Report • 15.01.2016

Social Commerce – Online retail’s path (or death)?

Why e-commerce is important for social media

Social media and e-commerce are increasingly intertwined since social...
Social media and e-commerce are increasingly intertwined since social networking platforms are very eager to gain a foothold in e-commerce.
Source: PantherMedia / Illia Uriadnikov

Right now, Facebook, together with the e-commerce platform Shopify, is testing a feature that allows people to buy products via its network and is thus one step closer to achieving its long-term goal – launching the Buy Button.

Twitter pursues a similar project and has worked on new features in the e-commerce area for quite some time and has just activated a “Buy Now” button with the help of startup Stripe. Another example is the recent release of a collection feature where selected companies assemble various products and insert a buy link. These collections can subsequently be reviewed by other users. Just recently, Pinterest and Instagram have integrated Buyable Pins and Buy Buttons, respectively.

Even though most of these features are not yet available in Germany and the operating agencies maintain a low profile when it comes to launch dates – this trend is coming soon. But why are the social media giants focusing so much on e-commerce? And above all, what does this mean for online retailers?

Social media heavyweights are testing e-commerce products and services

Social media and e-commerce are by nature rivals since they are both competing for the attention of online users. Yet social media providers have increasingly recognized the potential of e-commerce and discovered that many of their users prefer to shop online just as much as they like being active in social networks.

In light of the popularity of e-commerce among social media users, it was inevitable that heavyweights like Facebook and Twitter would eventually try to get a piece of the e-commerce action. Aside from an improved user interface, e-commerce also provides new sources of revenue that enable social media platforms to reap more financial profits from their business model.

Embedded e-commerce services have been around for quite some time and they are the logical progression of social media platforms trying to retain people on their web page. The option to purchase items online on their own pages is a logical next step, since social networks are looking for ways to expand their advertising campaigns primarily into the mobile realm.

The key message for online retailers is: social networking platforms are very eager to gain a foothold in e-commerce. By seamlessly embedding the buying process for consumers, Facebook encourages its users to purchase products on Facebook pages instead of ordering from the retailer.

Michael Hubrich: In light of the popularity of e-commerce among social media...
Michael Hubrich: "In light of the popularity of e-commerce among social media users, it was inevitable that heavyweights like Facebook and Twitter would eventually try to get a piece of the e-commerce action".
Source: SAP hybris

Lessons for online retailers

To be able to compete with internet giants like Facebook and Twitter, online retailers need to understand which behavior and preferences of users drive the success of social networks in e-commerce.

Purchase experience from a single source

The integration of e-commerce into social networks is based on the desire for smooth and seamless customer experiences. Even though a seamless customer experience has always been an important goal of online retail, customers no longer accept alternating between different applications if they want to purchase something. Instead, they expect a consistent purchase experience across all sales channels and to effortlessly choose between them.

Simple buying processes have become the standard

In addition to seamless online experiences, today’s customers also expect easy and efficient purchasing and ordering processes.  Tedious, multistep ordering processes are no longer accepted – especially since social media platforms and other providers entice with 1-click shopping. To meet the expectations of their customers, online retailers therefore have to rethink their coupon, product and ordering systems and search for new ways to make them equally convenient in online and brick-and-mortar retail for customers.

Data is more important than ever

The e-commerce plans of the social media world enable major providers to collect more and more user data – which is one of the most precious assets of e-commerce. Online retailers might like to remember this in terms of how data is important and how it is necessary to constantly test new ways to collect and analyze user data, and give their customers relevant and personalized products and services that increase the conversion rate.

The recent developments at Facebook, Twitter & Co. are just the next stages of social media channels entering e-commerce to generate higher revenues and increase user loyalty for their platforms. Online retailers and manufacturers need to react. They can join these social networks of course; after all, this enables them to increase their conversion rate and utilize image-focused sites like Pinterest and Instagram as a showcase for a wide spectrum of products and services, for instance in the home & garden or fashion area.

At the same time, retailers can only meet the expectations of their customers when they take the time to fully integrate the respective platforms into their omnichannel lineup. Many companies still handle their business activities in an isolated manner on social networks. As a result, there is a risk that brand continuity is lost in the eyes of consumers or things go wrong on the part of the provider which can result in delayed processing, unhappy customers and decreasing customer loyalty. If this is avoided and the customer sees a “uniform brand image” regardless of time, place, platform or sales channel, the retailer is well set up for smooth sailing in the future.

Author: Michael Hubrich, Senior Vice President MEE at SAP hybris, Customer Engagement & Commerce Division

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