When Howard Schultz came on board with Starbucks in 1982 after a trip to Italy, he advised the company to evolve its business from coffee beans and accessories to coffeehouse culture and espresso by the cup.  The idea was initially met with rejection from company founders.  Given Starbucks’ meteoric rise over the next 20 years, the rest is history, with the lesson that businesses need to be cognizant of market trends and embrace new revenue channels that promise growth.

Similarly, retailers now ignore social channels at their own risk, and a number of recent market trends have coalesced to make social commerce a top of mind objective.  A majority (58%) of all consumers now research products online before purchasing, and half of those consumers publish comments or reviews online about the products they buy. Global e-commerce revenue figures continue to grow at a faster rate (19%) than the economy as a whole.  Over 700 million users have flocked to Facebook to interact and share with friends.  These developments have created a fertile ecosystem both for retailers seeking to cultivate new revenue streams and for platform vendors providing solutions to enable social commerce.

Facebook’s explosive growth from internet users and brands has led many pundits to question whether it will become the de facto hub of commerce for retailers.  Commerce on Facebook is alluring because it enables companies to harness social capital, and retailers are eager to tap into the tremendous word-of-mouth potential of fans liking products, making purchases, and sharing those purchases with friends.  Social media strategists often tell their clients to “fish where the fish are”, which has caused several retailers to open Facebook storefronts.

In the Fall of 2010, Procter & Gamble made a splash by launching a direct-to-consumer sales channel on Facebook for its Pampers brand.  While certainly not the first retail brand to extend its e-commerce presence to Facebook, P&G’s initiative still attracted a media blitz, and the idea was praised for its ability to induce impulse purchasing.  However, P&G actually outsourced the logistics to Amazon Webstore.  Consumers could browse products and add to their shopping cart while on Facebook, but the checkout process actually lived within Amazon’s borders.

Why wasn’t the entire experience contained within Facebook?  The reason may be due to analytics.  Facebook Insights provides valuable data on interactions and engagement metrics, such as number of impressions, likes and comments.  But Facebook’s analytics engine simply cannot replicate the breadth and depth of information available from dedicated analytics platforms like Coremetrics or Omniture, or e-commerce platforms such as Demandware, GSI Commerce and Magento.  These platforms offer a suite of analytics that are simply more germane to retailers, who tend to be focused on transactional metrics such as conversions, sales or acquisition costs.

Traditional analytics platforms deliver rich clickstream data, which lets retailers track browsing behavior and determine methods to optimize the purchase funnel.  They also offer intelligence about which marketing programs (email, search, PPC, social or affiliates) are most effective at driving sales.  Facebook Insights, while great for measuring engagement, may not yet provide the level of actionable data required for commerce.

That said, a category of promising technology vendors has emerged to address some of these concerns by making it easier for retailers to integrate Facebook storefronts and track consumer behaviors.  And there are encouraging case studies from companies that have sprouted complementary sales channels directly on Facebook, such as JC Penney and 1-800 Flowers.  But because many storefronts use iFrames or Flash to serve product content, they are often SEO black holes and receive very little love from the search engines.  Given that 25-35% of traffic to large e-commerce sites is organic search, the lack of search engine discoverability for product content on Facebook is a concern.  When one of your potential customers searches on Google for charcoal suits or the latest must have tech gadget, do you want him to find your competitor’s offering instead of yours?

So, clearly there is value in maintaining a strong commerce component under your roof. Perhaps Ethan Beard, Facebook’s Director of Platform Marketing, said it best last December when he remarked, “We’re not trying to recreate the Internet on Facebook.  In fact, I spend most of my time working with people to socialize the web outside of our site.”

David Fisch, Director of Business Development at Facebook, echoed Beard by adding that, “storefronts are really only one piece, and really a pretty small piece, of the burgeoning area of social commerce.  Our interest isn’t in getting people to create tabs where people can shop but allowing consumers to shop wherever they are and helping them discover products through their friends.”

Fortunately, with the right mix of tools, the benefits of social shopping can be extended to your e-commerce site. Here are seven ways to leverage the power of Facebook and social commerce on your site to grow conversions and sales.

1. Ratings & Reviews

Ratings & Reviews platforms like Viewpoints and PowerReviews help retailers integrate customer feedback and community features directly into their websites.  Over a decade ago, Amazon.com experienced such pervasive growth in part because it made user-generated content core to its shopping experience.  In short, Amazon recognized two facets of human behavior that are intrinsically social – product research and shopping – and sought to replicate those behaviors in an online context, through ratings and reviews.

Despite Facebook’s sheer volume of users and abundance of user-generated content, ratings & reviews are finding a home on retailers’ own websites.  Why?  The ability to structure consumer reviews around product pages and other points of purchase on a site yields increased conversions, and ownership of data is a critical consideration for retailers seeking to engage their audience through personalization, recommendations or loyalty programs (more on this later).

Retailers also reap significant SEO benefits by housing product reviews on-site.  As mentioned, 25-35% of traffic to large e-commerce sites is organic search, and Google favors fresh content, which is often user-generated, in its search results.  Most retailers will claim that traffic directly to product pages produces the highest conversion rates. Blending product descriptions and marketing copy with consumer reviews (user generated content) on these pages creates optimized content that search engines simply can’t resist.

2. Social Identities

Retailers may try to encourage creation of user accounts on their site for several reasons.  They may wish to learn more about their consumers for targeting or personalization, build relationships and foster retention through special offers and promotions, or unify customer intelligence and track behavior across multiple commerce channels such as online, in-store and catalog.

But traditional acquisition methods can be a headache for consumers, who often are averse to completing lengthy registration forms and may provide inaccurate information if asked to do so.  This is where social login emerges as a viable solution.  By leveraging a consumer’s existing social identity and reducing the registration process to one or two clicks, retailers can encourage the use of real identities during checkout, collect richer demographic and social data on their consumers, and reduce shopping card abandonment.

A December 2010 study by Blue Research confirmed that social login is preferred over traditional account creation or guest checkout.

The study also revealed that the consumers who prefer to use their social identities to interact with sites across the web (labeled as fans on the next page) are more valuable to retailers.  They tend to buy more often online and are more likely to rely on their social networks to influence purchase decisions.

Furthermore, these consumers are nearly twice as likely to make a purchase on a site that automatically recognizes them.

We’ve entered a climate in which online consumers prefer to use their real identities from a social network to access sites on the web, and those who do so are far more lucrative buyers.  The question then becomes which social identities to support for registration and login.

While Facebook is a natural option, our data across the 350,000 websites using Janrain Engage for social login demonstrates the value of choice.  Specifically among retail sites, Facebook is the most popular social login provider, but half of all consumers prefer to use an identity from Google, Yahoo! or another social network.  Retailers that only support Facebook may be leaving as much as half of their potential audience in the cold.

3. Social Sharing

Social sharing taps peer recommendations to drive qualified traffic to product pages and conversion points on your e-commerce site.  It lets consumers promote their purchases, product reviews, or other content from your site to their friends on multiple social networks.  This blends the benefits of word-of-mouth marketing and brand advocacy to drive qualified new referral traffic to your site.  Janrain customers generate an average of 13 new referral visitors to their site for each piece of shared content.

Social sharing also helps retailers and brands circumvent the challenges of news feed optimization.  Facebook’s EdgeRank algorithm is designed to promote relevance by favoring news feed posts from friends with whom you frequently interact.  While your brand page may have plenty of fans and likes, your Facebook posts could get lost in the news feed unless consumers frequently interact with your messages or visit your page.

Peer-to-peer sharing is different because it leverages the high affinity scores that your consumers already have with their friends.  As a result, posts that originate from consumers may be more likely to filter to the top of the news feed than those from your brand.  In essence, more impressions lead to more referrals and ultimately, increased sales.

4. Incorporate Friends and Social Graphs 

One reason retailers turn to Facebook is to replicate the shopping mall experience online – where consumers flock to stores with their friends to browse and purchase products.  But this type of social shopping is also possible directly on a retailer’s site after enabling social login.

When consumers sign-up on retail sites with their Facebook identity, they can choose to grant the retailer access to their member profile data and friends lists.  This social graph data opens the door to optimize social shopping on your site.  Here are a few ways your customers can incorporate their Facebook friends into the shopping experience:

  • Filter product listings or reviews to prominently display content that friends have recommended.  In other words, provide a window into purchases, product reviews and activities from friends.
  • Invite Facebook friends to check out a particular product or visit the site.
  • Recommend gift ideas for Facebook friends based on their birthday or interests.  See the image below for an example.

By making the shopping experience social, retailers can turn on word-of-mouth to expand product awareness, increase time on site, and improve the likelihood of purchase.

5. Mobile Check-ins

By now, we all know that mobile is the fast becoming the online social activity platform. Shrewd retailers can harness this channel to uncover new revenue streams – primarily by leveraging check-ins.

The incumbent check-ins providers, Foursquare and Gowalla, were joined in 2010 by Facebook, which launched its Places feature in August.  Even local reviews sites like Yelp, which can leverage its 3.7 million monthly mobile visitors and close relationships with local businesses, have entered the mix.

Facebook’s inherent advantage over these competitors is its scale.  But regardless of which check-ins provider a retailer partners with, mobile check-ins offer numerous benefits.  A “check-in” status update posted to a user’s social network feed exposes a retailer’s brand to that consumer’s social graph and provides a form of social proof – if one of my foodie friends spends her Friday evening at that new French fusion restaurant in town, maybe I ought to try it out as well.

But integrating check-ins can also have a direct impact on customer lifetime value.  Retailers that offer badges, discounts or special offers to users who frequently check-in facilitate repeat business and loyalty. Game mechanics, when also applied to other value-added activities such as making a purchase, writing a review or referring a friend, make it possible to incentivize desired behavior, reward influencers, and keep customers coming back for more.

6. Social Ads

Targeted social ads are another effective traffic-driver to product pages and conversion points on your site.  Because Facebook now accounts for about 12% of all time spent online in the U.S., it is an incredibly potent channel for advertisers, and Facebook now expects $4 billion in projected revenue for 2011.

Facebook advertising works for retailers partially because of the social network’s scale, but also because Facebook can target relevant ads based on a consumer’s demographics and/or interests.  If your company sells athletic shoes, you will generate more conversions and a greater return on your advertising investment by targeting Facebook users who are interested in running.

Many retail brands use Facebook ads to drive traffic to their brand pages on the social network.  While this is an effective tactic if the goal is to build community on Facebook, your product pages or custom splash pages should be the destination if revenue is the immediate objective.  Your e-commerce site remains the best place to track consumer behavior, influence conversions and measure performance indicators through more robust analytics tools.

7. Credits

Core to Facebook’s progression purely from a community site to a possible engine for commerce transactions was the 2009 launch of Credits, its virtual currency.  Sold at 10 credits to the dollar, users can purchase virtual goods within social games or other apps while on Facebook.  All social game developers are now required to accept Facebook Credits as a currency in their games, and special incentives are given to companies that accept Facebook’s method of virtual payment exclusively.

The introduction of Credits brought many retailers to Facebook’s doorstep in a new context.  Beyond brand building, product promotion and customer service, Credits was seen as a way to now facilitate commerce transactions within a social environment.

While the introduction of Credits has certainly helped reinforce Facebook’s position as an enabler of social commerce, universal buy in from retailers may be difficult to achieve.  Some companies, such as deviantART, sustain their own vibrant virtual economy in part by enabling the purchase of physical goods with their own brand credits.  Coupled with the fact that these retailers can circumvent Facebook’s 30% commission for Credits transactions and thus retain higher margins, it comes as little surprise that the concept of virtual currency beyond Facebook’s borders is gaining traction among retailers.

Credits are a great incentive to offer consumers in exchange for desired behavior.  While most commonly used as a payment method for transactions, savvy retailers can leverage the concept to reward consumers for writing product reviews, referring friends, sharing products, or making repeat purchases.  The next generation of loyalty programs involves virtual credits, and they are a significant catalyst for improved customer lifetime value. 

For social commerce to become an industry mandate, the metrics must shift beyond engagement to real dollars, because at the end of the day, playing in social only makes sense for retailers if it moves the sales needle.  Facebook certainly has the potential to become a viable direct selling channel for retailers and a hub for social commerce.  But until it evolves to support the deep level of analytics, SEO and merchandising tactics that retailers already use on their commerce sites, it is perhaps best leveraged as a complementary sales channel, a branding and engagement tool, and a traffic-driver to your e-commerce site.  Fortunately you can bring the power of Facebook and social shopping to your site through the tools discussed in this paper.

About Janrain

Janrain helps organizations succeed on the social web with its user management platform. Comprised of multiple products that can be used together or separately, Janrain solutions build user engagement and brand awareness. Janrain Engage provides social login and social sharing to enable a user to login with an existing account on Facebook, Twitter, LinkedIn or more than 20 other networks, as well as share activities from the site to their social networks. Build deeper online engagement with available extensions for loyalty, rewards and commenting. Janrain Capture is a turnkey registration and social data storage solution. Janrain Federate provides single sign-on functionality to extend a brand’s online ecosystem. Janrain customers include industry leaders such as Universal Music Group, MTV Networks, Kodak, NPR, Tribune Interactive, Sears and Citysearch. Founded in 2005, Janrain is based in Portland, Oregon. For more information, please call 1-888-563-3082, or visit http://www.janrain.com/.