Article

Opinion: Forget about selling on Facebook for now

One expert suggests that the market for retailers on the social network is actually miniscule.

April 4, 2011

In January, Booz & Company produced a report suggesting that stores on Facebook were set for explosive growth—a 56 percent CAGR over the next five years, which some commentators have hyped as 600 percent growth. In 2015, the report says, the market for products sold on social network sites will be worth $30 billion, of which $14 billion will be in the United States.

According to some commentators, this is a "massive opportunity" that ecommerce companies should jump on and get the "first mover advantage."

Hmm. Many of the ecommerce heads who I’ve talked to that have Facebook stores are somewhat more cautious, referring to their stores as "an interesting experiment" or "we’ve learned a lot and so has our Facebook shopping cart vendor." When asked about sales volumes, they typically report low single-digit sales.

All of this says to me that these are very early days, and while early adopters may want to plunge into the bleeding edge, it’s frankly not right for most ecommerce companies. In fact, I’ll go further and suggest staying away for 2011, with a few exceptions.

Here’s why:

A $14 billion U.S. market may sound really big, but I wanted to see how big it is relative to forecast growth for traditional ecommerce. It’s miniscule.

By combining the data from Booz with the U.S. Commerce Dept. and mobile commerce forecasts from CODA, for the first time we can see where commerce on social networks sits relative to overall online sales. As a percentage, in 2015, after that 600 percent growth, commerce on social networks will represent only 4 percent of all online commerce.

Mobile commerce is forecasted to be three times bigger by 2015.

Here’s the data, published for the first time:

Of course, all forecasts are wrong: They’re either too high or too low. But, for mainstream ecommerce, it just doesn’t make a whole ton of sense right now to duplicate the ecommerce site, particularly when sales using the Facebook channel are miniscule.

The best opportunities for social commerce on Facebook are undoubtedly where there is some natural social element to the purchase; so entertainment, travel, music, gaming, etc. all fit the bill. These types of businesses could gain significantly from having a commerce site on Facebook or other social networks. If you’re in these businesses, you’re probably already looking at it. If not, you should be. But for the majority of ecommerce, it’s not for you in 2011.

Here’s why: Ignoring the immaturity of the platforms, the really big problem is that customers don’t want it.

Only 27 percent of Facebook fans say they will shop on Facebook stores. Seventy-three percent say they won’t, citing security and privacy fears. If Facebook has all of my shopping data, who are they going to open that up to?

Perhaps more damning is that most consumers simply don’t think of Facebook as a place to go and shop.

The bigger short-term opportunity for ecommerce is not to build a Facebook store, but put the effort instead into integrating Facebook’s social features into the ecommerce site. In 2010 most ecommerce sites implemented Facebook Like; next on the priority list is Facebook Login (formerly Facebook Connect) which is quickly gaining momentum. Both Amazon and Yahoo are in the process of adding Facebook Login and a host of other social features to their sites.

The main reason for implementing Facebook Login is that three times more visitors would login to an ecommerce site than would register. It will help you reduce friction for your customers, capture email addresses and enrich what you already know about your visitors.

A recent study by Gigya suggested that more than half of online retailers, who responded to an August 2010 survey, had either implemented social sign-in (such as Facebook Login) or planned to add it in the near future.

In the short term, ecommerce teams have the most to gain by integrating Facebook social plugins to build their communities, reduce friction and encourage social links and sharing.

Charles Nicholls is founder and chief strategy officer for the consultancy SeeWhy.