Friday, 31 July 2009

Will Facebook shops be a new dawn for monetising social media?

The question of how to measure & monetise social media investment has been a hot potato throughout 2009. Many brands are either embracing or interested in adding social media marketing to their mix but struggle to define how this investment can be planned, measured and analysed to ensure it 'adds value'.

Over in the US, retailer 1-800 Flowers (can you guess what they sell?!) has taken a bold and innovative step forward in the race to commercialise social media activity - they've worked with advertising network Alvenda to launch a shop within their Facebook fan page.

The big leap here is that customers can shop and buy without having to leave Facebook. Whilst the current storefront is Flash based, it is an interesting step towards evaluating the cash potential of engaging customers via social networking sites. 1-800 Flowers currently has a low fan base, 2095 fans as of July 31st @ 10am (UK time!). Imagine though the potential of selling to a niche audience as that number grows. Provided they continue to engage with customers on Facebook and provide relevant content and contribute to discussions, perhaps there is a viable commercial model in play.

Why do I think this could work? Firstly the user interface is quick and easy - you don't need to be web savvy to order. Check out the screen flow below - clear navigation, buttons & calls-to-action:

Secondly, customers demand convenience. There may be a % of your audience who only use Facebook for communication, conversation and information. If you do not have the right presence in Facebook, you might lose the opportunity to convert them into a paying customer. I'm not saying this is going to work for everyone but it is logical that this eCommerce channel has potential.

Some might throw up the criticism of cannibalising online sales and losing margin by paying fees to Alvenda and/or Facebook. However, would you rather take a sale at a lower margin than your main website to gain a new customer who can then fall into your retention cycle, or potentially lose them to a competitor? The same argument applies to marketplaces like Amazon, eBay, affiliates and price comparison sites. Having been a Head of eCommerce for a retailer using marketplace and affiliate programs, I know that without them the net sales and contribution from the online channel is lower than with them, even if your margin % point is diminuished. I guess the investment decision relies on whether commerically you target margin instead of net profit. If you have a limited stock base, this becomes a more pressing concern.

The reality is that people have wanderlust online, they are promiscuous and shopping habits change. Presence is essential, as is grabbing attention in an attention deficit world. It is feasible that Facebook shops will add another channel to the online mix and help retailers monetise part of their social media investment. What interests me is the fallout of the 1-800 Flowers PR - how many 'me too' retailers will jump into a Facebook shop and how many will sit on the fence until there is evidence of the results?

Thanks to Econsultancy's blog for a helpful write up of what 1-800 Flowers has done and the ensuing discussion.

I'd welcome comments on my blog - what do you think of this move, will is start a footrace for the next frontier of social media? Alternatively, join in the Econsultancy blog discussion - I think this is an exciting move and would welcome other people's views on it.

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