PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
That means it will reach $14 billion in the United States alone.
While few retailers have reported sustained success with selling products on Facebook, social commerce is set to take off over the next five years as consumers and retailers become accustomed to buying from social media storefronts, according to a report by consulting firm Booz & Co.
The report, “Turning ‘Like’ to ‘Buy’: Social Media Emerges as a Commerce Channel,” estimates that social commerce sales will reach $5 billion worldwide this year, with $1 billion coming from the United States. By 2015, social commerce sales will total $30 billion, with $14 billion coming from the United States. The report defines social commerce as a channel in which consumers make purchases within a social network’s platform, rather than at a retailer’s e-commerce site. And the estimates include only so-called hard goods, such as electronics, apparel and movie tickets, and not services such as a cable company offering movie downloads.
That estimate is based, in part, on a 2010 Booz & Co. survey that found 27% of consumers said they would be willing to purchase physical goods through social networking sites. As social networks take steps to allay security and privacy concerns that percentage should rise, the report suggests.
“As companies find ways to embed their e-commerce engines within social media, the market for social commerce will skyrocket, helped, in part, by new models for buying and by the availability of products developed specifically for social networking sites,” says the report.
Retailers selling on social networks such as Facebook may be able to leverage some of the sites’ features. For instance, 1-800-Flowers.com Inc. could use information such as a consumer’s Likes to highlight particular flower bouquets to offer that consumer.
The report notes that Facebook isn’t the only social network on which consumers are shopping. For instance, the Dutch social network Hyves has developed a payment system that enables consumers to pay as much as 150 Euros ($211.11) for goods within the site. The site also features a consumer-to-consumer marketplace called Supply & Demand that is similar to Craigslist in that it allows individual consumers to post items for sale.
Key to social commerce’s success, says the report, is the large pool of data that retailers will be able to mine.
“Social commerce will marry multiple types of data—purchase, behavioral and demographic—to form sociographic data that tracks not only what individuals buy but what their friends buy,” says the report. “This gives companies the chance to influence behavior along the entire purchase path.”