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Does Investment in Social Retail Really Pay for SMEs?

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The Guardian last year reported on the rise of social retail.

Regular readers will remember that I blogged about Social Retail last December. Social retail is the name given to the growing practice of brands (particularly online retailers) using social media platforms to conduct e-commerce transactions.

There is no doubt that the popularity of e-commerce is growing: The Guardian reports that “online retail sales increased by 14% last year to more than £50bn, according to Kelkoo“.

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“The social web means people have a voice and they increasingly want to speak to and share with their peers. This interactivity means web retail brands can no longer ignore their customers and need to start engaging with people discussing their brand.”

We all know that social media platforms offer almost limitless possibilities when it comes to interacting and engaging with customers on a more personal level, and much of this can be done below the line.

The Guardian gives some great examples of brands that have been doing e-commerce and social retail well, such as Sephora and its Beauty Talk forum:

“A Beauty talk community user spends two-and-a-half times more than the average Sephora customer.”

But does this now mean that all e-commerce websites now need to have some sort of “social element” to their online marketing strategy to succeed nowadays? Is it enough anymore to just have an online product catalogue with ‘buy now’ links, or do you now need to link to a your company Facebook page, have a ‘share on Twitter’ tab and be posting photos of your products in quirky places on Pintrest too?

As highlighted by The Guardian:

“Brands maybe drawing millions upon millions of people to their Facebook page, but just because people are ‘liking’ or ‘retweeting‘ doesn’t mean they’re buying. And that is surely the end goal of brands developing and maintaining a social media presence. A social strategy needs to lead to increased desire for products and then drive sales.”

So how do you convert social media interest to e-commerce sales?

It all goes back to traditional marketing communications and patterns of buyer behaviour:

For higher value purchases (either higher emotional value or higher financial value) the buyer requires more reassurance prior to purchase. And one of the most trusted ways of obtaining reassurance about a purchase decision is through friends (word of mouth marketing) and trusted experts or peers (opinion formers/opinion leaders).

As The Guardian points out:

“Social communities are the perfect place for brands to connect with their audience, as it taps into a psychological urge for people to talk and share with people who have similar passions.”

This can be seen from the results of a recent social retail (social commerce) study by JWT Intelligence, which highlighted the effect social is having on shopping. It found that: “Over 40% of men and over a third of women are more likely to purchase something if a friend has recommended it on a social network.”

I have worked with a number of online retailers to developonline shopping ecommerce websites, and I always recommend giving customers as much opportunity to share product information as possible: those Facebook and Twitter links can be really useful for taking your products to new audiences (who are already engaged and interested in what their friends are buying and doing); and online reviews on Yelp, Amazon, Google+ all help.

The problem for many small businesses is knowing where to dedicate the time and money. With so many social media platforms springing up all the time, the marketplace is very busy and it is impossible to cover them all.

The Guardian proposes that: “instead of just looking at networks which have a large user base [businesses] should consider building their own branded community to gather all their passionate fans together.”

I disagree. For most businesses, especially SMEs, investing in the set up of a whole new community space is high risk and prohibitively high cost. You are much more likely to achieve better success in a shorter time frame if you carefully focus your energies on a small number of existing social media platforms; ones where you already know your customers are spending their time.

So how do you do this?

I explore this topic in more detail in my next blog: Why Builders Don’t Use Instagram!

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