Facebook Commerce

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A thought paper that uncovers, through a comprehensive study, the current state and future promise of Facebook commerce through the lens of Facebook, users, businesses and service providers. . Prepared by BBDO Proximity Germany and presented by the Digital Lab.

Transcript of Facebook Commerce

FACEBOOK COMMERCETrading Commerce September 2011 1

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We live in fast-moving times in which changes happen on a daily basis. Some of these changes demand decisions about the future, and many companies are now confronted by one such challenge, because something is heading their way which could permanently change conventional online retailing. Facebook Commerce has got underway, and we should look carefully to see whether it is a train onto which it is really worth jumping. Up until very recently, Facebook was simply a social network in which friends met in their own communities and kept each other updated about their activities. That has now changed. More and more brands are establishing a presence on Facebook. Nowadays, many Facebook users are friends with numerous brands, which have thus become part of their networks. This kind of direct dialogue within a very private sphere is at the centre of F-Commerce, and it is becoming an effective marketing tool with which products will soon be able to be sold extremely successfully. In this study, BBDO sheds light on the subject from four different angles: Facebook, users, businesses, and service providers. We then draw up some recommended actions for businesses on the basis of these different points of view. One thing, after all, is certain: it is crucial to get firmly to grips with this transformation in retail. If F-Commerce is going to establish itself as a relevant sales channel, then it is important to make use of the opportunities and to occupy vacant ground. So stay tuned. I hope you enjoy reading the study.

Foreword

Michael Schipper COO, BBDO Germany

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Contents6 7 MANAGEMENT SUMMARY | F-COMMERCE 8 11 BACKGROUND AND SETUP | STUDY FOR ACTION 12 19 STATUS QUO | F-COMMERCE IS STILL IN ITS INFANCY 20 27 PLAYER 1: FACEBOOK | FROM FRIENDLY SPACE TO MARKETPLACE 28 41 PLAYER 2: USERS | FANS BECOME BUYERS 42 55 PLAYER 3: COMPANIES | SELLING BY COMMUNICATING 56 65 PLAYER 4: SERVICE PROVIDERS | NEW PLAYERS EMERGE GLOSSARY

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MANAGEMENT SUMMARY

F CommerceThe commercialisation of Facebook is moving ahead at full steam. Numerous brands and games have paved the way for commercial offerings on Facebook. Up until recently, most companies used the platform primarily for customer loyalty purposes. Half of the people surveyed as part of this study are friends with at least six brands on Facebook. Two-thirds of those asked consider Facebook a central place for all kinds of interesting themes. This situation has led to products being sold via the platform alongside pure dialogue activities. F-Commerce is currently in a relatively early stage of its evolution. But it is safe to assume that it will be taken up by consumers more quickly than e-commerce was a few years ago, because it is no longer necessary to accept a completely new technology as it was with e-commerce. Furthermore, shopping online is now absolutely normal. F-Commerce, therefore, will expand over several stages. In the first stage, product recommendations will be generated by incorporating Facebook functions, and then disseminated in the social network. In the second stage, products will be presented in Facebook storefronts. In the third stage, complete purchase transactions will be put on offer. Facebook wants to get its foot in the door of online retailing because it can see the enormous potential that lies in retail activities on its platform. The social network already has its own currency, called Credits, and it earns 30% of the turnover generated by social gaming through virtual goods traded in social games. In order to push F-Commerce forward, Facebook set up an internal Commerce Partnership Group at the end of last year which is intended to help retailers to use Facebook as a sales tool. Retailing inside Facebook does not cost companies anything at the moment, but that can change. The question is not whether, but when, Facebook will capitalise on retail within, and using, its platform. Convenience is one of the most important motives for buying on Facebook. It is the clinching argument for 36% of those surveyed. Great offers and discounts come second (32%), followed by exclusive products (30%). Only 8% of those asked have already bought things on Facebook, while twice as many have browsed through an F-Store. One in five people stated that the social component is an advantage. What they mean by that is shopping together with friends and commenting on the purchases they have made. Products that can easily be shared with others and given away are especially well received on Facebook: two-thirds of those asked can definitely imagine buying vouchers and tickets on Facebook.

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MANAGEMENT SUMMARY

But F-Commerce is still more suitable for impulse buying. That is because most Facebook users still visit the site without any particular intention to shop. Instead they are more likely to stumble upon product recommendations for interesting products from their Facebook friends or brands they are friends with. Instant rewards as a shopping incentive will play a major role in F-Commerce for this reason. Products requiring a lot of information, on the other hand, are less in demand, and are more suitable for e-commerce channels. For companies, F-Commerce is also a place to try out new concepts. They can experiment there with time- and volume-dependent offers, fan-first and fan-only items, and group purchases. The results from this will give rise to new marketing and sales concepts which will aim at attracting attention and creating relevance. Merging communication and retail in this way will produce unique possibilities which are only feasible on Facebook. Dialogue with the brand will always be at the centre of F-Commerce. At this point, Facebook has not yet fully undergone the transformation into a sales channel. This means that for companies, F-Commerce is currently an investment, and primarily a marketing tool. The monetary benefits are still low. Emphasis is very much on customer loyalty and customer involvement, because there are few buyers, and the ones there are are not very willing to spend. Not until F-Commerce establishes itself fully (stage three) will companies be able to convert these customer relationships into hard cash. The development of F-Commerce will depend very much on Facebook as a platform. If users abandon the social network, then F-Commerce will fail. Half of the people polled expressed reservations about data privacy and security, but only one in five fundamentally distrusts Facebook. For Facebook to establish itself as a retail platform, it will not only need to demonstrate more dependability to businesses, but it will also have to make security and data privacy its priorities.

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BACKGROUND AND SETUP

Study for ActionDefinition of F-Commerce: F-Commerce describes retailing inside or by means of Facebook. Retailing inside Facebook means that either the products are presented on the platform, or the complete purchase transaction takes place there, while retailing using Facebook enables companies to generate traffic on their own e-commerce sites, or to collect user data. This study focuses on retail inside Facebook. That includes (fully integrated) F-Stores, product presentations (storefronts), group purchases (deals) and trading in virtual goods within Facebook games.

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BACKGROUND AND SETUP

Exciting Commerce is one of the most prominent German e-commerce blogs. One of its authors, Jochen Krisch, deals with themes that include social commerce, and advises e-commerce businesses.Jochen Krisch, Exciting Commerce

Smatch implemented numerous Facebook Commerce activities for the Otto Group starting in 2010. Stephan Wolk is responsible for marketing and product developing at Smatch.Stefan Wolk, Smatch

ShopShare is one of the best-known providers of Facebook Store solutions. This Austrian company offers both customised and standardised store concepts.Hendrik Maat, ShopShare

And in order not to neglect the corporate perspective around this theme, one of the clients of the BBDO Group was interviewed.

HORNBACH has maintained its own successful brand fan page on Facebook since 2009. Christoph Strassburger, its Director of Social Media, is responsible for managing all social media channels.Christoph Strassburger, HORNBACH

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BACKGROUND AND SETUP

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BACKGROUND AND SETUP

Method:ReseaRch step

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Desk Research Existing, published knowledge in industry magazines, blogs and surveys on the subject of Facebook Commerce was gathered together, and on that basis hypotheses were formed as the starting point for the next research steps.

ReseaRch step

Interviews Three experts were interviewed in order to gain an understanding of how Facebook Commerce is likely to develop in the future. Each expert embodied a specific perspective of the subject.

ReseaRch step

Online User Questionnaire As part of the study, a representative cross-section of 504 people were polled online. These 504 people were selected according to three criteria: Criterion 1: Facebook users. The people in this category use Facebook at least every two or three days. They are divided up as follows: 64%areheavyusers: they use Facebook several times a day. 36%areoccasionalusers: 12% use Facebook every two or three days, 24% use the social network once a day. Criterion 2: brand friends. In this category we only asked people who have made added brands and companies to their list of friends on Facebook. Criterion 3: regular online shoppers. In this category we only asked people who shop online at least once every six months. This is how their shopping behaviour broke down: 75%areheavyonlineshoppers: 13% of those asked buy things at least once a week online, 32% several times a month and 30%