Social Media & Online Retail: Was The Buzz Exaggerated?

Some believe the value of social media to online retailing (and vice versa) has been overestimated. While this blog started out to be how social media can help or hurt online retailing competition, it became clear that our search was going in a different direction, prompting us to ask: Was the buzz about the potential relationship between social media and online retail all it's been cracked up to be? Is the jury still out on how the two will work together and get along?

Witness the following headlines:   

Item: 80% (of consumers) Say Social Networks Had No Influence On Holiday Shopping Decisions.  (TechCrunch)

Item: M-Commerce Rocked the Holiday Season. Still No Word About F-Commerce. (Forbes)

Item: Social Media Has Little Impact on Online Retail Purchases. (Mashable)

Item: Why Social Isn't Helping Online Retailers Find Customers (Entrepreneur) 

Ok, there are more than 800 million active users of Facebook. And there are millions of online retailers. The question is: Should online retailers relate to social media? The answer, as we will see, is yes, no, and maybe.  


What, if any, benefits do businesses actually derive from participating in social media asked columnist Mikal E. Belicove in his Entrepreneur article, Why Social Isn't Helping Online Retailers Find Customers. Based on Forrester Research results, Belicove noted that online retailers in the U.S. reaped an impressive $176 billion in sales in 2010, but most online merchants believed that social media-related marketing did little in the way of lifting sales.  

Online Retailers did, however, point to a number of benefits (to using social media), such as building brand awareness and improving customer service:  

  • 90% said search-engine marketing was the most effective source used to acquire customers last year, and they see social marketing strategies as experimental and needing further exploration.
  • 82% said they're pursuing social networking simply to learn more about what it can do. 
  • 62% said their return on investment was either unaffected by social media or that the benefits remain unclear.
  • 61% said they see the primary ROI from social marketing as “listening to and better understanding our customers."
  • 52% said they’re participating because they don’t want to be left behind.
  • 45% cited the tremendous buzz about social networking as reason to participate. 
  • 37% said they’re participating because it’s inexpensive to do so.

So, while online retailers say social-commerce marketing has been less than successful for their businesses, many claim they’ll continue to place more of their marketing dollars into social networking, citing the potential for improvements from those channels in the future.  

Social networks could one day revolutionize how we get shopping recommendations -- but not yet -- said Josh Constine in TechCrunch, citing tablets as the big news of the season. Important to our point, Constine wrote that 80.2% of 1000 holiday shoppers said social networks had no influence on their holiday shopping decisions. 

Social Media Has Little Impact on Online Retail Purchases wrote Todd Wasserman in Mashable. The report showed that social media rarely leads directly to purchases online... “data indicates that less than 2% of orders were the result of shoppers coming from a social network”.

Where is Social Media Headed in 2012? Campbell Phillips, in PowerRetail, says navigating the social media wilderness is no easy task, but armed with the right knowledge and direction, online retailers stand to make big gains in this area. Phillips goes on to say that fewer than 20% of Australian online retailers saw Facebook as a source of new customers, with other platforms rating even worse. There's no doubt social networks offer a multitude of opportunities for almost every sector, he says, but retailers worldwide are confused about how to get social media working for (and not against) them.

Maybe F-Commerce (Facebook) will take off this year, but the way consumers and retailers use Facebook -- and Google -- right now suggests otherwise -- said Erika Morphy in Forbes. Facebook (i.e. social media), she continues, has always been about sharing, entertaining and informing. Shopping, though -- not so much. When consumers think of retail and Facebook, they think of coupons or exclusive offers, not a shopping cart. Maybe this will change, Morphy says,  just as mobile commerce began as humble use of talking and texting.

Bottom Line: 

Social media is a means to an end, not an end in itself. Perhaps everyone was expecting more dramatic results -- sooner. Online retailers are feeling their way through the new realm of social commerce, which has new rules, new audiences, new reactions, and new ways of doing business. Retailers will eventually learn how to use social media for their advantage, but for the time being are cautious, while giving their attention to more immediate needs, such as competitive pricing and selling and competing for sales with competitors.

Note: Thanks to the following bloggers and columnists for information used in this report: Josh Constine, TechCrunchErika Morphy, ForbesTodd Wasserman, MashableMikal Belicove, Entrepreneur

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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