The Rise of Social Commerce

1. The Rise of Social Commerce
By: Robin D. Steele
MKTG 7546: Marketing in a Digital Environment
Professor Brey

2. Introduction
The process of buying and selling products over an electronic system has revolutionized
the way consumers interact with a product. No longer limited to brick and mortar retail stores,
shoppers can quickly search for a product on the internet and have it delivered to their front door
in a few business days. Because physical stores are no longer essential to selling products many
retailers experience fierce price competition from companies that are strictly internet based.
Because of these low cost structures internet companies are able to offer products at extremely
low prices and take market share away from these large retailers. With internet usages
continuing to increase customers are becoming more price sensitive because they know that they
have several options when it comes to purchasing a product. As internet usage increases the
usage of social media has followed, allowing people from around the world to be connected and
interact on a constant basis. The increase of social media has become integrated with electronic
commerce and created a subset known as social commerce. This type of business includes
online media that supports social interaction to assist in the buying and selling of products. As
the usage of social media increases this trend will also increase and become more prevalent in
the future.
Historical Overview
There are many different ways to describe social commerce, but a general overview
would be the “act of consumers with similar interests, passions, and needs collectively engaging
in conversations related to products and services that satisfy those interests, passions and needs”
(Cavazza 2012). The foundation of social media lies within the relationship between people and
how we interact with each other. It is a natural desire for people to want to be accepted and to
seek the approval of others. This psychological concept is known as social proof where people
tend to go along with the actions of others and seek confirmation that their way of thinking is
correct. This concept is very important in the purchase process because consumers now have
more choices than ever. The internet has opened up a brand new world of options and people
want to be sure that they are choosing the correct option. Research shows that a buyer is 71%
more likely to purchase a product if it is recommended to them by a friend. People trust people
that they know and feel comfortable with, which is why word-of-mouth marketing is the best
form available. There is no substitute for people saying good things about your product to a
friend and now that people are talking to their friends constantly through social media companies
must capitalize on these connections.
Shopping is an activity that is not just about purchasing a product, but it is a social
activity that many people use for purposes beyond a sales transaction. It is a time for friends to
get together and discuss their interests and share their passions all while browsing through retail
stores. Now that the retail store is no longer the only channel for shopping, buyers can maintain
the social aspect of shopping on the internet through social commerce. Because social media is
used primarily through mobile phones, social commerce reflects this transition through the
integration of commerce directly into mobile apps such as Foursquare. Social commerce has
also been directly integrated into social media platforms such as Facebook (f-commerce) to
allow consumers to shop from a company’s page without ever leaving their social community.
As social commerce continues to grow retailers will be challenged to find more engaging ways

3. for consumers to interact with their product and share their reviews to their social network
(Hutton 2011).
Impact of Social Commerce
The impact of social commerce can be seen through increased brand loyalty, measurable
traffic increases to a company’s site, and more engaged buyers. These outcomes are desired by
any company who wants to capitalize on the opportunities created by social commerce. The
ultimate goal is to get people talking about your product and social media is an effective means
of accomplishing this goal (Cocotas 2012).Social commerce has impacted the business world
through many different channels, but one channel that has been completely revolutionized is
facebook.
The use of social commerce through facebook (f-commerce) is a new avenue that is
becoming more popular as the use of social media continues to increase. Companies are looking
to enter this world where their customers are socializing and bring their products directly into the
site. Facebook is a great channel because it allows companies to see what their consumer’s
interests are and allows them to market directly to these interests. Companies must be careful to
not bombard customers with advertisements because that could aggravate facebook users and
create a negative perception of the company (“Facebook Commerce”). Facebook also has
geographic abilities that allow users to identify their exact location and receive advertisements
and coupons to specific stores in their area.
Case #1: Malaysia Airlines
Beyond simply using facebook for customer data purposes companies have created actual
store platforms where users can purchase products directly on facebook. These commerce pages
are usually integrated into the company’s personal facebook page and they tend to look very
similar to their online website. A host of companies are using facebook commerce including
Coca-cola, Starbucks, and Nike. Although the appearance of these social media stores may look
different they all share the common theme of selling products on facebook. A company that has
really capitalized on social commerce and expanded its features is Malaysia Airlines. Many
airlines such as Delta have caught on to the trend of allowing passengers to book flights from
within a social network.Malaysia Airlines has expanded the trend by also allowing them to
choose their seat, post their itinerary on their wall and check in directly on Facebook.All of this
is made possible through a Facebook app called MHBuddy, which embraces the concept of
social seating and allows people to interact before they actually sit together on their flight. Of
course when given the option people are going to want to sit by people they know, but for
frequent travelers this choice is not usually available. Using this app people can view the seating
chart along with people who booked the flight and choose their seat based on common interests
(“Airlines”).
I think that Malaysia Airlines did a great job of expanding this trend of social commerce
through facebook by emphasizing the “social” aspect of flying. Space is limited on aircrafts, so
people are many times forced to sit next to strangers that they share nothing in common with,
which can make for a very uncomfortable flight. By leveraging the social power of facebook
people can make these connections before the flight and begin the conversation beforehand so
that the initial meeting is not awkward. I think that the airlines could take this social aspect a

4. step further by creating an actual “seat selection questionnaire,” where every passenger would
answer a couple basic questions that would help passengers determine where they would like to
be seated. For example, a question could be “Do you prefer to sleep, read or talk on flights?”
This type of question could help people determine the type of personality they would like to be
seated next to throughout a flight. Another question could be regarding personal hobbies and
interests, that way if a person sees that they share many of the same interests as another person
on the flight they may choose to sit by them. These common interests can lead to conversation
over facebook and can help establish a relationship before the people ever even meet.
These types of connections represent the purpose of social media and how people can use
these sites to connect with someone they have never met and continue the relationship beyond
the initial meeting. This same concept can be used throughout the travel industry or really any
industry where people will be meeting up for the first time and want to meet people online before
meeting them in person. When preparing for a conference all attendees can fill out a similar
questionnaire and select who they would like to sit at a table with for the duration of the
conference. When assigning people to dorm rooms as they enter college a similar map of the
dorms is provided along with a forum for people to talk about their passions and educational
interests. From these forums people could select their roommate(s) based on personal
conversations as opposed to relying on college administrations to make these connections. As
the world becomes more connected people can establish these connections before their initial
meeting, which will lead to longer lasting relationships.
Case #2: Dell-IdeaStorm
Another example of the impact of social commerce on digital marketing is the presence
of customer forums where companies interact directly with the customers. In these forums
customers can post their ideas for products or give reviews of existing products. These forums
are based on social interaction amongst consumers and direct interaction between companies and
the consumers of their products. These types of forums have been used for several years where
sites such as Amazon allow customers to rate products and leave their reviews of products that
they purchased. This concept has been very successful because people are more likely to buy a
product if someone else suggests it, even if they are a complete stranger. Dell harnessed the
power of social interaction and created a website called IdeaStorm, which is a forum for
consumers to suggest ideas to Dell and give feedback on existing products. This social
suggestion board gives customers a voice to interact directly with the makers of the product and
provide proposals on how it can be improved. Registered users are able to add articles and then
vote on which ideas they like the best. These ideas can also be linked to user’s facebook page to
garner more votes and attract more attention to a new idea. Those ideas receiving the most votes
eventually make it to the “popular page” where they are reviewed by Dell executives for possible
implementation. This type of community is essential to increasing commerce because it makes
people feel like they are part of the production process and that their opinions are relevant (Dell).
Dell did a great job of listening to its customers and giving them a direct channel to
express their ideas and socialize with other consumers who have similar interests. Oftentimes
companies get too distant from their consumers and lose sight of what they actually want, but
this social ideation forum ensures that the connection remains strong. Dell could have taken this
concept a step further by integrating the voting process directly into facebook and twitter, instead
of limiting it to registered users on a separate website. If people are able to vote directly on

5. facebook that will attract more attention to Dell and it will be seen as a customer friendly
company. They will also be able to penetrate additional markets and gain more exposure by
being directly embedded on the largest social media sites. This type of forum would be useful in
many industries because customer feedback is important in every business. For example, a
restaurant industry can have a social forum where consumers gather to share recipes and offer
suggestions on how to improve menu items. The best items would be voted on by the
community and later added to the menu if management likes the idea. There can be a rotating
item on that menu that is specifically dedicated to this social forum and the item is named after
the creator. This would also be applicable for companies such as 3M and Ideo whose business
relies on product innovation and creating useful products for their consumers. These types of
discussion forums would be a great way to generate ideas and get customers involved in the
creative process.
Future of Social Commerce
The future of social commerce appears to be bright as the usage of social media sites
continues to increase. Customers are becoming more savvy shoppers and they are no longer
persuaded by cool advertisements from large companies. They want to know how a product will
fill their need and be sure that they are getting the best possible return for their money. With the
economy still in recovery mode from the housing crisis people are very price sensitive and not
willing to take risks on products that they are not well informed about. Studies show that 59% of
consumers research a product before making a purchase. The internet has presented an array of
options for shoppers, so there is plenty of information available that will help inform the savvy
shopper. Social media sites now present a new channel for consumers to get information and
many consider this source the most reliable. Rather than simply reading reviews from strangers
online shoppers can connect with people they know personally and get their feedback on a
product. This type of social proof has deep psychological meaning for people who need the
reassurance that they are making a good purchase. Those in the digital marketing industry are
confident that this trend will continue to increase because it was created on the fundamental
concept of socialization (Anderson 2011).
Interview with Media Relations Specialist
During his short-time in the digital marketing industry Christian Ross has seen the
growth of social commerce in many different industries. As the youngest member of his team he
is charged with the task of staying knowledgeable on current trends and seeing how they can be
integrated into his organization. Because he works for a non-profit school district there is no
direct link to the commerce aspect, but he does see great opportunities to build brand awareness.
“I think social commerce is just the natural next step for people to do business and interact with
customers. Obviously this would not be possible without social media sites, but as they continue
to grow businesses are forced to take notice and find ways to capitalize on this growth” (Ross).
It is clear that social media sites have changed the social interaction landscape by presenting a
new and convenient medium of communication. Social commerce will have this same impact on
business landscape as companies revalue their marketing strategies and look to create an online
presence.

6. Is Social Commerce Business Worthy?
The concept of purchasing products on the internet (e-commerce) has been growing for
years now and will continue to grow as the internet becomes more widespread. Currently, 14%
of all transactions occur online, so it is vital that a company have an online store available,
otherwise they are likely to miss out on a significant number of sales. Companies had to adjust
their business model to account for this emergence of e-commerce and now they may need to
adjust again to account for the presence of social commerce. Many companies are creating new
positions that deal directly with social media and how a company can benefit from its use.
Media Relations Specialist Ross believes that this is a great opportunity for young marketers to
enter the industry because this is a new field that directly targets the younger audience. “In
college, I was approached by so many different small businesses that wanted to have a presence
on social media, but just didn’t know how to start. This is a way for young professionals to enter
the industry because there is a need for this type of knowledge” (Ross). Companies are
reconfiguring their marketing budget to create these new positions and to financially support
these new channels. The business landscape is constantly evolving and this is certainly a trend
that will affect how companies market to their customers.
Because social commerce is such a widespread trend it affects any industry that sells
products online. Any retailer that has an online presence is constantly looking for ways to drive
traffic to their site and this is another tool to support that. Social commerce is mostly viewed as
the full integration of commerce into social media sites, but if a company can create buzz about
its product by getting people to talk about it and exchange information that can be just as
affective. The target consumer would be those who use social media sites, which is constantly
increasing. The idea is to connect to these consumers on a personal level and learn how you can
affectively market your product in way that is appealing to them. If they like your product, the
natural concept is to share it with their friend which is residual benefit that a company receives.
These types ofoutcomes are difficult to measure, but they are vital to building brand awareness
online. People will begin to trust your brand the more positive things they hear about it and this
type of advertising is invaluable (Hutton 2011).
Social commerce will continue to grow as more people become more comfortable with
inputting their personal financial information on these sites. When talking to Ross about where
he sees social commerce in the future, he was very confident that it will have a major impact. “I
think as companies see increased revenue coming from these social stores we will see a lot more
companies following their lead. It’s only a matter of time before Facebook becomes the Wal-
Mart of the internet because they are changing the way we do business” (Ross). In order to
maintain this competitive advantage social commerce must be properly integrated into an overall
multi-channel strategy. Although this trend is gaining momentum it is important that a company
not disregards its traditional marketing channels. These are still effective ways of reaching
consumers and must be continuously supported by the organization.
As companies continue to mine customer data for insight into how they can better market
their products, they must not forget the importance of the overall customer experience. Shopping
is a social activity, so it is about more than discovering an individual’s personal interests.
Companies must leverage consumer’s social connections to attract a network of friends who
willbecome brand ambassadors for their product. For now it seems that social commerce is a
business worthy trend that will only become bigger in the future.

7. Works Cited
“Airlines Use Social Commerce to Promote Social Seating.”Social Commerce Today. Jan. 2012.
<http://socialcommercetoday.com/airlines-use-social-commerce-to-promote-social-
seating-infographic/>
Anderson, Matt. et al. “Turning like to Buy, Social Media Emerges as a Commerce Channel.
Booz &Co. Nov. 2011. <http://www.booz.com/media/uploads/BaC-
Turning_Like_to_Buy.pdf>
Cavazza, Fred. “The Six Pillars of Social Commerce.”Forbes Magazine. Feb. 2012
<http://www.forbes.com/sites/fredcavazza/2012/02/01/the-six-pillars-of-social-
commerce/>
Cocotas, Alex; Blodget, H. “The Rise of Social Commece.”Business Insider. Feb. 2012
www.businessinsider.com/the-rise-of-social-commerce-deck-2012-2
“Facebook Commerce Holds Promise for Retailers.” eMarketer-Digital Intelligence. Jan. 20
2012.<http://www.emarketer.com/Article.aspx?R=1008787&ecid=a6506033675d47f881
651943c21c5ed4>
Hutton, Graeme; Fosdick, Maggie. “The globalization of social media: consumer relationships
With brands evolve in the digital space.” Academic One File.Journal of Advertising
Research. Dec. 1, 2011. Vol. 51, No. 4.
Ross, Christian. (2012, Feb. 7). Telephone Interview.

8. Interviewee bio: Christian Ross, Media Relations Specialist
Christian Ross is a graduate of the University of Tennessee - Knoxville and current Media
Relations Specialist for Memphis City Schools.
During his tenure at UTK, Christian majored in Journalism and Electronic Media with a
concentration in News Writing. Though he is a journalist at heart, he found himself drawn to the
field of marketing and public relations. It is his love for the community that led him to return the
very school system that nurtured him through high school.
"I just want to be able to shed light on the great things that are going in MCS," Ross said. "There
are so many things that people simply miss out because often times the news focuses on the
negativity in the city." As the media relations specialist, Christian is responsible for the creation
and maintenance of all social media accounts for the school district. He role includes
researching this data to find innovative ways to market MCS events and projects to the
community.
Before Ross returned from Knoxville, he served as an advertising intern with E.W. Scripps,
social marketing representative at UTK and worked with DestinationImagiNation Global
Conference. His long-term career goals includeworking as consultant with either the Boston
Consulting Group or opening his own agency.