What's Next for Social Commerce

Experts explain what retailers have gotten right (and wrong) in utilizing social commerce and what the future of this fast-evolving technology looks like.
Social Media

Millennials are reaching their prime spending years. Social media usage is rapidly rising. Online shopping has gone mainstream. All of these factors combined would appear to create an environment where U.S. social commerce can thrive. Social commerce, however, still represents a tiny portion of sales. In 2014, it accounted for 1 percent of e-commerce sales, according to Morgan Stanley.

But the financial firm also expects social commerce to catch up, given social media's growth. According to the Pew Research Center, 65 percent of adults now use social networking sites in a nearly tenfold jump from a decade ago. "We see 'social shopping' being a materially larger distribution channel," notes Brian Nowak, lead U.S. Internet analyst for Morgan Stanley, in a statement.

Therefore, while social commerce offerings are still in their infancy, retailers and brands should be paying close attention to lessons on how to harness the potential of social commerce, retail experts say.

Buy Buttons: Too Early?
When Pinterest, Facebook, Twitter, and Google began experimenting with click-to-buy features known as "buy buttons," their efforts were hailed as a smart way to remove barriers in shopping. Instead of being directed to another site, consumers would be able to complete transactions on the social platform. However, the buy button failed to gain the kind of traction that retailers had hoped for.

According to research company GlobalWebIndex, which polled 16 to 64-year-old social users in 2015, only 14 percent of respondents were interested in Instagram buy buttons and 13 percent were interested in Pinterest buyable pins. Meanwhile, a 2016 survey conducted by digital commerce strategy firm Sumo Heavy found that only 1 in 10 respondents had used a button, with about one-quarter of those (2.6 percent overall) saying they won't be doing so again.

Part of the challenge is that few retailers are ready to store and manage enough inventory to support buy buttons. Furthermore, the shopping experience may not be reliable. If shoppers find a dead link or a product that is not shoppable, they'll quickly move on.

At the same time, buy buttons aren't necessarily doomed, says Robert Howard, partner and digital practice leader at Kurt Salmon Digital, a digital agency. "While the buy button and similar social commerce mechanisms have seen limited initial success in North America, the explosive potential of this medium and the success in other parts of the world cannot be ignored," Howard says. "Consumers seem to be increasingly willing to purchase via social platforms, but retailers have been slow to enable social commerce capabilities that are simple and easy-to-use."

Dave Bruno, director of marketing at Aptos, a retail solutions provider, agrees that the user experience is key to driving adoption of more social commerce offerings.

"Many retailers attempted selling on social sites several years ago, and the results were universally disappointing. So I wouldn't expect retailers to be too eager to make big investments in social selling again soon," Bruno notes. "However, if the social platforms make it easy to implement, that could rapidly accelerate the growth of social commerce.

All Eyes on China
Some retailers-particularly those in Asia-have developed innovative ways to enable social commerce. "America should look to Asian markets as an indicator of the potential of social commerce," Howard says. "Platforms such as WeChat [a mobile messaging and payments app] and XiaoHongShu or 'Little Red Book' effectively influence and facilitate millions of daily transactions between consumers and businesses."

XiaoHongShu is an app that was launched in China on January 2014 that allows users to review merchandise bought overseas. "I saw that Chinese people travelling abroad spent a lot on shopping, so we made an app to help them share their shopping experiences," Charlwin Mao, one of the co-founders, tells Wired.

The developers soon noticed that many people who weren't traveling were using the app to purchase products. The firm that built the app, Xingyin Information Technology Company, quickly bought a warehouse in order to directly source and sell popular products from the app to users. The company also focused on growing a community of bloggers around the world who share their findings on the app. The company determines what products to carry based on the products that are trending.

In less than two years, XiaoHongShu claims it already has 17 million registered users and is valued at $1 billion, according to Bloomberg. Retailers can learn a lot from the Xingyin Information Technology Company which has found a successful way to collect and mine user insights. "Retailers that are engaging with customers via polls or asking questions about what they want to purchase enables them to make smarter product development choices and also manage inventory for the products they know are most popular," Howard observes.

Social's Data Goldmine
Some retail experts believe that social media offers the most value as a source of consumer insight. "I'd argue the biggest opportunity from social networks isn't sales but the data around what keywords and images are trending," writes Forrester Research Analyst Sucharita Mulpuru in a blog post. "These are crucial demand signals that merchants don't always get on their own."

Indeed, advertisers and brands are already looking to social data to inform retargeted ads. Social commerce will see the most growth in remarketing to existing customers over the next few years, maintains Tyler Walton, marketing manager at Clutch, a loyalty marketing and customer intelligence solutions provider. "Consumers have become increasingly willing to share their personal information with their favorite brands via social channels, allowing these businesses to better personalize their content and customer experiences," Walton says. "By providing consumers incrementally more personalized content, engagements, and offers, the more a brand stands to gain on their bottom-line."

Andrew Choco, VP of marketing at the digital agency Directive Consulting, also says clients are seeing success with retargeted ads on social media. As an example, Choco points to a campaign in which the agency sent out an email blast to its client's customers with a discount code, and by matching the email addresses with Facebook profiles, reminded users of the offer by sending them the same ad on Facebook. "Just from that we saw over $500 of revenue in three days," he says. "As tracking evolves, advertisers will be able to learn a lot more about the exact steps their buyer took, and may be able to create different ads that auto-fill features depending on their potential buyer."

However, the tracking and retargeting features that sites like Facebook offer could become so specific that "it will be creepy," Choco notes.

Looking Ahead
Retargeted ads could reach a level of detail that many consumers will find disturbing, agrees Henry Lawson, CEO and co-founder of autoGraph.me, a marketing technology firm. And if consumers were to push back even more on data collection practices, marketers and brands will have to find another way to engage consumers.

Therefore, in addition to being transparent about data collection practices, a smarter approach is to think of social commerce as part of a wider strategy. "Think of it as a Venn diagram where brick-and-mortar retail, social media, digital marketing, and games all overlap," Lawson says. "That is where businesses will find the most success, when they learn how to incorporate all of these factors."

Aptos' Bruno shares Lawson's sentiment that few businesses have been able to take full advantage of social media's potential for engagement, let alone tie it with other platforms and channels. "Even Pokémon Go, one of the most popular apps in the history of apps, completely missed the opportunity to leverage social media in any way," he points out.

And without a meaningful way for players to interact, "I actually think that may lead to the eventual (if not rapid) decline in the appeal of the game. And so, if something as wildly popular as Pokémon Go struggles to maximize social media, it is easy to understand how retailers juggling countless shifting and often competing priorities, can struggle in implementing truly engaging and sustained social media strategies."

Therefore, until retailers and social media management executives both have "a seat at the strategic table" it will be difficult to realize social media's full potential as a marketing and sales tool, Bruno continues. "Unless, of course, the platforms themselves make it easy to conduct commerce. Then, social selling options will expand rapidly. Whether consumers will come along for the ride, however, remains to be seen."