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2011

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Top 10 Merken 2011


1 Coca-Cola71,861 ($m)
2 IBM69,905 ($m)
3 Microsoft59,087 ($m)
4 Google55,317 ($m)
5 GE42,808 ($m)
6 McDonald's35,593 ($m)
7 Intel35,217 ($m)
8 Apple33,492 ($m)
9 Disney29,018 ($m)
10 HP28,479 ($m)
Bekijk de Top 100 Merken

Press & Media

Lindsay Beltzer
Senior Associate,
Global Marketing & Communications
+1 212 798-7786


Social Commerce: Winning the Hearts and Minds of Customers

By Soyoung Lee


Social Commerce

Social commerce companies like Groupon have been stealing much of the spotlight globally. Using social networking sites like Facebook and Twitter, Groupon made a splash, with an astonishing 2,300 percent sales growth since its launch in November 2008 thanks to its innovative business model that changed the paradigm of the e-commerce.

Social commerce sites use a group buy model to offer a minimum quantity of products or services at discount prices during a certain period of time. More buyers mean lower prices in this model, so consumers voluntarily work as salespeople and promote items to their friends using social networking services. This win-win strategy—where sellers enjoy lower marketing costs and consumers purchase at lower prices—differentiates social commerce from conventional online business models.

Groupon currently offers services in around 500 locations in 44 countries. What factors drove the social commerce business model to emerge as the dark horse of the e-commerce market just three years after its launch?

Economic recession

The steep growth of the social commerce market is not just a trend, but a consequence of the era. Household consumption around the world has dwindled in the past few years following the global financial crisis in 2008, putting pressure on small merchants. The wild popularity of discount coupons offered by social commerce companies increased consumption and helped small local merchants connect to customers. The rapid growth of social commerce was not a one-time event but a natural consequence of the times.

The undeniable attraction of huge discount prices

In a difficult economy, sensational claims like “50 percent discount” or “blowout sale” made an immediate connection with customers. Since group purchasing is likely to offer lower prices, the fun factor of setting up common interest groups among friends increased consumers’ demand for the business model. Now, many social networking service users start their day by logging onto the service, checking for new products, and promoting them to their friends.

Moreover, social commerce has evolved quickly in terms of product lineup and marketing. For capricious customers who easily get bored, the unique and diverse selection keeps them coming back. In the Korean market, for example, one can buy virtually anything, including discount coupons for restaurants, tickets for water amusement parks or musicals, travel packages, massage services, cosmetics, and garments. Even apartments and half price coupons for used cars are sold on social commerce sites. The varied product lineup offers numerous opportunities for growth.

Convenience through technology partnerships

More than anything, convenience is at the heart of the success of social commerce. Because one can purchase coupons anytime, anywhere, with their smartphone, there is no inconvenience of having to make a phone call, print the coupon, and hand it in. Recently, real-time location-based coupon sales services, that provide coupons that consumers can use immediately in their current location have become popular. These services exploit the merits of fast and convenient smartphones, allowing users to quickly see information related to products nearby and freely purchase as well as cancel purchase, regardless of time or place. Social commerce is thus evolving to be smarter and more convenient to win even more consumers.

In August, Living Social of the United States acquired Ticket Monster to facilitate its advancement into the Asian market. As the social commerce expands, investment deals as well as mergers and acquisitions among the major leaguers of the industry are increasing, meaning the birth of a gigantic social commerce market is likely. As these conglomerates, with help from portals like Google, are reaching further into the market, competition is expected to grow even fiercer in the social commerce space. In fact, it has recently experienced cutthroat competition with regards to costly promotions, such as advertisements on TV, buses, subways and Internet portals. Tough competition suggests that instead of relying on short-term marketing activities, social commerce businesses should continue developing new models that could serve as their future growth engine for the long-term. Additionally, they should make every effort to ensure they are differentiated from competitors.

TRUST IS KEY

By definition, trust between diverse parties, such as consumers, sellers, and intermediaries, is a prerequisite for effective social commerce. Companies that focus only on discount prices and side effects, have seen their consumer complaints about refund policies or after-sales services increase. Currently, many social commerce companies do not appear to be a very trustworthy intermediary or platform as they can’t guarantee that the consumer will always gain through the discount, nor are they fully prepared for various consumer complaints and losses.

Social commerce companies should follow the example of a company like Zappos, the online shoe seller that has grown to over US $1 billion annual sales ten years after its launch. A Zappos customer called to say that he wanted to return the shoes he had bought for his mother who had since passed away. Though it was well past the refund period, Zappos sent a card and flowers to the customer to console him and issued the refund instead of sticking to its policy. It has continually demonstrated its philosophy of wowing customers through small but attentive details related to customer service. Though Zappos has a different business model than social commerce, the social commerce industry can still learn from the leading brand. A better attention to service might alleviate the social commerce industry’s frequent conflicts with consumers.

The social commerce market is undeniably going through a growth period. However, adapting quickly to a more competitive landscape and winning the trust of consumers will be key to continued growth. Social commerce companies will need to position themselves apart from competitors, whether it is through location-based services or the next up-and-coming trend. Just like Facebook, which became synonymous with the “social network,” social commerce brands need to begin focusing on a clear brand message that reveals their true value to consumers. To create true long-term growth, they must focus on building trust with consumers through active communication and a strong brand identity.


ABOUT SOYOUNG LEE

Soyoung Lee is a strategy consultant for Interbrand Seoul. She began her career at Interbrand as verbal identity consultant and has since moved to strategy, where she participates in a projects convering brand identity, brand architecture, brand endorsement, brand royalty rate assessment, and brand valuation.