But losses mount for the home furnishings e-retailer that went public in October.
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Some industry observers have been surprised at just how big a role consumer input plays in web shopping. Retail consulting firm J.C. Williams Group Ltd. recently conducted research to determine which web tools and features online shoppers found most helpful in making buying decisions. Of the 1,972 American online shoppers the firm surveyed in April for its “Transforming the Multi-channel Shopper” report, 92% said customer reviews were very or extremely helpful when making a decision. The next closest of the other 14 tools measured was keyword search with 71%.
The firm expected customer reviews to be high on the list, but it turned out they left the others in the dust; this shows that customer reviews and related consumer-generated material are at the heart of the content retailers need to present, says Jim Okamura, J.C. Williams Group senior partner. “Consumers want to make shopping decisions based on the advice and experience of their peers,” Okamura says. “So there’s a good future for social networking in e-commerce. However, since creating social networking sites is not among retailers’ traditional skills, it’s going to be a challenge for them to understand what it takes to build an excellent site that’s not easily copied by competitors. This is not something that should be done half-heartedly.”
“We’ve done focus groups and usability studies on this subject,” says Chris Kermoian, vice president of product management at Become.com, which is giving social networking some thought, “and it’s clear to us that the more we can help people with this, the greater the opportunity for us in the future.”
A good match?
While social network members clearly can influence other members in all kinds of ways, many experts aren’t yet certain if mixing business with pleasure is a good idea and are unsure of the return on investment.
“I don’t yet know ways to monetize social networks, and their ability to convert shoppers remains to be seen,” says Sucharita Mulpuru, senior retail analyst at Forrester Research Inc. “For now retailers with niches like consumer electronics that typically include individuals passionate about the products might have a greater chance at success.”
But managing what happens in the unique world of social networks is not in the genetic makeup of retailers, who want shoppers to come to them at all costs, contends John B. Horrigan, associate director for research at the Pew Internet and American Life Project, who specializes in online communities and web shopping. “Retailers more prone to risk, who get in on the ground floor and establish an early presence potentially have more opportunity in social networking in the long term.”
Still, the potential benefits are obvious: easily reaching a wide audience, helping retain customers through entertaining sites far less utilitarian than e-commerce sites, and weaving unobtrusively a business and brand into shoppers’ lifestyles and daily activities, says Rodney Nelsestuen, senior analyst for financial strategies and I.T. investments at research firm TowerGroup.
Generally speaking there are three methods retailers can use to establish a presence in the social networking arena: creating a free space or sponsoring a space (costs, usually minimal and sometimes part of a larger advertising contract, depend on each networks’ policies) on an existing mass appeal network, affiliating with or buying an existing niche network, or building a niche network of their own.
Last month Alibris Inc., a retailer of books, DVDs and CDs, debuted a space on the monolithic MySpace. It plans to use the space off and on. For example, because it offers a large selection of used textbooks, one of the company’s biggest selling seasons is August and September. High school students, college students and 20-somethings are the largest group of social networking users. So Alibris, which already has run advertisements on MySpace, decided to use this year’s high season to test the social networking waters.
“We want to generate buzz about our low textbook prices. One of the ways we’re doing so is by giving away coupons and discounts exclusive to students on MySpace who search for the subject or who are told about us by their MySpace friends,” says Brian Elliott, COO at Alibris.
The company’s space looks just like the spaces of individual members. It includes book information, coupons, special offers and other content. Alibris will measure its social networking success or failure by studying traffic to its space and gauging the use of the coupons and offers, as well as, on a different note, tracking site traffic that stems from the ads it has purchased on the giant social network. “The network offers a great demographic for us and the ability to generate buzz in a very short period of time,” Elliot says.
He warns, however, that retailers that choose this route must ensure their space is rich with intriguing content that gives network members a reason to visit and return to the space. To ensure this, company executives hired two college students to create the space and its content, search out and link to high-use network members and “opinion leaders,” and monitor the space to help make sure it’s hip. The company is paying the students a modest stipend for their work. “This clearly is an experiment,” Elliot says. “No retailers really know what will happen in social networking.”
In your face(book)
Like Alibris, Abebooks decided to start a space on a mass appeal network, in addition to its LibraryThing purchase. In July the company created a space on Facebook. Also like Alibris, Abebooks launched the niche space, sponsored as part of a marketing contract with the youth-skewed Facebook, to get the word out on its inventory of new and used textbooks. One Abebooks staff member has been designated to tend to the Facebook space in addition to other, unrelated duties. The company also is running ads on the network.