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Should brands, retailers and businesses bother investing time, effort and money to sell with Facebook?

Yesterday, market research agency, Forrester, published a report “Will Facebook Ever Drive eCommerce?” answering the question with a NO and with analysis to support their scepticism about the viability of f-commerce. “Analyst slams Facebook’s e-commerce potential” screams the Wall Street Journal video (see below).

Forget f-commerce it’s foolish – according to Forrester’s research analyst Sucharita Mulpuru…

[blockquote]”In spite of the fact that hundreds of millions of people around the world have Facebook accounts, the ability of the social network to drive revenue for eCommerce businesses continues to remain elusive. eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook, and social networks overall trail far behind other customer acquisition and retention tactics like paid search and email in generating a return on investment. For some companies and brands, Facebook promises to support branding and awareness (i.e., “top of the (marketing) funnel”) efforts, but for most eBusiness companies in retail, Facebook is unlikely to correlate directly to near-term sales. A few pockets of success, however, have surfaced, and a cottage industry of vendors who can support these programs will inevitably burgeon”

Sucharita Mulpuru – Forrester[/blockquote]

Bottom line, according to Forrester, unless you’re a small online retailer, or using f-commerce in the context of a loyalty program (CRM), in publishing or gaming industries, or running online flash sales or marketplaces, then forget f-commerce.

Whether you’re for or against f-commerce, it’s useful to know the arguments against – whether  it’s against using Facebook itself as a retail channel or as an e-commerce traffic generator or against adding a Facebook layer to existing retail channels – in-store or on the Web.

And whilst it’s disingenuous to dismiss early positive results as selective data trawling to find any link between f-commerce and business performance, it’s also disingenuous to dismiss bearish naysayers as having the same myopic mindset as those who were dismissing the viability of e-commerce 15 years ago, when the Web had far fewer users than Facebook today.

Even for the most ardent f-commerce fans, ‘know thy enemy’ is good policy; to argue for something – it helps to know what – and who – you are arguing against.

So here’s the case against f-commerce (see here for an earlier related article)

  • Online shoppers don’t want to buy on Facebook – the Booz & Allen report on social commerce found that 73% of online shoppers would not purchase goods on Facebook or through other social networking sites

  • Facebook itself is an immature and risky platform – do you really want to be investing in next year’s MySpace?

[blockquote align=”right”]”Ditch your Facebook efforts and start thinking about mobile where the ROI is at least quantifiable…”

Sucharita Mulpuru – Forrester[/blockquote]

  • Where’s the money??? No major brand or retailer has yet provided compelling evidence that selling with/on Facebook unequivocally drives ROI or CLV (customer lifetime value)
  • A recent WPP survey found that 23% of marketers said they were convinced that they were getting a good sales return on their social media investment, while 18% said they think their ROI is “average” and 9% described it as “poor.” (see slides below)
  • Where’s the (independently verified) money??? There have been no independent research demonstrating the value of selling with Facebook – all data is from people with vested interests – companies themselves and their technology partners.
  • Businesses find social networks to be the least effective new customer acquisition tool (Forrester Data – see chart below)
  • From a purely practical perspective, designing a gold-standard customer experience in Facebook is an up-hill struggle, with restrictive and oft’ changing formats and requirements
  • Facebook is a people-centric forum, and whilst huge – a forum it is.  And the forum has been around since the 1970’s – do you know any businesses that made money from connecting forums with retail?
  • Facebook Credits is a non-starter for most retailers. This is the “currency” that consumers can use to buy, say, potatoes on Farmville. Facebook however has little to no credibility with respect to financial services among consumers and the same retailers reluctant to implement PayPal (which so many large merchants are) will be ten times more resistant to a less-tried, less-reliable, newer payment mark.

[blockquote align=”right”]”The likelihood that Facebook will ever [become] a key sales-driving tool for retailers and creating a reliable revenue stream for Facebook, is unfortunately far-fetched”.

Sucharita Mulpuru – Forrester[/blockquote]

  • When only 1% of site visitors come from a social media URL,it’s difficult to take Facebook seriously as an e-commerce traffic generator
  • While email marketing campaigns can boast an 11 percent click-through rate and a 4 percent conversion rate, Forrester’s findings show that Facebook can only generate a 1 percent click-through rate, with only 2 percent of those people converting to actual customers
  • According to a Goldman Sachs survey, Facebook has little effect on online shopping activity

  • Overall, Facebook for businesses is more suited to generating insight, advocacy, loyalty and engagement — but not sales.

  • Author
    Marcin Nieweglowski

    In my opinion, f-commerce still should be treated as one of many retail experiments. Let’s take a look at a rate of engagement of each fanpage. It’s all about a few or at the most dozen percents. Mostly, something betweeen 3% to 15%. And this is value of – mentioned before – engagement, that is, people comments, their likes etc. Thus if it accounts for a quite low level of attraction (of 20k fanpage, a few hundreds active fans – for example), there’s really place to somethimg more … complex? Act of buying something requires more efforts than just put a like at single post on fanpage. Obviously, Facebook is a proper tool to obtain a veryfied recommendation related to products. It’s also good place in order to look for a peer influencers – its coming advocates – for your brand. But Facebook and commmerce services? Its current status I would compare to NASA’s space travels: we possess a huge and theorcitaly knowledge about planets, galaxies etc., albeit, practically, we get acquainted with some dusts only, until now. So I agree with you – f-commmerce is far-fetched outlook to e-commerce, so far.

  • Author
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  • Author
    Jeff Sable

    Paul,

    Moontoast is focused on four client segments, we’re not trying to be everything to everyone. Our Facebook Stores are low cost and they deliver immediate ROI for specialty retailers, musical artists, authors and publishers, and celebrities (including athletes) who sell. Facebook is a great revenue generating channel for impulse purchases (our stores are NOT intended to be a replication of an ecommerce site). While all of our clients’ campaigns originate as Tab stores, the significant majority of revenue that we are helping our clients generate on Facebook is within Wall/Feed stores (the entire transaction occurs within the Wall/Feed). These are impulse purchases and my client services teammates are able to work with the marketers from our clients to create promotions that make fiscal sense for our clients and are compelling for their fans.

    I am curious if any of your readers are interested in building a new stream of low cost revenue.

  • Author
    koningwoning

    sigh……
    What is this… a summary of what is wrong with the current inFACEBOOK program or social shopping? In the beginning they said the same of E-commerce.
    The thing is: E-commerce is a different beast than normal shopping – and so social shopping is different than other forms of E-commerce.
    It is NOT a place to do exactly what you were doing elsewhere, but CAN be used to either a) Enhance the online shopping experience (easy way to ask friends for validation of sale) or b) make shopping a social thing (shop with friends and….)
    If shopping can be made a social experience I do not see how that is harmfull…. however just blindly opening shops in this place ‘because you gotta be there’ can be.
    So if we do not look at the current situation, but look at the possibilities and focus on that I think we’d be having a different discussion.

    P.s. the ‘value of a fan’ is as stupid a question as the value of a fan depends on a) your business and b) the reason this person became a fan (for instance if someone needs to become a fan to see something – then his/her worth is COMPLETELY different than if someone became a fan organically)
    Besides – I think this report was made before Edgerank became an important thing: most fans nowadays don’t even see your post as Facebook does not deem it “top news”

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    Amit Agarwal

    Brilliant, thought provoking and very impartial.
    Social Deals do have a possibility on facebook however f-commerce haven’t caught as people expected it to.

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