Many of the conversations in 2007 were about whether social networks will become centric to conducting commerce, B2B, B2C and P2P.
While social networks continue to grow exponentially the next growth curve will be driven by the holy grail of economics“, social commerce. Social commerce may actually become the dominant development in 2008 and subsequently turn business models upside down and inside out.
One might ask why?
Simeon Simeonov writes “Consider for a minute how gargantuan the social shopping/merchandising market opportunity is: the current US retail market (excluding home and automotive) is around $4+ TRILLION/year and is supported by $150+ billion in advertising, the bulk of which still goes to TV for immersive, emotionally impactful ads. Capturing the proverbial 1% of that total market would represent over $40 billion/year in transactions which is huge!”
“So, clearly, whomever figures out how to get paid to unlock socially-driven product discovery and merchandising is going to make an astounding amount of money and have a huge impact on net culture.”
Is there consensus on this opportunity?
We recently asked the following questions aimed at adults throughout numerous social networks, “Will businesses and people conduct commerce using social networks?” We asked 2,000 of our contacts the question and received responses from 623 which created a 31% response rate as of December 31, 2007. The responses are still coming in as of the writing of this post. The responses carried many comments, some of which we will be sharing in future post, however the majority, 72%, said absolutely Yes. Obviously these responses are influenced by people who are engaged with the social web and see the opportunity.
On the other end of the spectrum
We were recently at a meeting with executives of a Fortune 500 company and the discussions were centric to the social web. The issue of social commerce was brought up and the opinions of the executives were that people wouldn’t buy things through their social network profiles and businesses wouldn’t engage is making purchases with other businesses via a social network.
When asked how many of the executives were active participants in social networks 100% answered they were not and 40% didn’t even have a profile on Linkedin. When asked how many of their employees (in excess of 20,000 employees) were active in social networks their answers were “We don’t know”.
How can business executives draw conclusions with no experience or understanding of the dynamic of the social web? The answer is they do and they will continue to, right or wrong. The awakening will come when markets move, when competition leads the movement, when executives engage with people who find satisfaction and benefit from engaging with other people, when the world shifts and an alarm ripples through the executive suites.
What are the factors that will drive social commerce?
- Consumer as communication channel: viral in its purest form just carries over a many to many channel an essentially one to many message from a business to its audience.
- Consumer as message author: recommendations and referrals are where the ‘consumer’ is already an ‘employee’ of the business, effectively working for the Marketing department and generating the message in addition to carrying it.
- Consumer as a transaction participant: where the business has found a mechanism to engage the consumer in more than just passing a message, in ‘closing the sale’, processes orders and (why not) takes PayPal payments.
- Consumer as co-creator of the product: from participation in product design R&D with feedback, ideas and recommendations, particularly where the ‘product’ is the message he spreads. Two more jobs: in the R&D and in the Production department of our business.
- Finally, consumer as Investor: already an insider of our business, he confidently buys our stock (and recommends that, too). Clever companies find ways to engage them even better in the share ownership through dedicated schemes.
There’s been a lot of progress made in 2007 in social commerce and 2008 will see new players, new technology and lots of money thrown at the solutions. Social commerce can encompass and influence a wide array of points on the purchase process, both before and after, and markets will move where money moves. Stay tuned for The Emergence of the Relationship Economy!
What say you?