It’s always worth listening when the Financial Times weighs in on a debate, and this week has seen two articles (here and here) questioning the value and prospects of f-commerce and, more broadly, social commerce. Because FT content has a habit of disappearing behind an impenetrable paywall, here’s the speed summary

Retailers wait for Facebook to deliver

Financial Times, Dec 23, 2011

Social commerce  “jargon for shopping via social media sites” makes no financial sense for brands and retailers because:

  • Advertising and store-fronts on Facebook aren’t working;  just 0.56 per cent of buyers were referred from social networks, according to IBM, on Cyber Monday in 2011.
  • Social commerce will fail because social media is about sharing not shopping.
  • Social commerce is nothing but a “rhetorical fad” and a self-serving illusion created by Silicon Valley.
  • Facebook’s privacy record means retailers are wary of sharing or storing customer data with the social networking site.
  • Facebook itself has no interest in becoming a retail channel – it is focused on selling advertising space and promoting plugins to personalise website experiences.
  • Even if social media can inspire shopping ideas there is no way to measure the commercial value of this.
Our view: Yes, social commerce has still to demonstrate it’s commercial value, and many players are looking for value in the wrong places (traffic, conversions, order value).  Ultimately, the case for social commerce will win or lose on its ability to drive customer acquisition and customer retention. 

Online Retailing: The Mobile Allure

“Our entire bodies and histories are being opened up and colonised and stored by the very people who want to sell us things. Online shopping is becoming a master of these technologies of simultaneous coercion and seduction.”

Sharon Zukin, a sociology professor at The City University of New York and author of Point of Purchase

  • Consumers are being duped into shopping with digital technology – the promise of better information and better prices sugar coats devious retailers who are tracking our whereabouts and our behaviour.  This may lead to a black lash
  • People are getting savvy to the fact the ‘scan-and-scram’ trend of in-store price comparison (and purchase elsewhere) with apps such as Red Laser and Amazon Price Check benefits retailers as much as shoppers – these apps are nothing less than a form of electronic tagging – making us prisoners to retailers
  • Consumers know that retailers masquerading themselves as your friends in social media, are only interested in selling to you with ever-more pernicious direct push-marketing digital sales tricks that use the information you give them with shopping apps
  • For example, social commerce sites that sell limited ranges against a countdown clock in daily sales advertised using urgent email alerts that turn shopping into an addictive game.  The goal of online these retailers is to use consumer information and game tactics to make shopping addictive
  • Other sites offer “curation” – creating an intermediary layer of professional connoisseurs to pick items for consumers who “are overwhelmed by options and the challenge of being smart about spending the limited money they have. They’re exhaus­ted, stressed and overwhelmed.”  But these sites have their own interests – not those of the consumer – at heart, pushing last-season overstock
  • For younger and savvy digital natives, shopping apps may not shift the balance of power from consumers to retailers, but for older digital immigrants, shopping apps are about devious retailers manipulating naive shoppers
  • Fortunately, “most talk of “social commerce” is hyperbole: just 0.6 per cent of buyers were referred from social networks on Cyber Monday, according to IBM” – and digital shopping remains a relatively small proportion (85) of the $2,000bn Americans spend on shopping every year.  But the worry is that this proportion is now growing fast; smartphones and tablet computers have accelerated the integration of the internet into our lives.  The proportion of shopping done online has doubled from 4% in 2004, and in Nov/Dec 2011 online sales jumped 15% to $30.9bn from a year ago. On Cyber Monday, mobile purchases jumped from  2.3 per cent of all internet spending in 2010 to 6.6 per cent.  Moreover, according to estimates by Forrester Research, for every $1 spent online, the internet influences $3 spent in stores.  Buyer Beware.

Our view:  Shopping apps are disruptive for both retailers (online and offline) and consumers, but there doesn’t have to be a winner and loser.  By using shopping apps to enhance the shopping experience, retailers and customers both win: an objective of “happy customers talking” benefits everyone.