Toronto-based incubator MaRS – a hub for entrepreneurs, scientists and capital – has produced a useful state of the market report on social commerce.

The report, authored by industry analyst Neha Khera, can be accessed here, but here’s the skinny.

  • “Overall, the social commerce market, while yet to provide significant measurable returns, is undoubtedly poised for growth, since all the players in its value chain are aligned. Consumers are drawn to social applications that make their commerce activity more informed and engaging. Retailers are realizing the enormous upside of social recommendations in promoting their products. Entrepreneurs are innovating rapidly to develop unique experiences that combine “social” with shopping. And investors are betting on this market as being the next big thing―when an Amazon finally meets a Facebook”.
    • Social commerce is about collaborative shopping experiences that result from the fusion of e-commerce  (a $7 trillion market) and social networking technology (adopted by 20% of the planet)
    • More formally, social commerce involves the use of social networks―whether it be interactions amongst friends or strangers―to drive commerce, including the exchange of money, knowledge, goods or services
    • In plain English social commerce is about meshing shopping with socializing helping people socialize where they shop, or shop where they socializeit is about integrating a social experience into the buying process
    • Social commerce is a $1bn market (US), currently representing just 0.5% of the overall $200bn US e-commerce market, which in turn represents just 7% of the total commerce (consumer) market (US figures)
    • The social commerce market is expected to grow to $15bn by 2015.  VC firm Greylock Partners, believes social commerce has the potential to transform what was a previously stagnant e-commerce market saddled with high customer-acquisition costs, low customer retention, and cash-consuming business models. The potential for social commerce is to create addictive and compelling experiences created whilst reducing customer-acquisition costs via word-of-mouth
    • The value proposition of social commerce for consumers is that it offers a more personalized, informative and engaging shopping experience.
    • The value proposition of social commerce for retailers is that by integrating social media into the buying process they can drive sales either online or in-store.
    • Additional benefits of social commerce include
      • Social commerce helps retailers drive product awareness
      • Social commerce helps levels the competitive field, by small retailers access to larger audiences – without huge advertising or outlet costs
      • Social commerce democratizes commerce, by giving the power back to the shopper by giving them an online voice
      • Social commerce humanizes commerce, by refocusing commerce on personal exchanges
      • Social commerce is sustainable commerce, peer to peer marketplaces allow people to rent, swap or borrow items – giving life to products that would otherwise be thrown out;  for every garbage can of waste we produce, seventy additional cans of waste have been produced upstream.
    • Social commerce adds a fifth P to the tradition 4Ps of marketing product, price, promotion, placement, and now, PEOPLE.
    • The social commerce ecosystem has evolved into 11 segments in two major divisions – shopping where you socialize, and socialising where you shop
      • Shopping where you socialize
        • 1. Facebook Stores
        • 2. Fan Pages (offers and discounts)
        • 3. Facebook Credits
      • Socializing where you shop
        • 4. Co-browsing
        • 5. Digital couponing [SCT note – we’re not so sure why this counts as social commerce]
        • 6. Group Buying
        • 7. Local Commerce [SCT note – idem. we’re not so sure why this counts as social commerce]
        • 8. Open Graph
        • 9. Peer to Peer Marketplaces
        • 10. Ratings and Reviews
        • 11. Social Curation
    • What’s working: Helping people socialize where they shop.  For example, social plugins on e-commerce sites that enable social sharing drive e-commerce site traffic, particularly for digitally distributed products – books, movies and entertainment (including tickets); Eventbrite, an online event organizer, estimates that every share on Facebook generates 11 visits back to their website and $2.52 in revenue.  Social plugins that enable user ratings and reviews also drive traffic, conversion and order value.  The same social plugins power daily deals and group-buy offers – allowing people to recruit friends into the deal
    • What’s not working: Enabling people to shop where they socialize. Consumers remain resistant to the idea of shopping on social networks (but may be open to shopping with social networks).  Using social sites to drive e-commerce traffic is not seen as particularly effective – click through rates are 1% – inferior to email marketing

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Today’s article is sponsored by Milyoni: The Leader in Social Entertainment

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