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Think Facebook Drives Sales? Think Again.

Feb 20, 2012
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In my previous post, I referenced the fact that Facebook qualifies as one of the “Big Four” in ecommerce, according to a report by research firm Forrester. Despite this designation, an interesting reality has emerged for some major ecommerce players: Facebook leaves much to be desired when it comes to driving ecommerce sales.

A Bloomberg story that appeared February 17 indicates retailers including GameStop, Gap, J.C. Penney, and Nordstrom opened storefronts on Facebook only to shutter them not long afterwards. GameStop opened its Facebook store last April and closed it six months later. Gap opened and closed a store in 2011. J.C. Penney launched a Facebook “shop” tab in 2010 and removed it at the end of last year. Nordstrom decided to broaden its social media focus, discontinuing its Facebook selling efforts.

Plenty of Fans… But Not Many Buyers

According to Bloomberg, “A year ago, investors hailed so-called F-commerce as the next big thing, speculating that the company had potential to threaten Amazon.com Inc. and PayPal Inc.”

Yet today, it seems, retailers are fleeing instead of flocking to “F-commerce.” Why? The answer is pretty simple: ROI.

Ashley Sheetz, VP of marketing and strategy for GameStop, told Bloomberg, “We just didn’t get the return on investment we needed from the Facebook market, so we shut it down pretty quickly. For us, it’s been a way we communicate with customers on deals, not a place to sell.” Despite gaining over 3 million customer/Facebook fans, Sheetz said she thought there was little incentive for them to shop via Facebook when the company’s own website is a convenient place to buy merchandise. Liz Nunan, a spokeswoman for Gap, said essentially the same thing, indicating the company realized that customers “preferred shopping on its own sites.”

Sucharita Mulpuru, who authored the “Big Four” report for Forrester, told Bloomberg, “There was a lot of anticipation that Facebook would turn into a new destination, a store, a place where people would shop. But it was like trying to sell stuff to people while they’re hanging out with their friends at the bar.”

Now public, Facebook needs to fuel its growth, part of which is related to its use by companies who sell online. Facebook’s revenues went up 55 percent in the fourth quarter of last year, so companies must be confident that advertising on Facebook is a smart bet. But Krista Garcia, an analyst for research firm eMarketer, told Bloomberg she thinks Facebook will use ecommerce “more as a way of getting users to stay longer than as a way to boost revenue.”

Social Ecommerce Is Not Quite There Yet

What should marketers trying to sell products via Facebook do? Clearly, they need a strong presence on Facebook. Marketers should recognize by now that Facebook, like all social media, is intended for building relationships. Listening to and corresponding with fans is at the core of a successful social media strategy.

Should marketers invest in advertising on Facebook? That depends on the objective. Those marketers who advertise on Facebook can keep their brands highly visible and in front of a lot of fans. They also could use Facebook to generate leads. But if the experiences of retailers like GameStop, Gap, J.C. Penny, and Nordstrom are any indication, marketers might find Facebook better at driving traffic to existing store websites rather than to Facebook stores.

At this stage, it may be that social media users are just that – users, and maybe prospects, but not necessarily buyers, at least not yet.

Still, F-commerce is evolving, and selling directly through Facebook may become a more attractive option in the future. The consulting firm Booz & Co. issued a paper last year suggesting that “social commerce” would grow from $5 billion worldwide in 2011 to $30 billion by 2015. About $14 billion of that growth would come from the U.S., said Booz, and Facebook would be the major contributor of those sales.

In its analysis, Booz saw the future of social commerce this way:

“Lead generation—the ubiquitous “likes” of Facebook—will not be the most important activity for long, however. The next phase will go beyond mere communication and influencing. Consumers will transact commerce inside social networks—selecting products, adding their selections to shopping carts, and completing purchases through payment with credit cards and points. As they do so, the era of social commerce will commence in earnest.”

We can only hope that’s true.

 

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

Filed under: eCommerce + Social Media
  • http://www.seojournalist.com/ SEO Journalist

    Thanks for the heads up about Facebook’s marketing downfall and how its starting to fade in terms of advertiser interest.

  • http://allaboutfocus.com/ Patrick Allmond

    For people to get the full shopping experience they are going to have to interact with the platform that is built for shopping. That is not Facebook. F-Commerce assumes people want to go from random picture browsing right into shopping. When people are F-stalking they are probably not in a shopping mood. 

  • http://www.printrunner.com/Sticker-Printing.aspx CustomStickerPrintingServices

    I guess Facebook is more for brand awareness and PR rather than directly selling the product. It’s effective for creating buzz about a company or product. 

  • Justin Reid

    Facebook should be more viewed as a media channel rather than a conversion. Its like saying if there was a “buy now” button on an interactive TV, all those Brands running TV campaigns would they then stop them if people didn’t “buy instantly” – course not. Social media is about brand awareness and advocacy leading fans down the purchasing funnel to increase their propensity to buy. Because people don’t buy instantly doesn’t mean FB can’t convert fans to purchasers further down the buying cycle. 

  • http://websoulsurfer.com websoulsurfer

    If you followed how they approached social media you would find that they were in “broadcast” mode, not engagement mode, and that is why their efforts failed.

    Social media is just that, social, and you have to engage with a human in a two way conversation to be successful. Not one of those companies effectively engaged their followers/fans. They talked AT them with ads and promotions, instead of creating conversations about their company or products.

    The failure was on the part of the PR/Advertising forms hired by Nordstroms, Game Stop, GAP and J.C.Penney to understand social media; NOT on Facebook.

    It also seems that since you give advice on marketing and driving revenue that you need to delve further into social media and determine why & how so many brands ARE successfully driving their sales and customer service by utilizing social media effectively. 

    • Bdsilv

      Thanks for the insightful comment. You make a good point about the fact that the blame for lack of sales could go both ways and not just be Facebook’s failing. If the brand marketer is inept at using Facebook effectively as a social media tool, then it will have a harder time converting its fans to leads and ultimately to sales. But I do think Facebook may have oversold its social commerce strength, too. 

  • http://lucio8474.edublogs.org/2011/09/21/the-advertising-and-marketing-firms-and-advertising-businesses-in-charlotte-making-a-new-id-for-themselves/ Charlotte marketing firm

    Well it’s interesting to read about facebook’s weaknesses after having heard so much about all its advantages!

  • http://www.spacecity.co.uk/ TV Commercial Production

    I like the analogy of Facebook ‘shops’ being like trying to sell someone something when they’re out at a bar. I’d definitely rather shop on a company’s website than on their Facebook page – that’s more the kind of place I’d go to see if they were running any offers, or to find out some more about the brand’s events. Although, ads are different – lots of people see an ad that catches their eye and click on it, it’s not the same as actually having a shopping basket on the Facebook site.

  • http://allroundnews.com/ Sahil

    Facebook is not recommended for direct selling is a like a platform, where you can launch your new products and highlight them to ur stipulated audience. It is just like a road side hoarding where u make people aware about your products services.

  • http://www.brickmarketing.com/ Nick Stamoulis

    Privacy concerns could play a role in why Facebook selling hasn’t taken off or isn’t as successful as predicted.  Even though people continue to use Facebook, many users are still wary about the privacy policies and aren’t 100% sure what they are sharing.  For that reason, they are just more comfortable clicking over to purchase from the actual store site.  

  • http://charter-communications-services.weebly.com/ Dawson_Rita

     ”Plenty of Fans… But Not Many Buyers” – Well said. When it comes to social media sales, you can get a maximum number of visits, but the visits to sales conversion rate is very low. To increase the conversion rate, the message must and should have a strong call to action.

    “For us, it’s been a way we communicate with customers on deals, not a place to sell.” by Ashley Sheetz, that’s really good as through social media we get to know what the consumers exactly need from the company.