E-retailers perfect their ROI for social media

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.

By Zak Stambor and Stefany Moore

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.

Like many retailers, Amazon doesn't just seek to drive traffic to its site via social networks; it also incorporates social elements into its own site. It recently announced plans to provide shoppers more product information that stems from shoppers' Facebook connections. For example, Amazon says customers with Facebook-connected accounts will see product reviews written by their Facebook connections and products that their connections have put on their Amazon Wish Lists. Wish Lists can be marked private, but Amazon's default setting for Wish Lists is for them to be public and viewable by anyone.

Amazon's on-site and off-site social media efforts tie in with its broader efforts to personalize shopping for consumers using crowd-sourced data, says Wade Gerten, CEO and co-founder of social marketing vendor 8thBridge Inc.

"Unlike the majority of retailers that believe brand-to-fan engagement is the primary goal of social media, Amazon has always concentrated on methods to gather crowd-sourced product information and sophisticated algorithms to personalize the shopping experience," he says. "Amazon believes social discovery is the most important aspect of social commerce."

That's a notion shared by Deb Shops, which works with 8thBridge to offer shoppers social elements on its site. It features a Want It To Win It button that, when clicked, gives a shopper a chance to win that item in a weekly giveaway. Clicking the button also prompts the shopper to give the retailer access to her profile on the social network, and to share the item she wants on Facebook. Deb Shops also offers Pinterest-like Style Boards that let shoppers collect various items on boards around a particular theme such as "Fall formal."

Using A/B testing, the retailer found that the mere presence of those social elements boosted its site revenue per visit 16%. And shoppers who interact with social elements visit 36% more often and convert at a 220% higher rate than other shoppers, says David Cost, vice president of e-commerce and digital marketing at the junior and plus-sized fashion retailer.

Moreover, the demographic information Deb Shops gathers from consumers giving it access to their Facebook information to use the tools enables the retailer to gain insights into its customers. For example, the retailer had assumed that its plus-size and shoes and accessories-buying customers were typically older than its junior customers because those styles skew older. The Facebook data confirmed that hunch—about two-thirds of shoppers interacting with plus-size apparel or shoes and accessories were 20 or older, while a much smaller percentage of junior customers were 20 or older. Cost declined to share the specific percentage.

Facebook's demographic information is unparalleled in its depth, he says, which makes it extremely valuable. "You spend years building up your Facebook profile, which means Facebook has many more details than anything else," he says. "It's like the most detailed marketing survey you could get. You can see patterns in user behavior that you wouldn't be able to see in any other way."

But to unlock that data, retailers constantly have to engage shoppers. Deb Shops reaches out broadly across online social media. Jennifer Fitzpatrick, the retailer's social media and brand manager, posts a mix of promotional and conversational content to eight social networks: Facebook, Twitter, Instagram, Pinterest, Tumblr, Google Plus, YouTube and shopping-focused Wanelo. About half the daily content it posts is planned, while the other half might highlight a new product that hit store shelves that day or mention a trending topic on Twitter.

The retailer has a simple goal: "We use social media to maximize the amount of time that shoppers spend with our brand," Cost says. To gauge its success, it uses engagement measures such as retweets, repins, comments per post, as well as clicks from social media. The formula has helped the retailer attract robust followings across each of the social networks. With an 8.2% engagement rate—which measures what percentage of its fans interact with its posts on Facebook —Deb Shops outranks all but 35 retailers in the 2014 Social Media 500. And shoppers clicking from Facebook and the seven other social networks it is active on, account for 5% of its site traffic, ranking Deb Shops No. 156 in the guide.

But it often isn't enough to rely on "owned" traffic that shoppers see when they follow a retailer, Cost says. In part, that's because the social network says a Facebook user typically sees only about 16% of the content his connections post on the social network. That's because Facebook only presents consumers posts it deems interesting to them.

To increase that share, retailers have to "earn" views by drawing shoppers in by posting content interesting enough that shoppers pass it along or mention the brand in their own posts, Cost says. Deb Shops also pays to promote posts on Facebook and Twitter to ensure its messages are seen by a certain percentage of fans—or other consumers—along with social networks' other ad formats that focus on boosting engagement via Likes, comments or retweets.

Deb Shops uses both Facebook's Custom Audience tool that lets advertisers use information shoppers share with them off of Facebook to target ads on the social network, and its Lookalike Audience tool that lets marketers target ads at consumers who share similar traits to its Custom Audience segments. It also employs other targeting options, such as age, interests and location, to present consumers ads featuring products and styles that match their tastes. It uses ads like Sponsored Stories, which let a brand pay to promote a message about a consumer's friend engaging with its page, app or event, and Promoted Posts, which let it pay to ensure a post receives a predetermined number of impressions from its fans and from consumers likely to be interested in its brand.

The retailer's approach to social network advertising mirrors efforts taken by several social networks including Facebook, Twitter and Tumblr over the past year to introduce new ad units and targeting tools that let marketers seek to drive specific results to a specific group of shoppers at a specific time and to demonstrate how shoppers respond.

Facebook and other social networks' efforts to bolster their advertising offerings has led retailers to either try out, or boost their spending on, ads. Of the 40 merchants in the Social Media 500 that supplied data on their 2013 and 2012 spending on social media ads, 32 reported doling out more for social ads in 2013 than 2012, and, as a whole spending increased for the 40 merchants nearly 300% to $4.2 million from $1.1 million. Seven merchants said they did not invest in social media ads in 2012 or 2013, and two reported a year-over-year decrease. Of the 32 merchants that reported an increase, 41% (or 13 e-retailers) said they invested in social ads for the first time in 2013.

One of those retailers boosting its social media ad spend is Office Depot Inc., the second-largest online office supplies retailer in the world. While the nature of office supplies might not seem to bode well for social sharing, Office Depot spent 150% more on social media ads in 2013 than it did the year prior, and it's also experimenting with new strategies like on-site social features, Facebook content targeted to segmented audiences, and partnerships with influential social media players who share content on the retailer's behalf, says Emery Skolfield, the retailer's senior director of digital brand and public relations.

During the holiday shopping season, the merchant ran a number of social shopping campaigns on Facebook, Twitter and other social networks, including its "perfect gift project," an application that allowed Office Depot followers on LinkedIn to invite colleagues to vote on products they should choose as gifts for office workers.

With 0.64% referral traffic from social networks, Office Depot ranks near the bottom of the Social Media 500 at No. 492. Direct sales derived from those visitors, an estimated $364,800, also fall in the bottom half of the Social Media 500 and are a drop in the bucket of Office Depot's more than $4 billion in annual online sales. But the social traffic and sales numbers are growing fast—social commerce sales were up 350% for Office Depot in 2013, and traffic to OfficeDepot.com from social networks grew 289% to 60,800 monthly unique visitors from 15,640 in 2012.

The fact that even store-based merchants, many of which doubted that social media would ever drive any real revenue, are experiencing measurable results shows that social media is becoming increasingly important, says Aaron Strout, managing director of digital marketing agency W2O Group. After all, other retailers can't sit on the sidelines when nimble newcomers like NoMoreRack are generating $50 million in social commerce sales. l

zak@verticalwebmedia.com / @zakstamborIR

stefany@verticalwebmedia.com / @stefanymooreIR

How to order the Social Media 500

Internet Retailer's 2014 Social Media 500 is available in a digital format ($79), and as part of the online database available on Top500Guide.com. To obtain a copy, visit InternetRetailer.com/social500. Or e-mail a request to Chaz McCrobie-Quinn at chaz@verticalwebmedia.com.


2014 Social Media 500, Facebook, January 2014 Magazine, Pinterest, social media ads, social media strategies, Twitter