How Social Media is Changing eCommerce

The re-invention of eCommerce is happening continuously and with the lightning speed of retail innovation, still, some retailers are choosing to stand by and wait.  With the state of today’s economy some retailers are reluctant to invest in new, unproven ideas that don't provide a known ROI (return on investment).  They are especially conservative about making changes to their eCommerce Web sites because they are beginning to produce a significant contribution to the company's “Bottom Line.”  Many retailers are of the "if it isn't broken, don't fix it" mindset that leads to stagnation.  In our industry, those who innovate will gain market share and margin share.

Enter social media and social networking, these are the next generation of Web sites.  They are focused on a product or product group and focus on the details.  Compare the Best Buy corporate Web site with a photographer's Web site focused on specific digital cameras.  Best Buy will have the information needed to make a buying decision, however, the photographer's Web site or personal blog will have the same info, along with reviews, opinions and stories focused on the “experience” the user had with a product.  The online landscape has gone through a transformation over the past couple years that has taken the control from the “webmasters” and put it in the hands of the end-users; i.e. customer, clients and vendors.  This is a paradigm shift that could change the way people shop as profoundly as the transformation from brick and mortar to online shopping.

As experts are indicating that social networks are the next wave of online commerce, traditional retailers are scrambling to understand how to benefit from them.  The social media user community has created a new space to do business which has created a new brand inside this space.  Shoppers are now looking to see what their friends or members of an online community purchased versus going directly to the retailer.  The branding is associated with individual credibility instead of the retailer’s main eCommerce site.  If retailers can learn to embrace, encourage and influence this space it could become a significant sales channel and an effective testing ground for new concepts and new technologies.

I would think that if risk and effort are non-existent to the retailer, then these sites are a good way to explore new retail concepts.  Also, think about them as an effective testing ground for new concepts with unique business models and they can also be used for evaluations when trying new technologies and ideas.

The biggest questions facing the retailers will be – how do you tap into the mindset of a whole community? How do people interact within an online group?  How do retailers or manufacturers re-invent their corporate way of thought when the landscape is changing every month?  These are the questions being answered today by the social marketplace … we are no longer selling to an individual, we are selling to a community and that community tells us what our product will be, do, have.

Comments

[Lisa Banks]

Great post, Alan! I think one of the biggest fears of allowing reviews and open communication by customers is that there are going to be negative remarks. Today's consumer wants to know the good, the bad, and the ugly before they make their decision, but traditional marketing departments have become experts at filtering negatives. Those companies that are facilitating, watching and responding to consumer voices certainly gain an advantage.

[Andy Nicol]

The question is - is it free from risk and effort? Risk, maybe, but there can be a lot of effort that goes in to integrating something properly.

[Rajeswari Sitaraman]

Hi, Nice post! Am an domain consultant who does extensive research on What Social media (Web 2.0, Semantics) can offer in retail space. I always have this question in my mind. When we talk about embracing social media, eve n though Walmart was quick enough to react with its 'The Hub' but it ended up to be a huge failure. But when we look at Target.com, it has been improving a lot with user's ratings and reviews and the online sales percentage in the site has steadily increased. What really went wrong! Change process? Or is it also important who embraces social media?