Social commerce gives companies better ROI

Tapping social networking tools to connect online customers with each other as they shop, can help companies monetize their investment in social networks, according to market observers.

Kim Diamond, Asia managing director of Bazaarvoice, which provides social commerce tools, told ZDNet Asia in an e-mail that when "social is placed as near to the purchase decision point as possible", companies can measure the impact of user-generated content, such as product reviews and recommendations, on their business in terms of sales--both online and offline.

Content contributions from the customer, hence, become the central force of a company's business strategy for growth and sales, Diamond said.

Paul Marsden, who is a digital ethnographer and editor of social commerce blog Social Commerce Today, said social commerce supports both social interaction and user contribution among the consumers themselves. These two factors assist in the online buying and selling of products and services, he said in an e-mail interview, adding that when user content is shared online socially, customers become better-informed shoppers and online retailers achieve more sales.

Marsden explained that sales volume gets a boost because social commerce makes the company's own retail site or social media profile, such as Facebook, more attractive since customers can shop and connect with their peers at the same time.

Power in word-of-mouth
Industry analyst Claus Mortensen concurred, noting that word-of-mouth is the "essence of social commerce".

Mortensen, principal of emerging technology research practice group at IDC Asia-Pacific, explained in an e-mail: "[Social commerce] makes advocates of the key people who will help spread the [organization's] message."

He noted that such primary company spokespersons often refer to guidelines discussed in journalist Malcolm Gladwell's book, The Tipping Point, who wrote that big changes can occur from small-scale activities involving three rules of epidemics, or otherwise known as the three agents of change: connectors, mavens and salesmen.

Connectors are people who know everybody else, while mavens are information specialists that people turn to, and salesmen are the charismatic agents skilled in persuasion, according to Gladwell.

In real life, Mortensen said, connectors, mavens and salesmen are three different, separate individuals. However, on the Internet, some online users can exhibit two or more of these personas, the analyst said.

For instance, they are connectors because they have vast social networks and they are also salesmen in that they are able to persuade those in their social cliques to make purchases, he explained.

Thus, social media tools and social commerce is a "potentially powerful" tool for businesses to harness, Mortensen said.

Marsden noted that it is logical for companies to "fish where the fish are" and launch social commerce services on major social platforms such as Facebook and Twitter. Businesses can access the audience mass and also leverage the social technology built into these social platforms, he said.

Denim jeans maker Levi Strauss, for instance, incorporated Facebook's "Like" button in its online Friends Store where customers can indicate the items they like and share the information with their friends on Facebook. The company's director of digital and social marketing, Megan O'Connor, said in an interview with eMarketer that the integration with Facebook aims to allow consumers to "find and share their experiences with friends".

Christine Bardwell, senior analyst of retail technology at Ovum, stressed that social commerce is not just about supporting e-commerce transactions over a social networking platform. It is also about "retailer-led social interaction", she told ZDNet Asia.

IDC's Mortensen added that a company's social commerce objective should focus on fostering social togetherness as well as a shared experience, through interactive activities and active discussion.

Better integration to come
Goh Khim Yong, assistant professor at the National University of Singapore's School of Computing department of information systems, said social commerce is likely to see tighter integration between e-commerce and social media sites, as well as mobile platforms such as tablets and smartphones.

Such marketing and advertising efforts can be deployed to target customers in a location- and time-specific context, Goh explained, pointing to Facebook Places, as an example.

Social commerce has the potential to flourish in Asia, he added, where in the Chinese and Japanese markets, for instance, word-of-mouth recommendations between friends are pivotal and human herding is commonplace.

Bazaarvoice's Diamond said social commerce is "on the rise all around the globe" even as countries differ in their adoption and the impact social commerce has on their business.

Martha Bennett, practice leader in financial services and retail technology at Ovum, agreed that social commerce is likely to become more pervasive in the future, but stressed that not every Web user dabbles in social media as some may be hesitant to share personal data.

Mortensen added that online consumers, compared to retailers, are generally savvier in using social media technologies.

Ovum's Bardwell shared a similar view, noting that many retailers have yet to build a social media presence or are still attempting to measure the value of social media on their brand.