E-commerce is evolving. Instead of shoppers simply sitting at their desktops, putting items into a virtual shopping basket, retailers are trying to account for the changing shape of the web and how shoppers access it, whether through their phones, via social media or by some other method. Throw in daily deals and flash sales and there is even more scope for innovation. StrategyEye examines the key trends emerging as retailers navigate the changing market.
FACEBOOK COMMERCE IN QUESTION
When Levi's opened a Facebook-powered social store that gave shoppers insight into what jeans their friends were buying, it was heralded as the blueprint of Facebook shopping. But two years on, such features are not common even among larger brands, and some operating standard Facebook store fronts are beginning to shut them down due to lack of sales. That Gap, Gamestop and other major retailers are taking their physical products off Facebook make forecasts such as Booz & Co.'s prediction that social commerce would bring in USD30 billion in revenue by 2015 look optimistic. From a marketer's perspective, there is still too little evidence that Facebook-commerce is an effective sales driver, and younger startups are showing exactly how it can be done.
SOCIAL SHOPPING EVOLVES
Shopping on Facebook itself may be showing cracks, essentially tacking on social elements to the standard online shopping experience, but third-party startups such as Wrapp are now working out how to leverage Facebook's data more neatly. The firm is a collision of social and mobile, allowing users to send digital gift vouchers to friends on the basis of birthday data stored on Facebook. Groups of Facebook friends can then top up digital gift cards through the social network with their own financial contributions. Early evidence shows that some elements of the service are still clumsy, but also that retailers in Wrapp's home market of Sweden saw, on average, a lift in sales more than four times the original value of the gift cards given. Wrapp is hardly ground breaking, but its service marks new hope in a market that retailers are struggling to navigate alone.
DAILY DEALS MARKET CONTINUES TO SHRINK
Where reliable forecasts for social commerce are thin on the ground, research houses initially fell over themselves to value the daily deals market from when Groupon burst onto the scene until it made its IPO last year. BIA/Kelsey predicted an annual growth rate in the deals market of almost 50% between 2011 and 2015, with revenues topping USD6.1 billion. But the market is not looking anywhere near as steady as first thought, with both Groupon and LivingSocial adding to their losses in recent quarterly results. Forrester, meanwhile, persists in a glum outlook for the wider sector, predicting "deal fatigue" while Deloitte sees the market shrinking to a "small niche" this year. These more cautious forecasts are borne out by the closure of some 800 deals sites in the latter half of 2011, indicating that deals startups are attracting continued investor attention and hype, but little success.
FLASH SALES PROVING ROBUST
Heady market valuations for the flash sales sector should sound a warning bell. Business Insider predicts it will be worth USD6 billion by 2015, almost exactly the same as predictions for the value of the daily deals market, which are looking increasingly unlikely. Alongside this, some flash sales sites are feeling the heat, with the likes of Gilt Groupe laying off reams of staff after expanding into new areas. But those which focus on narrower sections of the market are seeing greater success. Design-focused shopping site Fab recently hit 3 million users and is on track to make USD100 million in revenue this year, despite only launching last summer. This still leaves it behind its daily deals competitors on both counts but, crucially, Fab is seeing repeat business with 25,000 customers making five or more purchases. Although the market will likely see further shake-outs, as firms make errors in their expansion, sustained growth and loyalty demonstrated by the likes of Fab indicate that it may be yet more robust than the deals sector.
MOBILE COMMERCE ON TRACK
Google is boldly predicting that mobile shopping will hit "critical mass" this year, and rising smartphone and tablet ownership indicate that the sector will be one of guaranteed growth in 2012. But market forecasts remain unreliable. Shoppercentric confidently states that a fifth of UK shoppers are already making purchases on their phone, contradicting eBay's stats which pin the figure at just 9%. eBay is right to be cautious at this stage, with small mobile screen sizes and consumer trust still barriers in the coming year. For merchants, mobile shopping is also likely to cannibalise desktop revenues, with consumers simply transferring their buying habits to different screens, meaning that retailers may see mobile alter the digital make-up of their revenues, rather than inflate them.