This blog post will be part of a string of articles related to Social Commerce and my first-hand experience at designing and building one of the most compelling and unique Social Commerce sites for the music industry. As for the details on this site, you will get a chance to see it publicly within a month and experience the rich media, content and social commerce model it delivers. Stay tuned!
To first set some perspective and align your understanding of Social Commerce, below are details on what Social Commerce is and the current opportunity in the market for e-Commerce sites to pursue it.
“Social commerce is a subset of e-Commerce in which the active participation of customers and their personal relationships are at the forefront. The main element is the involvement of a customer in the marketing of products being sold e.g. recommendations and comments from customers.” and the eventual monetization of this process through the sale of a product – Wikipedia
Your typical e-Commerce site converts at 2%. Meaning, an average of 2 in 100 people purchase products when visiting an e-Commerce site. Sounds unrealistic doesn’t it? Well, it is mostly true – granted sites like Amazon, Eastbay and NewEgg do much better.
Social Commerce models will help break this barrier by engaging buyers with entertainment and rich community content to keep them online longer, therefore increasing the conversion rate. The longer a user is on your site being entertained by video/photo/testimonial reviews of products, the more likely they will eventually buy something.
Taking this a step further, let’s take a look at the evolutionary steps of online commerce. Brick-and-mortar stores in the early/mid 1990’s started pursuing an online presence with e-Commerce sites and online catalogs. This led to the massive growth of online commerce during the Internet bubble with sites like Amazon for example, offering a wide variety of products for sale online.
The whole concept of shopping from your home or office was a breakthrough – not needing to go to the store and hassle with lines, low inventory etc. became a thing of the past.
The past 2-3 years have been shifting online commerce into a new evolutionary phase. This phase is driven by the fact that online commerce is unable to get anywhere close to the 70% offline revenue generated by brick-and-mortar stores. But why is this?! Well, simply because 2% of online shoppers actually buy something when visiting an average e-Commerce site, and also because e-Commerce sites are not “sticky” – meaning they are not engaging.
The current state of e-Commerce sites are that they act as online catalogs with some features of user participation (e.g. reviews, ratings and comments). Clearly not enough to keep buyers entertained. Alternatively, if you walk into the Apple store, for example, you are entertained and engaged – this keeps the customer in the store experiencing the product physically and sharing experiences with others. This enhances the emotionally-driven shopping cycle that attributes to 70% of offline revenue being generated by “product discovery”.
Product discovery is driven by advice from friends, feeling and trying a product out, learning from others what their experiences are etc. Social community sites that generate this content (e.g. Engaget, DP Reviews etc.) generate the online content necessary to bridge that “product discovery” experience. The future of social commerce is about blending content that these sites generate with an e-Commerce model – keep the buyer engaged, and provide that instant buy-now capability.
Now for some interesting numbers…
In an IDC estimate, social networks only made about $400 million in revenues in 2006, but could make as much as $1 billion in 2007. AC Nielsen also noted that nearly 40% of Americans say they participate in online communities, with sites around hobbies, shared personal interests, and health-related issues among the most popular. All these numbers point to signs of an emerging online market space.
Well, all this ideas and numbers are great and fantastic, but how can we get it done?
The answer lies in technologies/solutions that are already available, and were in fact used on the soon to be launched site.
There are several advanced e-Commerce platforms that offer the out-of-box functionality needed to put a store online almost instantly. Products like AspDotNetStorefront for small to mid, and soon large, sized businesses, MediaChase ECF for mid to large size businesses, and Microsoft Commerce Server for large to enterprise businesses.
Taking these platforms and blending/merging them with Community Server, allows you to leverage the community aspects/features into the e-Commerce model. Product reviews, videos, photos, forums, live chat and much more will help add that “stickiness” to an e-Commerce site and break the 2% barrier that many e-Commerce businesses are striving to breach.
From a technical aspect, these types of blended products will provide single sign-on and unified accounts, seamless community-to-commerce and commerce-to-community purchasing and publication processes, integrated administrative interfaces and highly customized and extended applications running on a unified SOA model.
In conclusion, there is a great market opportunity picking up steam, and solutions out there that can be leveraged to provide for a social commerce platform.
In my next post, I will present the project/site I worked on and discuss the technical solutions used to deliver it.
