Practical Ecommerce

4 Realities of Selling on Facebook

There are few who question Facebook’s potential for ecommerce merchants. Access to a user base of nearly 600 million consumers — coupled with the targeting of specific audience segments based on users’ Likes — are compelling reasons to experiment with it as a sales channel.

However, little has been said about how well Facebook actually performs for ecommerce merchants and what the realities are of selling products on that platform.

In this article, we address four realities of selling on Facebook. In preparation for the article, we queried a number of smaller merchants as well as ecommerce vendors — those who sell software and services to ecommerce merchants — to gather their insights.

Reality #1: Sales Volume Is Low

While Facebook may hold a wealth of possibilities for social commerce, those we spoke with — both merchant and vendor alike — say the percentage of sales on Facebook and other social channels is in the single digits. Some reported sales that came as a direct result of product exposure within a social network to be as low as 2 percent of their overall totals.

Most attribute this low volume to the fact that social media is a new channel and that only a small group of companies are even exploring it at the present time. There is also resistance to perceiving Facebook as anything other than a social network. How resilient that perception remains within the minds of consumers will largely determine how well Facebook performs as a shopping channel.

Reality #2: Managing Back-end Functions

A number of vendors provide some type of Facebook shopping presence. Hosted platforms, such as Volusion, BigCommerce and 3dcart, frequently provide Facebook “stores” (photo galleries, really) that link back to the ecommerce sites. Other providers, such as Milyoni and Payvment, allow for purchase transactions to take place within Facebook. The consensus among those we contacted is that routing purchasers to the main ecommerce store will be how most online retailers choose to integrate Facebook.

In the event a merchant created a Facebook cart that is on par with its ecommerce site, what types of technologies need to be considered? A Facebook shopping cart would have to be open enough to accept data feeds and back-end integration into a merchant’s existing platform. Order management, inventory management, payment processing and accounting issues would all have to be ironed out.

One company, Milyoni, does offer custom integration options via its API that includes product catalog, inventory, payment processing and order processing. Another Facebook shopping cart provider, VendingBox, stated that inventory and orders could be synchronized through plug-ins to some existing ecommerce platforms.

Reality #3: Merchandising Is Limited on Facebook

While traditional forms of online merchandising — limited-time special offers, promo codes, free shipping offers, affiliate marketing and so forth — can also work in Facebook, merchandising within the social network takes on a different dimension. Some respondents suggested there is a form of merchandising unique to social media that is based on users sharing products and purchases with friends. Not only that, one respondent suggested that putting a store tab on your Facebook page is insufficient if unaccompanied by merchandising efforts that get the product into Fans’ news feeds.

The ability for Fans to share product information with friends is important from a Fan’s perspective. For merchants, however, an even more important consideration is analytics. Merchants must be able to track impressions, click-throughs and sales conversions, something that Facebook does not easily facilitate at present.

Reality #4: Facebook Is the Gatekeeper

Merchants who rely on Facebook for direct sales or referrals implicitly place that company between themselves and their consumers. It’s a similar “gatekeeper” concept that many merchants experienced with eBay, for example, when those merchants ultimately exited eBay after the company changed its policies.

Opinions as to the value proposition Facebook brings as a sales channel were varied. One respondent said that Facebook doesn’t warrant “middle-man” status, while another said Facebook should be inserted between the merchant and customer due to the wealth of information that could be gleaned from the interaction. Another recommended that Facebook be seen as either an ecommerce-enabled customer-relationship platform or an ecommerce event-marketing platform, but not a duplicate sales channel. Most agree the primary benefits to using Facebook are the potential for increased traffic to the merchant’s website, the opportunity to engage with customers in real-time conversations, and the ability to advertise to highly targeted audience segments.

Conclusion

In short, having a presence within Facebook in any form comes with benefits and risks. First, there is access to a wealth of data based on user’s likes and interests. No other marketing channel provides anything nearly as comprehensive. On the other hand, dependence on a third-party brings with it a loss of control over the customer’s experience. Everything is subject to Facebook’s terms of service and changes can be made with little, if any, notice.

Is it possible for Facebook to cross the chasm from social network to social shopping portal? That remains to be seen. Users’ perceptions will have to change and merchants will have to be willing to embrace the uncertainties that currently exist.

In some respects, selling on Facebook and other social networks is not unlike selling via comparison-shopping engines and open marketplaces like eBay and Amazon. This practice, known as multi-channel marketing, has as its goal finding outlets to get products into the hands of as many customers as possible. It is not inconceivable that social networks could be added to the list as well.

Paul Chaney

Paul Chaney

Bio   •   RSS Feed


email-news-env

Sign up for our email newsletter

  1. Bobby Cintolo January 11, 2011 Reply

    Some great points in this article. It is great to have a presence and following on Facebook but it will not replace a merchant’s Online Store. Having an eCommerce system that allows customers to easily share and integrate product information, order history, and opinions with Facebook is big key to generating revenue.

  2. vendingbox January 11, 2011 Reply

    Integration with existing systems will be key. Vendors don’t want to maintain multiple product databases, stock levels and so on. They would prefer to facade their existing systems.

    Further, the ability to create calls to action like discounts for fans, on special items is likely to generate a buzz through new streams which is not easily available on destination sites.

  3. mattcompton January 11, 2011 Reply

    Hi Paul –

    Thought I’d follow up with a few things we are seeing, in regards to Facebook as a channel, analytics and Facebook (or social sites in general) as an enabler.

    We see social eCommerce as another channel that needs to be integrated to core eCommerce – else inventory, pricing, order management, customer groups, branding etc all start to suffer – and the customer will notice. We feel vendors will move from using multiple social widgets and shopping carts to optimize the social Web and consolidate on a comprehensive platform to alleviate the issues you cite.

    In regards to analytics and how to optimize your network, we think it requires a comprehensive approach. For example, we are seeing a 16% higher conversion rate on transactions that originate from a friend’s post. So a business would want to incent their customers to share their experiences through a post, and reward them for the registered shoppers, revenue or orders they drive. You can then begin to badge them based off their achievement and give them exclusive offers and shopping experiences that they can share with their friends to earn even more incentives. None of these analytics and the ability to segment, manage and reward the network would be possible in a scenario of silo’d shopping carts or social promotion widgets.

    Regarding the last point, we feel Facebook (or any social site) should be seen as an enabler and not an intermediary. We see the Groupons of the world are intermediaries that can add significant value, but they do control the transaction, take the margin and set the rules.

    A couple examples of Facebook as an enabler:

    – Using Facebook connect as a registration capability on their .com site, a customer of ours drove in 20K registered shoppers in 2 months. It streamlines the process and provides data points from the social graph
    – Over the holidays, we saw a 2X conversion on transactions that stayed inside of Facebook. Our guess is when a friend leads you to a transaction (versus a company’s ad), you are more likely to spend. In addition, these transaction averages were 10% higher than the transactions occurring on the .com at the same time.

    We’d be happy to share what we are seeing for any future articles on social ecommerce!

    Thanks
    Matt Compton – ShopIgniter

  4. Charles Nicholls January 13, 2011 Reply

    Hi Paul

    Great article!

    The best opportunities for social commerce on Facebook (fCommerce) are undoubtedly where there is some natural social element to the purchase, so entertainment, travel, music etc. all fit the bill. These types of businesses could gain significantly from having an fCommerce site.

    But for mainstream eCommerce it just doesn’t make a whole ton of sense right now to duplicate the ecommerce site. You may recall SeeWhy conducted s survey of 476 eMarketers back in June last year, and we found that the majority of marketers (67%) view Facebook as a source of traffic, rather than as an additional channel at this point. A further 44 percent plan to use Facebook applications in place of microsites for launches and specific promotions. Only 26 percent planned to build fCommerce applications.

    You can find the research here: [http://seewhy.com/blog/2010/07/14/social-commerce-most-marketers-view-facebook-as-a-source-of-traffic/](http://seewhy.com/blog/2010/07/14/social-commerce-most-marketers-view-facebook-as-a-source-of-traffic/)

    Of course back end integration is improving all the time, and this may well change the picture.

    Perhaps the other data point that’s worth considering is the rapid move to integration of Social features onto ecommerce sites. A recent study by Gigya suggested that over half of online retailers who responded to an August 2010 survey had either implemented social sign on (such as Facebook Login) or planned to add it in the near future.

    This research is here: [http://www.emarketer.com/Article.aspx?R=1008151](http://www.emarketer.com/Article.aspx?R=1008151)

    Charles

  5. Naruby January 13, 2011 Reply

    Great article Paul!

    I’ve also spoken with a few retailers selling only on Facebook and found that their sales volume were low. However, they were also new to e-commerce and found that setting up a shop on their site through Payvment was extremely easy to do and great way to get started. One hurdle for selling directly on Facebook is the fact that the application asks for permission to access users’ profile information at which point some people may drop off and not complete the sale.

    These are minor hurdles though, and I do believe that we are in the infancy stages of f-commerce and will see many retailers (including large ones) treating Facebook as a channel. Especially since retailers can combine the power of targeted advertisement to drive users to your Facebook page. Check out this article: http://socialcommercetoday.com/f-commerce-comes-of-age-pg-opens-facebook-store-selling-29-top-brands-screenshots/

    Naruby
    http://www.ordoro.com/

  6. Craig Vodnik January 13, 2011 Reply

    Hi Paul,

    Nice article about fCommerce.

    We recently launched a fully-integrated Facebook store for Malwarebytes (www.facebook.com/MalwareBytes). A promotion to their 50k+ followers for 25% off resulted in the desired 10 sales in about 90 minutes. Some really good user comments on the special, though (http://www.facebook.com/Malwarebytes/posts/187490391276877).

    In the grand scheme of things, sales are quite low. I would draw the analogy to 1997 or so when Dell broke $1 million a day for online sales. That was a big deal back then, but a rounding error on their balance sheet. However, within a few years, online was a strategic channel for Dell and a real differentiator. I view fCommerce and Social Commerce the same way.

    On point 2, I suspect that all the major e-commerce providers will likely offer FB stores sometime this year, assuming that they have the technical capabilities to leverage their existing frameworks. In doing so, integration of data to back-end systems should be trivial, like we’ve done at cleverbridge.

    What I ultimately expect from Facebook Stores is the following:

    1. New e-commerce merchandising schemes (First X that buy Y discount)
    2. Give as a gift becoming a mandatory feature
    3. Social Graph integration outside FB driving traffic and sales back to FB store.

    I’m an optimist on this and looking forward to a great year in social commerce.

    Thanks.

    Craig Vodnik
    Building Keystones

  7. molly griffin January 14, 2011 Reply

    Great article. Here at Dydacomp, many of our clients are small businesses who are interested in the future of social commerce. Good points and we are all excited about this new exciting year in the world of social commerce.

  8. LIAD January 17, 2011 Reply

    We at Shoply.com provide retailers their own online shop as well as one on Facebook.

    Since launching our fCommerce offering a few months ago we have seen a high proportion of merchants utilise it.

    However an ongoing concern is the limited design and merchandising options available and the changing API and terms of use.

    Our strategy is to provide our merchants a way of leveraging Facebook and the social graph, but not being fully reliant upon it