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Notes from the editor Social Commerce Insights

Why Social Commerce isn’t failing

Buy Buttons have been heavily discussed during the last couple of months as major players such as Facebook, Pinterest and Instagram are going to implement those buttons and other advertising formats for internet retailers to monetize on eCommerce. But now as Twitter decided to curtail product development on its Buy Button and shifted its commerce team into other divisions within the company, first doubts are expressed. Andrew Meola, writer for Business Insider’s premium research service BI Intelligence, has even come up with the theory that Social Commerce is failing because most Social Media users aren’t very likely to click on a Buy Button. In our eyes, Andrew Meola’s article is typical for the discussion about Social Commerce that is insufficient and superficial in at least three aspects.

But let’s start with a short summary of Andrew Meola’s piece as many of you won’t have read his article. So how did he come to the conclusion that “Social Commerce is failing”? Meola’s article is based on two studies – one carried out by SUMO Heavy, the other by Global Web Index. Both were focussed on the impact of Social Media on purchasing decisions. While Global Web Index worked out that 30 per cent of the general population and even 40 per cent of global consumers aged between 16 and 24 use Social Media to research products, SUMO Heavy asked U.S. adults if they use Buy Buttons. It turned out that “45 per cent have no interest in using a Buy Button on Social Media, and an additional 26 per cent did not even know these buttons existed.”

Those two figures let Andrew Meola believe that “Social Commerce is failing”. And here are three reasons why he is wrong:

 

1) Social Commerce is not about Social Media, it’s about consumer behavior

It’s insufficient to reduce the phenomena of Social Commerce to Social Media or even to Buy Buttons. Actually, Social Commerce is much more than this. In our eyes Social Commerce has to be seen as a paradigm that can be used to describe a shift in consumer behavior. As not only the still growing number of adblock users, but also the growing relevance of recommendations, tutorials and reviews show, more and more consumers feel annoyed by traditional and interruptive types of marketing such as newsletters or display ads and take their purchasing decisions instead based on the opinion of other consumers.

The traffic stats for countries such as the UK, France, Germany and the Netherlands clearly show that the “Social Factor” (read: the conversation between consumers) is today much more important than traditional marketing: While newsletters and display ads have contributed less than 5 % to the leading internet retailers of each country during the first quarter of 2016, the relevance of organic search results and referring websites such as Dealabs, HotUKDeals, mydealz and Pepper NL is at an all-time high. Consumers act independently and search actively for the information they need to make their individual purchasing decisions.

 

2) Buy Buttons are rather outdated than innovative

Accepting this fact, it somehow feels odd that Social Networks such as Facebook or Twitter try to drive (more) consumers to an internet retailer’s shop by simply adding a Buy Button to their display ads respectively Promoted Tweets. Most of their members use the specific service to stay in touch with their friends, update their status or read news. In this specific situation most users inevitably perceive interruptive types of advertising as an irritation. So it’s not very surprising that 45 per cent of all consumers have not interested in using Buy Buttons and 26 per cent pretend to haven’t seen them, yet, like SUMO Heavy figured out.

In addition a serious number of consumers refrain from using Buy Buttons – for one main reason: privacy concerns. In a study carried out by the Cologne/Germany-based consultancy Detecon the statement “I am not going to use Facebook shopping, because Facebook would otherwise get control over too many data/personal information” was rated by Social Media users with 4.26 points and the statement “Facebook Shopping is risky and therefore not appealing for me because I mistrust Facebook’s general privacy policy” was even rated with 4.48 points out of 5 points.

 

3) Facebook, Pinterest, Twitter and Co. are (still) not very relevant for internet retailers 

This might be the reason why Facebook as well as other Social Networks such as Pinterest or Twitter are still not very relevant for internet retailers. Actually, there is a huge gap between the time and money internet retailers invest in Social Media Marketing as well as their number of fans and followers on the one hand and the number of visits they are able to gain by spending money on Social Media Marketing on the other hand.

One could think that specially British internet retailers benefit from their huge Social Media audiences: On an average level the thirty leading British internet retailers were able to reach out to 5.47 million fans across all Social Network in March 2016. But having a high number of social media followers does not necessarily mean that retailers are successful in terms of traffic from these platforms. On the contrary, the Top-30 online retailers in the UK were only able to generate an average of 2.50 per cent of traffic from social media platforms.

When you compare the traffic stats from Facebook and our British Social Commerce platform HotUKDeals.com it gets even clearer that consumers not necessarily use dedicated Social Networks to make their purchasing decisions, but engage in more specialized communities such as HotUKDeals to discuss their experiences with other consumers and to discover deals as well as new products: In the first quarter of 2016 the Top-25 British internet retailers were able to generate 2.45 per cent (89.40 million visits) of their traffic due to deals posted on HotUKDeals.com while Facebook only contributed 1.54 per cent (56.06 millionen visits).

That’s exactly the reason why Oliver Smith from The Memo described HotUKDeals.com as a “deals empire bigger than Facebook” and explains why the failure of Buy Buttons doesn’t at all indicate that “Social Commerce is failing”.