E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Gone are the days when retailers didn’t worry about their return on investment from social media marketing. Retailers now look to hard measures to gauge success. And they’re generating significant results.
NoMoreRack.com had never seen anything like the sales explosion that marked the start of the 2013 holiday season. It generated $32.3 million in online sales during the five-day span between Thanksgiving and Cyber Monday—topping the $29.1 million it generated for the entire period between Nov. 1 and Cyber Monday 2012, its previous best sales window. During the corresponding 31-day start to the 2013 holiday season, the discount products retailer's sales grew 168%, topping $78 million.
A big part of the retailer's success is the roughly 25% of those sales that stemmed from shoppers clicking from Facebook and other social networks to the retailer's web site, says CEO Deepak Agarwal. The retailer generated about $19.5 million in social commerce sales in November and the first two days of December, that is, sales from consumers coming directly from social networks, he says.
NoMoreRack's social commerce sales growth is largely a reflection of the retailer increasingly viewing social media—and Facebook in particular—as a way to directly boost sales, and not just build brand awareness, says Agarwal. The majority of its posts focus on a specific product. That's also true for most of the posts it pays to promote via Facebook's Promoted Posts ad unit—the main ad product it uses—which lets a marketer pay to ensure that a particular number of targeted consumers see a post. The shift in its approach has led to 35% of the retailer's traffic in a typical month in 2013 stemming from social networks, the third-highest percentage in the 2014 Social Media 500, a new Internet Retailer research guide that ranks retailers by the percentage of traffic to their web sites from social networks—a measure of the effectiveness of their social media strategies. That's up from 15% in 2012.
Those clicks from social networks are generating more sales than in the past thanks in large part to social networks developing more targeting options and more ad units to drive users to click to a retailer's page, says Joe Martin, Adobe Digital Index analyst. A recent Adobe Systems Inc. report found that the average revenue per visit for shoppers who click from Facebook was 93 cents in the third quarter, up about 39% from 67 cents in the same period a year earlier. The average revenue per visit for consumers clicking from Twitter was 44 cents, up 300% from 11 cents in 2012. And the average revenue per visit for shoppers clicking from Pinterest was 55 cents, up 150% from 22 cents a year earlier.
NoMoreRack's shift to viewing social media as a direct response channel is part of a broader trend of retailers increasingly focusing on the return on their investment from social media marketing, experts say. Many retailers—and the social networks—have pivoted away from focusing on nebulous measures such as Likes and followers to focus on firmer metrics, such as traffic from social media or the social commerce sales that traffic produces. For many, like NoMoreRack, an e-retailer launched in 2010 that generated an Internet Retailer-estimated $50 million in social commerce sales in 2013, that approach is generating a significant boost to their bottom lines.
It isn't just NoMoreRack that has seen a significant jump in the number of consumers clicking onto retailers' e-commerce sites directly from social networks. Merchants ranked in the Social Media 500 experienced a 41.9% jump in referral traffic from Facebook, Twitter, Pinterest and YouTube in 2013, to 51.5 million total monthly unique visitors, from 36.3 million in 2012. On average, the 500 merchants in the guide got 5.14% of their total site traffic directly from Facebook, Twitter, Pinterest and YouTube in 2013—up from 3.64% in 2012.
And retailers are increasingly converting those visitors into buyers, too, as social commerce sales are also on the rise. Merchants in the Social Media 500 brought in $2.69 billion in social commerce sales in 2013—up 62.5% from $1.65 billion in 2012.
While it's often smaller, web-only retailers like NoMoreRack reporting the biggest chunk of their traffic and sales from social networks, many larger merchants are also starting to realize they cannot ignore the power of social media in building and maintaining relationships with customers.
For instance, Amazon.com Inc. generated an Internet Retailer-estimated $538 million from shoppers who buy on its site after clicking to it from social networks in 2013. That's just for Amazon.com and doesn't include other Amazon-owned properties like Zappos.com or Diapers.com. Zappos was on pace to generate $55.8 million in 2013 sales from visitors coming from social networks and Diapers.com $1.61 million, Internet Retailer estimates.
Add the three sites' social commerce totals together—as Internet Retailer does when it ranks companies' total sales in the Top 500 Guide—and the world's largest online retailer will generate more than $595.4 million in social commerce revenue this year. If that were all its sales in 2012, it would have been the 54th largest online retailer in North America.
Even for Amazon.com Inc., which booked $61 billion in revenue in 2012, $595.4 million is more than a rounding error. Amazon has by far the most social commerce sales—by $450.4 million over Wal-Mart Stores Inc., the next-best retailer in the Social Media 500.
However, Amazon.com only ranks No. 169 in the Social Media 500 because the ranking is by percentage of traffic from social networks, and many smaller retailers that lack Amazon's brand name and marketing budget rely on social media to attract a much larger share of their visitors. Amazon gets 4.87% of its traffic from Facebook, Twitter, Pinterest and YouTube, which is significant given that 130.8 million unique consumers visit Amazon.com each month, according to web measurement firm Compete Inc. In fact, Amazon.com attracts nearly 6.4 million unique visitors from social networks—the most in the Social Media 500 by more than 3.2 million visitors.