he stated matter-of-factly that f-commerce is about one thing: discovery. In his view, it’s a way for brands to connect with consumers where they hang out. Getting prospective customers to make a first purchase from a brand is his company’s goal.

Taylor takes a somewhat antagonistic view toward the idea of people sharing product information with their friends in the newsfeed. “Facebook’s social graph really isn’t that powerful. Most people only have 130 friends. Even if we were to get people sharing products, that not going to make a big dent,” he said. “If only 130 people have the capacity to see it, how many are on at that time to see the newsfeed item?”

Taylor said that the key to f-commerce is what he refers to as the “taste graph.” In other words, people who have a certain interest will influence the purchase decisions of others who share that interest. Payvment’s business model reflects that paradigm.

Facebook is About Fans

Here at SCT and in the SYZYGY whitepaper on f-commerce, Dr Paul Marsden offers a “third way”, arguing that f-commerce is not necessarily all about discovery or friends promoting to friends on Facebook, but about ‘fan-commerce‘.

Marsden takes a customer loyalty perspective and suggests that the business case for f-commerce really only makes sense when you think of it as fan-commerce and use Facebook as a fan-loyalty platform to drive customer retention (via fan loyalty) and customer acquisition (via fan advocacy).

So in this view, f-commerce is is all about rewarding fans with exclusive fan-firsts or fan-only offers to build loyalty and activate advocacy; that advocacy acts a a ‘zero moment of truth’ (zmot) for new customers, helping them discover and decide what to buy.

Five Blind Men “Observe” an Elephant

I liken the whole brouhaha over f-commerce to the story of the five blind man and the elephant. Touching whichever part of the pachyderm’s anatomy their hands happened to land on, each remarked that it was one thing or another – “A wall,” said one; “A rope,” said another; “It’s a snake,” said yet another, and so on. Soon, not unlike what we’re seeing with f-commerce, an argument ensued among the men about who’s observation was correct.

Conclusion

What f-commerce will become has yet to be determined, in my view. It’s an evolutionary process fraught with experimentation. Each of the people mentioned in this post – Mulpuru, Gerten, Marsden and Taylor – have their own distinct views of Facebook, its impact on commerce (or lack thereof), and the business model that’s best suited to take advantage of what the social network has to offer.

Whether or not you buy the view of SCT Editor, Dr. Paul Marsden  that f-commerce is only likely to thrive as fan-commerce in the context of Facebook as a fan-loyalty platform, he perhaps draws a useful conclusion for all involved with Facebook commerce: “There are no cookie cutter recipes for setting up successful Facebook stores for your brand fans; f-commerce is too new and experimental for that.”

His advice is to retailers is simple: make customers smile. “Ultimately, f-commerce for consumer brands will not succeed or fail based on processes, but on the ability to act on the insight that making your fans smile is smart for business,” Dr. Marsden said. “So the best advice for embarking on an f-commerce journey is to ask yourself how you can make your customers smile with a privileged and personal point of purchase on Facebook, and work back from there.”

I would like to hear from you. Whose side are you on? Which business model is the one best suited to make Facebook the social commerce powerhouse its purported to be? Or, in your opinion, has that determination yet to be made?

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8 Comments

  1. February 20, 2012
    Reply

    Pleased to see you weighing in on this. I think there’s much to be said for the social proof/social discovery argument.

    Meanwhile, the simple & effective Facebook-as-email-list still seems to be working well for some retailers.

    • February 22, 2012
      Reply

      Mat, thanks for your comments. This is a discussion that needs to be had. I see it as a positive thing.

  2. February 20, 2012
    Reply

    Superb article Paul. I think that Taylor and Marsden are probably touching the same elephant. Discovery by first-time buyers drives sales, but discovery is going to be driven by existing fans (who are usually very happy past customers). Of course, the incentives for those fans will only make commercial sense if their purchase is bringing in new customers. Personally, I think f-commerce should be seeking to create a series of ‘fortunate encounters’ the facebook equivalent of walking past a shop and meeting a friend coming out with an armload of bargains.

    • February 22, 2012
      Reply

      Great POV Xaq. Perhaps, at this juncture, that “accidental” or “incidental” discovery similar to what you concluded with your analogy is how f-commerce works to this point. I know that retailers would love to be able to systematize the process so that a greater degree of certainty in terms of sales/new customers, etc. can be achieved based on their efforts. We’ll get there.

  3. February 21, 2012
    Reply

    Excellent article Paul. Our view would be that most businesses don’t understand the fundamental building blocks of a successful store on Facebook. Your point about fan only and fan first is well made and is a key differentiator between a successful and non successful store based on the data we are getting off the VendorShop platform. one important clarification is that fan first and fan only doesn’t necessarily mean discounts! If you’re a fashion retailer for instance, why not launch a new range first to your Facebook fans fo a few days. Your fans don’t have to worry about missing out and you not only create sales but some strong loyalty and buzz to go with it.

    • February 22, 2012
      Reply

      Good point Chris. Success in f-commerce doesn’t have to just revolve around sales, discounts, or special offers. Fan-exclusives tied to a new product launch fits the model as well.

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