This is a disruptive era in retailing. There is no question that the structure of retailing has changed dramatically and shopper behavior with it. We now are competing in an omnichannel market, selling to informed and empowered shoppers. At the same time, a beneficial convergence of social media and omnichannel retailing has finally occurred. The challenge facing retailers is how best to capitalize on this fortuitous event.
A hallmark of this new environment is the change in shopper behavior. The orderly purchase funnel is a thing of the past, replaced by the purchase loop, wherein customers can and do access multiple sources of information on everything from pricing to product quality, adding and subtracting brands, products and retailers as they move from consideration to conversion. There are now many more touch points for retailers to engage with shoppers – one of the most important being social media.
So how does social commerce fit into the mix? Well, according to Bain, reducing customer attrition by 5% can improve bottom line profits by 25% to 85%. Also, increasing loyalty by 1% reduces costs by 10%. Social commerce can improve customer retention and loyalty because of two complementary outcomes:
1) it enables retailers to join the omnichannel purchase path, and
2) it deepens engagement and enhances loyalty with existing customers because both parties are engaged in an authentic, organic way.
Social commerce resides on the retailer’s web site, with the social component being the result of the shopper’s actions. This new methodology gives the shopper control of the messaging, providing the option to share in the social sphere. By engaging with shoppers via social commerce, retailers gain two advantages,
1) they increase loyalty by engaging with shoppers at their preferred touch points, and
2) they acquire new customers with a more genuine message that is posted by real people, not brands.
Tom Hutchison, the Director of Marketing CRM and Analytics at Raley’s Family of Fine Stores, shared his experience in social commerce at the 2014 National Retail Federation show. His reasons for using social commerce were:
1) harness the digital “word-of-mouth” power of social media, and
2) communicate an enhanced value perception to the marketplace.
Tom was looking for a social commerce engine that would facilitate evolution in the marketing approach and provide performance analytics to enable a “test and learn” methodology. The results to date have been exemplary. Redemptions are in the 23-45% range – substantially above the typical 1% rate for print. Notably, each $1.43 of vendor funds resulted in a product purchase plus five posts to Facebook viewed by 15 friends. This is a win for both retailers and their vendors. It is a powerful new part of the marketing mix and should be included by all those who wish to succeed in this new omnichannel world.