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Rethinking Social for E-Commerce

February 16, 2015

Social commerce, or the leveraging of social media to drive e-commerce sales, has been an idea ahead of its time. While it is accepted that social proof and digital word-of-mouth is a powerful driver of purchase decisions, until recently, social as a driver of either traffic or revenue has been underwhelming to say the least. With the growing popularity of a new class of social networks that emphasize visual product discovery over friendship, social, evolved for e-commerce, is poised to deliver more than just awareness and engagement.

Humble Beginnings

Monetate has been tracking social's performance against other channels for a number of years, and while each new quarter shows improvement, social referral traffic has historically converted at less than 1% and its traffic contribution to a retailer's website has been less than 2%. Compare this to the ever-reliable but expensive paid search, which contributes on average 1 out of 3 visits and converts more than twice as well.

This has left proponents of social for e-commerce to suggest that measuring social ROI through referral traffic on a “last-click attribution” basis neglects to credit social’s important role in helping consumers discover and form opinions about new products through the lens of their friends. The lack of direct attribution to sales, however, too often sends marketers looking for other key metrics, such as brand awareness and engagement, to justify social spend.

The Elephant in the Room

Despite its collectively modest track record, mounting evidence suggests social is poised to finally take its place as a significant driver of e-commerce sales. Most prominent is Facebook’s rollout of “Shop Now” and six other calls-to-action, such as “Book Now,” “Sign Up” and “Watch Video.” Of the six, Adroll reports that “Shop Now” is by far the most popular and creates the second-highest lift in click-through rate.

Combined with deep segmentation of its users, Facebook is looking to take market share from Google search, even to the point of de-emphasizing the social nature of the shopping experience. For example, one effective way to leverage Facebook for e-commerce sales might be to combine a “Shop Now” call-to-action ad with targeting from a brand’s email list using its “Custom Audiences” tool.

With its vast reach and scale, Facebook is undoubtedly the elephant in every conversation about social and all of its initiatives, including in e-commerce, should be watched closely. New product releases, such as the just announced Product Ads, also provide a brief and exciting opportunity for retailers to test and learn before too many marketers jump in and costs invariably rise. It is striking, however, that Facebook is applying a relatively non-social path to proving its value to the e-commerce chain. With the most popular way of using Custom Audiences, for example, Facebook is basically allowing brands to target users on Facebook who match those from their email lists — not much different than traditional targeting for direct response.

The Rise of Social Commerce Networks

The steady growth of e-commerce and social is starting to converge as social networks evolve into emotion- and idea-driven discovery engines that replace price-driven shopping comparison sites such as shopping.com.

There are three key differences that set apart these new social networks and position them to help retailers grow their businesses. The first is that social commerce networks are tied to interest more than friendships — the so-called “interest graph.” The second is that the best performing of these networks are single-mindedly focused on, what else, shopping, and often to a narrow demographic. The third distinction is that these networks are all part of the visual web. Taken together, this group outperforms other social networks in key metrics such as average order value and conversion rates.

Wanelo Want Need Love Graphic

Pinterest

The biggest and most famous of these sites is Pinterest, which has grown to become the third-largest social network in America and drives the second-highest order value to e-commerce websites. Etsy entrepreneur Alicia Schaefer and her shop ThreeBirdNest is a good example of the power of Pinterest for driving a burst of sales. Alicia’s store makes about $80,000 a month or nearly $1 million a year. She attributes her early success to pinning her goods on Pinterest and her strategy of emphasizing photography and styling. While its 70 million users pin everything from fashion to hairstyles, Pinterest is reportedly planning to unveil a “Buy” button that will allow pinners to buy items directly on the site without having to visit the merchant’s site. Pinterest already allows better displaying of products via “rich pins” and promoting your pins.

Polyvore

Unlike Facebook, Pinterest and Instagram, which dilute the shopping mood with other unrelated content, some of the highest conversion rates and average order values can be found in pure shopping-focused social networks, such as Polyvore and Wanelo. The hyper-focus on shopping helps Polyvore drive the highest average order value — $383 per order according to one study, compared to Pinterest’s $99 and Facebook’s $93.

Wanelo

Wanelo, which is a portmanteau of want, need and love is a spin on Pinterest except that it is dedicated to shopping one of the 20 million products crowd-sourced on the site. The social network recently introduced a “Buy” function that allow its 90% mobile visitors to purchase more than 500,000 of those goods without leaving Wanelo. The network has become something of a runaway hit with its loyal base of millennial young women, and top retailers have taken notice. Nordstrom, for example, is displaying its Wanelo page in the “Juniors” section of more than 100 of its retail locations. As Wanelo founder Deena Varshavskaya told WWD, "People are just ready for an experience that is fully focused on shopping." In fact, Nordstrom products get more "saves" on Wanelo than on the company's Pinterest page.

Another brand heavily investing in Wanelo is Urban Outfitters.You might be surprised to learn that with 3 million followers, Urban Outfitters is bigger on Wanelo than Facebook and Pinterest combined. Urban Outfitters has also reported that Wanelo's conversion rate is 4x higher than any other social network's. Urban Outfitters is just one of 200 brands working with Wanelo to sell its products directly on the network. It’s the first time Urban Outfitters has allowed a third party to sell its merchandise in the U.S.

From Engagement to Sales

“Traditional” social media platforms still have a “first-click” role in raising awareness and shaping the perception of a product or brand, which ultimately influences a final purchase. Social commerce networks, however, play much closer to the purchase decision, from encouraging a shopping mindset to accepting payment without leaving the network. When combined with crowd-sourced discovery and peer validation, these networks provide real value in surfacing interesting products in a noisy world. By actively building a presence and following on these networks, e-commerce marketers have a golden opportunity to grow awareness and sales with direct attribution. If Wanelo and its “Buy” function hasn’t piqued your interest yet in social commerce, when, not if, Pinterest introduces it, you might already be behind the curve.

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