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The Social Web's Meager Promise for Retail Marketing

The Social Web's Meager Promise for Retail Marketing

Online retailers looking to push sales through popular social networking sites like MySpace and Facebook shouldn't set their hopes very high. If retailers want to take advantage of the social aspects of the Web, they should do so at their own Internet outlets, according to a recent report. Niche retailers stand to gain the most from social and community sites.

By John P. Mello Jr.
07/05/07 4:00 AM PT

Social and community networks may be great hangouts for Web surfers who shop but not so great for retailers looking for virtual "ka-chings."

That was one of the findings in a report released Saturday by JupiterResearch of New York, based on a survey conducted in March of more than 2,000 online consumers.

"The majority of online shoppers who have used social and community sites while researching and purchasing do not believe that such sites affected their purchase decisions, and few online shoppers said they spend incrementally more due to their use of social and community sites," states the report.

"Thus," the report continues, "retailers should mitigate their expectations of influence and sales driven by exposure on social and community sites."

While advice from friends has great influence on a shopper's buying decisions, the report notes, a "friend" is not necessarily any unknown person who happens to post on their MySpace page about some jeans they just bought.

For that reason, it asserts, "the incremental effect of those individuals who actively contribute to social and community sites may be more limited for direct retail sales than it is for overall branding and awareness building."

Don't Believe the Hype

Retailers need to avoid being sucked into the buzz surrounding sites like MySpace and YouTube, according to Patty Freeman Evans, the lead analyst for the report.

"Retailer should take a pause from all the hype they've heard about social networking and social media because those sites are not something that's going to immediately drive incremental sales for them," she told the E-Commerce Times.

"The social and community Web sites that are out there are nice experiences, but not the main places where people are looking to make purchase decisions," Evans added.

If retailers want to take advantage of the social aspects of the Web, they should do so at their own Internet outlets, she suggested.

"They should present user-generated content in the form of product reviews on their Web sites," she observed. "That's something that is of great value, but it's most valuable when it's right on that retailer's Web site."

Niche Retailers Gain Most

Niche retailers stand to gain the most from social and community sites, she maintained. A site where gardeners congregate may present fruitful sales opportunities for a company like Burpee, she averred, but not for Macy's, Target or Wal-Mart.

"There's limited niche appeal, but within those small niches, good opportunity over time," Evans said. "We don't think this is going to be the new Google anytime soon in terms of driving retail traffic."

Traffic volumes from social and community sites may eventually reach the levels of comparison shopping sites, which account for about 3 percent of all traffic to retailers, she noted. By contrast, Google accounts for 15 percent of all traffic to retailers.

'Sweet Spot'

Niche retailers benefit most from gab-and-gather sites, agreed David Galbraith, founder of Wists.com, a Web site that combines social networking with shopping.

"The sweet spot for social Web sites is the niche area," he told the E-Commerce Times.

That's not to say that social sites lack potential for bigger things in the future, asserted Galbraith.

"You build communities and as you get bigger and bigger you can offer more to bigger and bigger brands," he observed. "But you have to start small and grow your site. It's not something that works by throwing money at it."

Soft Sell

Meanwhile, niche retailers have begun testing the social Web as a sales driver for their wares.

For example, Ice.com, an online-only jeweler based in Montreal, Canada, has experimented with video promotions on YouTube.

"We are trying to use viral videos to expand our brand," Pinny Gniwisch, founder and executive vice president for marketing for Ice.com, told the E-Commerce Times.

The company had to be careful when pitching itself at the community site, he noted.

"We had to use a very soft pitch," he said. "People on YouTube don't appreciate it when brands get involved in their entertainment."

The company intends to do three or four more videos before assessing YouTube as a viable sales channel, Gniwisch said, but it's cheery with the results it has received so far from its efforts.

"When you talk about 70,000 people interacting with your brand, at this stage, we're happy with that," he observed.


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