Groupon says its focus is on the bottom line, rather than top-line growth.
Some retailers with customers passionate about their markets are building niche social networks that are increasing loyalty and sales.
Bodybuilders are intensely passionate about their fitness lifestyle and how they achieve their goals. It goes way beyond “How much can you bench?” But the spirit of that question is at the heart of how bodybuilders socialize-they like to compare bodies as well as learn from one another.
This spirit is also at the heart of Bodybuilding.com’s decision to launch a social network-not a presence on a network like Facebook or MySpace, but its very own network. The e-retailer wanted to go beyond selling fitness products and providing a vast library of information to become the meeting place online for bodybuilders and other fitness buffs.
So the e-retailer launched BodySpace in September 2006. By December 2007 it counted 50,000 members. Today it boasts more than a quarter of a million. And these members are very loyal customers, not only routinely adding content to Bodybuilding.com but money to the web retailer’s coffers. “We focused almost 100% of our efforts in 2008 on the community, and it paid off: Sales increased 45%,” says CEO Ryan DeLuca.
A zealous following
The giant social networks are enormously popular and becoming engrained in many people’s everyday lives. The few retailers that have built their own social networks-ranging in annual operating cost from $3,000 for basic, templated, off-the-shelf software with a small number of members to more than $250,000 for homegrown networks containing rich functionality and serving a great many members-are looking to engage social networking fans, but on a smaller scale and in a highly focused fashion. And they’re integrating customer reviews with social networks as a way to increase content and encourage back-and-forth between members while simultaneously giving members a gentle nudge toward buying.
These retailers all are seeking to accomplish the same goal: tap into customers’ passion for the subject their products address to increase traffic to the site, customer loyalty, repeat customers and sales. These retailers, including Bodybuilding.com LLC, Buckman’s Ski Shops and Indigo Books & Music, offer the same advice to fellow merchants: If a retailer serves a market for people with a shared zeal, it is ripe for a social network.
“The future of social networks will be niche destinations formed around a common purpose or passion,” says DeLuca, who spent $50,000 to launch the network in house and spends around $250,000 annually to maintain it. “On the web in the beginning there were a few main portals; today there’s a web site for everything, no matter how small or obscure the subject. The same will happen with social networks.”
Bibliophiles are no less passionate about their favorite pastime than bodybuilders. What’s more, not only do they have the shared interest of loving books, they split off into sub-sections of interest, such as science fiction or romance novels.
Like Bodybuilding.com, Indigo Books & Music recognized the macro-trend of social networking and set its sights on carving out a social niche. It launched in house Indigo Community in October 2007 and today boasts 200,000 members-20% of its 1 million online customers. And the retailer, which lays out between $250,000 and $500,000 a year to operate the community, says it hits its return on investment threshold of cost plus 18%, driven by sales attributable to social network content and interactions.
Joining Indigo Community and BodySpace, and just about any social network, involves a very similar process. An Internet user enters a username, password, birthday (to control the minimum age of membership), sex and a couple other basic demographics.
The new member then is prompted to add more information, if the member chooses, to create the most descriptive profile possible. At Bodybuilding.com, for example, members can include measurements, progress photos, videos, workout routines, supplements (with product page links), favorite books and movies, and more. Members also can write their own blogs.
Indigo offers a twist on the conventional social network profile. A member enters the basic information, but then is asked to create a virtual bookshelf. Members add favorite and newly purchased books to create profiles that show fellow members who they are by what they like to read. Members then can connect with other members or create groups based on very specific shared interests, whether they be Charlaine Harris’ Sookie Stackhouse Southern Vampire Mysteries or nonfiction tomes on Medieval history.
“Customers are constantly adding books to their shelves and writing reviews and adding friends. They’re adding a ton of fresh content to the site that we don’t have to create,” says Sumit Oberai, vice president of customer solutions. “And the search engines really love fresh content; because of that, we have seen our natural search traffic skyrocket.”
In addition to boosts in natural search traffic, retailers with social networks are securing more repeat customers. This was the explicit goal behind B Space, the social network of Buckman’s Ski Shops. While the retailer has only had B Space up and running for a few months, garnering 780 members to date, it already is reporting an increase in repeat customers.
“People don’t wake up in the morning and say ‘I want to see what new skis are out there,’ but they often like to talk about their latest skiing and snowboarding experiences,” says Matt Gahman, director of Internet sales and development at Buckman’s, which uses a hosted system from 2Dogs Software-$2,000 start-up fee, $250 monthly fee-to operate the social network. “They are more likely to come back to a social network where they have friends rather than just visit an e-commerce site, but the social network fosters loyalty and leads members to buy.”
Using a social network as a selling tool, however, requires great finesse. Retailers operating social networks say to be successful socially, merchants must drop the hard sell and understand that providing a unique place for enthusiasts to meet and greet without pressure to purchase is the aim. Customers know it’s the retailer providing this social setting and become increasingly loyal, in turn buying more, and more regularly, the retailers say.