As more business consultants weigh in on social commerce, here’s a quick summary of Cap Gemini’s introductory perspective on the subject, from Jo Lewis covered in The Rise of Social Commerce: Re-designing the shopping experience.

  • What is social commerce? Using social media as a fourth commerce channel (alongside stores, telesales and more traditional web channels).
    • From the brand or retailer perspective, social commerce extends the role of social media from marketing (generating awareness, consideration and loyalty) to an integrated marketing AND commerce channel. In terms of benefits this allows vendors to 1) increase their retail footprint (sell where the shoppers are (i.e Facebook)), 2) enhance the customer experience (adding social features to the experience), 3) improve conversion by imposing fewer clicks and barriers to completing transactions (like coercing customers to leave Facebook to shop) and 4) generate customer insight by creating a clear digital trail from social network communication to purchase.
    • From a shopper perspective, social commerce enhances the shopping experience by 1) replicating the social aspects of the offline shopping experience (sharing the experience, getting advice, and showing off with friends), and 2) making the shop experience more convenient by allowing people to shop where they are (on social networks, not your site) (one less click)
  • How big is the social commerce market? The value of goods sold through social media is currently $5bn, but is set to grow to $30 in the next 5 years. 2011 is the year that major brands and retailers will start adopting social media as a commerce channel. The trend of selling through social media sites is not limited purely to retail companies. FMCG, travel and luxury goods companies are also increasingly selling their brands via social media sites.
  • How does social commerce work? Enabling consumers to ‘share’ and ‘like’ products whilst browsing, and when in Facebook, to browse, share, like and buy all within the network (e.g. Asos f-store) [Combining social actions (like, share, rate, review) with shopping actions (browse, compare, research, buy)]
  • Is social commerce a potentially significant sales channel? Potentially yes, but that potential has yet to be realised and the jury is still out as to whether social media can ever become a significant sales channel.  That said given the size and functionality of Facebook today, it is advisable  to at least consider Facebook when developing any multi-channel commerce strategy
  • What social commerce means for Facebook? Recent investment by Goldman Sachs into Facebook has given the company an implied valuation of about $50bn – which given estimated revenues of only $2bn, puts Facebook valuation at an excessive 25x sales.  But it Facebook can become a commerce channel, creaming off some of the predicted $30bn in transactions, then the valuation looks fairer.