Supply Chain Shaman

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Report Publication: Rise of Social Commerce

Meet the new shopper.  Underneath the keys of the keyboard, they are shopping in a new way.  They could be beside you on the train tonight, it could be your teenager behind the closed door, or your spouse smiling as she clicks on the accept button for the PERFECT holiday gift.  Each is unleashing the power of the social network.

Meet the Digital Consumer

The digital consumer is shopping with friends, sharing recommendations, and actively engaging in dialogue with brand owners on how they want to be served.  But, can you listen?  Can you serve the new shopper?  Or are you so busy YELLING your brand message, that you will miss this opportunity to listen, engage and serve the consumer in new ways?  With the rise of social commerce, you have new opportunities to anticipate, personalize and energize the shopping experience; but our finished research report documents that convention is the biggest barrier. Enterprise processes that are designed to broad-brush markets, push big-brand messages, and serve markets through conventional channels.(To access the report follow this link. rise_of_social_commerce_final)

The Four Phases

The “Great Recession” set the stage for this new era, and emerging technologies accelerated the transformation.  The shopper has fundamentally changed and wants a new buying experience.  Trust in big brands is low.  Consumers want confidence in what they buy from their friends, and insight from their community.  Pioneers are driving this change.  In our qualitative interviews, on average this change consists of five people in interactive marketing, armed with an array of technologies.  In 2011, this will spread into an enterprise initiative to know the digital consumer.  The change will enable new ways to sense and shape demand, and build a more powerful relationship with the buyer.  As a result, in 2011, 90% of companies surveyed will increase funding for social commerce initiatives by 8%.  This represents net new spending by the line-of-business leader in brand marketing for a manufacturer or retailer. 
This evolution of social commerce (s-commerce) harkens us back to the birth of e-commerce 10 years ago.  At that time, e-commerce represented both a new channel and a new way of communicating brand promise to a shopper.  The change was pervasive, and it rewrote the relationship between company and consumer. Social commerce is analogous. It is both a new channel and a new way of doing business.  It is reshaping how consumers shop.  It is changing customer expectations about their interactions with brands. 
Three years ago, the action shifted to mobile.  Again, it was both a new channel, and a new way to promote brands and redefine the customer experience.  The handheld device has fundamentally changed shopping patterns; it has enabled consumers to shop anytime and anywhere.  The rise in smartphone use has accelerated the pace of change.  According to Nielsen, 30% of shoppers have smartphones, with predictions of 50% adoption in 2011.  Of the companies interviewed in our qualitative survey, 40% were actively involved in m-commerce strategies today. 
 We see this evolution happening in four phases.   Today, most brands are getting engaged in the first phase of social commerce, which we call Let’s Be Social, where it’s all about getting social at a minimal level.  Dissatisfaction with superficial interactions will drive people to the second phase of social commerce to drive a dialogue.  We call this second phase Enlightened Engagement. In the third phase, Store of the Community, shoppers give input and have the opportunity to shape products, promotions, and offers. This outside-in value chain empowers the digital shopper to own the experience and enables brand owners to better serve micro-markets. The  fourth and most mature phase of the social commerce framework – where convergence will catalyze a complete redesign of the shopping experience – is a phenomenon that we call Frictionless Commerce.  For more details, see the nineteen case studies that we outline in the report.

Why it Matters

We can see industry sub-segments (e.g. apparel retail, consumer packaged goods, financial services, travel and entertainment, etc.) moving at different rates and on different paths: each is using industry-specific social technologies and processes.  However, while each industry has different tactics, they are all moving forward through these four distinct phases to build a closer relationship and increase brand presence with shoppers through the use of new technologies.  It is a journey, not a destination; but one that we think is worth taking.  Consider these facts that we uncovered in the research:

  • More effective couponing.  Companies deploying social couponing methods got a 5% lift on paper coupons, a 25% lift on electronic coupons and a 100% lift on social coupons.  The story is higher conversion with less cost.
  • Larger market baskets.  A social commerce technology company powers both ecommerce and social commerce fan pages on Facebook.  The market basket is 15% greater for the social commerce shopping experience.
  • Direct diagloue on new product launch.  The Facebook Like button is now used by 50,000 Facebook sites.  This feature enables feedback and quick assessement for new product launch, new positioning and promotions.
  • Improved customer service.  62% of the companies surveyed for the report have active Twitter and Facebook customer service agents engaging in direct dialogue with the shopper.  For the 70% of these companies with more mature processes, this feedback is shared weekly with research and development teams.

 Yes, for many social will be defined as social media: an arm of marketing with a new way of communicating a message to a community.  The focus will be on message refinement and public relations.  They will miss the greater opportunity.  The curtain is raising for YOU to meet and better serve the digital consumer.  Join me in ushering in this new era.  Read the report and sign up in the ranks of the Social Commerce pioneers.
This is my first report at Altimeter Group.  Two new ones will follow within two months (An Update on S&OP Technologies and the Evolution of Downstream Data.) So, let me know what you think.  How did you like this report?  What helped you?  What would you like to see me change?

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