This document discusses how social media is emerging as a new commerce channel. It notes that some companies have already started using social networks like Facebook and Twitter to engage customers and generate awareness of their brands. However, social commerce is still in its early stages. The document predicts that over the next five years, as companies find new ways to integrate e-commerce capabilities into social media, the market for social commerce will grow significantly from $5 billion currently to $30 billion globally by 2015. Social media will have the biggest impact in driving consideration, conversion and loyalty among customers. The document provides some early examples of companies experimenting with social commerce.

1. Perspective Matt Anderson
Joe Sims
Jerell Price
Jennifer Brusa
Turning “Like” to “Buy”
Social Media Emerges
as a Commerce Channel

2. Contact Information
Berlin Düsseldorf New York
Dr. Florian Gröne Roman Friedrich Fabian Seelbach
Senior Associate Partner Senior Associate
+49-30-88705-844 +49-211-3890-165 +1-212-551-6073
florian.groene@booz.com roman.friedrich@booz.com fabian.seelbach@booz.com
Chicago Frankfurt San Francisco
Jennifer Brusa Olaf Acker Jerell Price
Associate Partner Principal
+1-312-578-4550 +49-69-97167-453 +1-415-263-3764
jennifer.brusa@booz.com olaf.acker@booz.com jerell.price@booz.com
Dallas Hong Kong São Paulo
Joe Sims Edward Tse Fernando Fernandes
Partner Senior Partner Partner
+1-214-712-6636 +852-3650-6100 +55-11-5501-6222
joe.sims@booz.com edward.tse@booz.com fernando.fernandes@booz.com
Dubai Houston Vienna
Karim Sabbagh Matt Anderson Klaus Hölbling
Partner Partner Partner
+971-4-390-0260 +1-713-650-4142 +43-1-518-22-907
karim.sabbagh@booz.com matt.anderson@booz.com klaus.hoelbling@booz.com
Booz & Company

3. EXECUTIVE As consumers around the globe spend more time on social
media of all kinds, it is inevitable that some of their posts and
SUMMARY
comments relate to what they are going to do at the mall and
what products they like. Many consumer-oriented companies
have already responded to this shift by setting up Facebook
fan pages or Twitter feeds. These can be great ways of engag-
ing with and influencing customers, especially since the
individuals on a social networking site are usually connected
to other individuals whom they trust and respect. So, in the
best case, a company that has something appealing to sell can,
through an initiative involving social media, provide an impe-
tus far superior to traditional advertising—recommendations
from the most influential people of all, the prospective buyer’s
friends and family.
But company influence through social from the unique characteristics of
groups and traditional marketing social media, including the oppor-
models is stopping well short of the tunity to get quick feedback from
emerging opportunity. For many multiple friends and family members.
customer segments, shopping in
the physical world has always been The market for social commerce has
social: I can go to the store with been embryonic to date, but that will
you and put an item in your shop- change over the next five years as
ping basket, saying “This is perfect companies race to establish stores,
for you.” Now, some companies are pushing up social commerce revenues
using social media in a similar way: as sixfold, to US$30 billion globally.
a place where they can transact busi- As this growth surge happens, social
ness with their customers and where commerce will take its place alongside
customers can shop with each other. stores, telesales, and the more tradi-
E-commerce is coming of age. These tional Web to emerge as a significant
trendsetting companies are focused sales channel in its own right.
on products and services that benefit
Booz & Company 1

4. THE IMPACT OF Social media has revolutionized
the way people communicate and
companies, it is also handing them
an opportunity. Retail, consumer
SOCIAL MEDIA maintain relationships. Globally, electronics, and media companies
ON CONSUMER Internet users now spend more than
four and a half hours per week on
are among the many types of
organizations that have followed
BEHAVIOR social networking sites, more time consumers into the social arena,
than they spend on e-mail.1 There is creating Facebook fan pages, sending
a public quality to how communica- microblog messages, and building
tion happens on social networks— communities. A 2010 presentation
people are, to use the Facebook by Shop.org said that 68 percent
analogy, sharing their thoughts on of North American business-to-
“a wall” for others to see. As more consumer (B2C) companies have
and more of what people think and acquired at least some customers
do ends up getting communicated on through Facebook. 3
these new-age bulletin boards, it is
inevitable that social networks will Lead generation—the ubiquitous
start to affect what consumers buy “likes” of Facebook—will not be the
and how they shop. In a way that has most important activity for long,
never before been true, consumers however. The next phase will go
are determining which products and beyond mere communication and
services succeed and are shaping the influencing. Consumers will transact
messaging. Underlining this point, commerce inside social networks—
Altimeter Group says there is now selecting products, adding their
a fifth “P”—people—to add to the selections to shopping carts, and
traditional four “Ps” of market- completing purchases through pay-
ing (product, price, placement, and ment with credit cards and points.
promotion). 2 As they do so, the era of social com-
merce will commence in earnest.
If the new medium of social
networks is creating challenges for
Consumers will transact commerce—
from selecting products to completing
purchases through payment with
credit cards and points—inside social
networks.
2 Booz & Company

5. EARLY directly into its Facebook fan page,
allowing consumers to make quick
The innovations in social commerce
are happening globally. Hyves, the
DEVELOPMENTS purchases without having to leave most popular social networking site
IN SOCIAL Facebook. The company has also
used Facebook as a component of
in the Netherlands, has developed a
payment system that allows users to
COMMERCE its Mother’s Day campaign and transfer as much as €150 (US$201)
has plans to integrate with other to other users to pay for goods
Facebook features such as birthday available within the Hyves payment
calendars and group gifting. It isn’t system. The Hyves site, which has
hard to imagine a company like more than 10 million accounts,
1-800-Flowers taking advantage of has also created a consumer-to-
Companies that are pursuing social other social networking features, consumer marketplace called Supply
commerce regard it as a distinct such as a person’s likes and dislikes & Demand that is analogous to
channel underpinned by a significant about colors, to help gift givers Craigslist, allowing members to post
new aspect of consumer behavior. decide which bouquets to send. items for sale.
This new channel represents the
merger of e-commerce and social Facebook isn’t the only social How ready are consumers to buy
media, as transactions are actually network on which commerce is products through social media? A
performed within the platform rather happening. Many companies, for 2010 survey by Booz & Company
than at the retailer’s e-commerce instance, have used Twitter to sell of consumers who spend at least one
site. While social commerce is still their products. As of late 2009, Dell hour a month on social networking
nascent, there are some notable Outlet had already sold $6.5 million sites and who have bought at least
examples of companies that are in products through its Twitter feed; 4 one product online in the last year
innovating in this area. airlines such as AirTran Airways provides some insight. Twenty-
have also used Twitter to sell seven percent of respondents said
For instance, 1-800-Flowers, a floral discounted tickets. Since November they would be willing to purchase
retailer that has ridden a history of 2010, users of Apple’s Ping physical goods through social
channel innovation to a national recommender have been using tweets networking sites. Moreover, 10
presence with more than $700 (Twitter’s 140-character posts) percent said their buying through
million in revenue, now has a fully to send song previews and iTunes social networking sites will be
functioning Facebook store. It has purchase links to their followers. 5 incremental to other buying they
embedded its e-commerce platform do—that is, they will end up buying
Booz & Company 3

6. more physical goods overall. (The as companies find ways to embed (see Exhibit 1). This estimate is
73 percent who said they would their e-commerce engines within only for hard goods—electronics,
not purchase goods through social social media, the market for social apparel, movie tickets, and the like.
networking sites largely cited commerce will skyrocket, helped Services are equally promising for
concerns related to security and in part by new models for buying social commerce—the online storage
privacy, two areas that many big and by the availability of products company seeking new customers,
social networking sites are already developed specifically for social the wireless company offering
working to improve.) networking sites. an upgrade, the cable television
company providing downloads or
These emerging attitudes make it By 2015, the dollar volume of streamed versions of old episodes.
unlikely that social commerce—a goods sold through social media Companies like these will have
cousin, after all, of the more should rise sixfold, to $30 billion multibillion-dollar opportunities too.
familiar e-commerce—will face from $5 billion this year, according
hurdles related to its newness. And to Booz & Company estimates
Exhibit 1
Booz & Company Estimate of Social Commerce Market Size (2010-2015; in US$ Billions)
$30
+56% $14 U.S.
$20
$9
$14
$9 $5
$16 Rest of
$5 $3 the World
$12
$1 $8
$6
$4
2010 2011 2012 2013 2014 2015
Note: Numbers might not add up because of rounding.
Source: Forrester Research; GP Bullhound; Euromonitor; Booz & Company analysis
4 Booz & Company

7. WHERE SOCIAL Companies see opportunities to use
social commerce at every moment
doing anything at all in this area (see
Exhibit 2). Many companies in China
COMMERCE CAN along the path to purchase—aware- are in some way using or planning
HAVE AN IMPACT ness, consideration, conversion, and
loyalty and service—and also to mea-
to use Tencent QQ (Facebook is still
prohibited by government authori-
sure the success of their efforts. ties) to create awareness of their
products; most Brazilian companies
Awareness are looking for ways to use Orkut, a
To date, most companies’ social social networking service operated by
commerce activities have focused on Google. In the U.S., many compa-
branding and user-generated content nies are past the looking stage; as of
in support of existing marketing the end of 2009, approximately 69
initiatives. This is the topmost part percent of U.S. retailers had social
of the marketing funnel—the level of network pages, 54 percent used
simple awareness—and it would be microblogging sites such as Twitter,
hard to find a sizable B2C company and 58 percent published customer
anywhere in the world that isn’t ratings and reviews.6 Most of this
Exhibit 2
Typical Social Activities in Each Stage of Marketing Funnel
MARKETING FUNNEL TYPICAL ACTIVITIES WHAT SOCIAL MEDIA ENABLES
Branding - New environment for promoting broader brand
Awareness Content Creation - Forum for new social/viral content (often user-generated)
erience
Traffic Generation - Additional ways to drive traffic to own site or social network presence
mer Exp
Engagement - New microsites/widgets/apps to engage potential customers
Consideration
Innovation/Ideation - Proactive customer engagement in product/service innovation
n Custo
Commo
Lead Generation - New mechanisms for targeting and incentivizing potential customers
Purchase Decision - Additional e-commerce channel
Conversion - Unique buying propositions
- Purchases as syndicated social content
Loyalty/Advocacy - Deeper connection with customers after sale
- Activation of brand loyalists to market/sell on your behalf
Loyalty/Service
After-Sale Service - Additional mechanism for community-based support
Measurement - Rich sociographic data set for effective real-time social targeting
Source: Booz & Company
Booz & Company 5

8. early activity, however, has been incremental revenue, and repeat social network called iPartment to
decentralized and uncoordinated, business—and thus more accurately promote the opening of a new retail
making it impossible for companies measure ROI. The key for companies location in Shanghai. Through the
to accurately assess their ROI from will be understanding how to use promotion, the site’s users, mostly
these efforts. social media in each of these stages. affluent Chinese women creating
virtual apartments, entered contests
At least for the moment, awareness Consideration and sent coupons for free Starbucks
seems to have limited value in actu- Many companies have already started products to their connections.
ally spurring social commerce. In efforts in the area of consideration,
Booz & Company’s 2010 survey, 71 mainly in the form of applications Savings.com also put a social spin on
percent of social networking users that entice customers to leave the the age-old coupon concept. The cou-
said their “liking” a company on social network site and move to the pons it posts to its site are voted up,
Facebook would have no impact on companies’ own websites. Companies commented on, or shared via Twitter,
their propensity to buy from that can and should do more in the con- Facebook, Digg, Reddit, Delicious, or
company. sideration stage, principally in two plain old e-mail.
areas: generating leads and generat-
Social commerce will almost certainly ing new ideas. Generation of new ideas can be
have the biggest impact at the lower enhanced through the use of com-
end of the funnel, in the consid- Leads can be enhanced significantly munities. Dell’s IdeaStorm has been
eration, conversion, and loyalty by developing new mechanisms particularly effective at eliciting ideas
and service stages. These are areas for targeting, data gathering, and from users—what might, in this
where it is possible to establish clear motivating potential customers. For context, be called social ideation.
metrics—including conversion rates, instance, Starbucks used a Chinese Thousands of ideas have been sub-
Social commerce will have the
biggest impact in the consideration,
conversion, and loyalty and service
stages of the client relationship.
6 Booz & Company

9. mitted through the site, and several runway where site visitors can put loyalty and give customers a chance
hundred have been implemented. The together outfits to share with their to advocate on behalf of the brand.
well of ideas is more reliable because friends or to present to the com- Social commerce introduces the pos-
it originates with customers. munity to be voted on. A pair of sibility of multiple new touch points
friends shopping at Wet Seal can use after a purchase. These touch points
Conversion a service powered by Sesh.com to can have many benefits, including
This is where social commerce will view the same product pages, chat in reducing churn.
have its biggest impact—providing real time, and use a drawing tool to
unique buying propositions for notate or highlight products they are For example, when a user “Likes”
customers and new touch points for considering. a brand on Facebook, he or she can
companies. become part of a community that
Social commerce is also ideal for receives special incentives, promo-
Group buying and group gifting facilitating conversion in other areas. tions, or early access to new prod-
are good examples of new buying Take the example of music concerts, ucts. And in the future, the “Like”
propositions. Social platforms can which for many urban consumers are button (notwithstanding its casual
conveniently bring together family a popular way to spend time. Many use today) could become the one-
and friends to contribute to a gift for fans would be more likely to attend click way to join a loyalty card
a specified recipient. Facebook appli- an event if they knew their friends system. Social loyalty platforms
cations such as TheBigGift.net and would accompany them, and if the will have the advantage of allowing
websites such as eDivvy.com provide process of inviting friends and buying customers to exchange points in a
a simple platform for users to set up tickets jointly were more seamless. A socially based marketplace.
group gifting and handle the logistics site called Eventbrite allows for just
of collecting money, sending remind- that sort of group planning through Measurement
ers, and sending the gift. Twitter and Facebook. Eventbrite While ongoing measurement is not
does not yet allow for sales directly actually part of the marketing funnel,
Social shopping is another example through social media sites, but that it is a critical way for companies to
of a unique buying proposition and may change. gauge the success of their initiatives.
is particularly relevant for fashion- Social commerce will marry multiple
related products. A study published Developments like group gifting, types of data—purchase, behavioral,
by eMarketer.com showed that 81 social shopping, and ticket buying and demographic—to form socio-
percent of teenage girls use their provide a small glimpse of what is graphic data that tracks not only
friends and peers as a source of trend in store. They are the equivalent of what individuals buy but what their
information and 45 percent seek the Amazon selling its first book and friends buy. Sociographic data is
opinions of those same groups when eBay its first collectible in 1995. collected in real time as customers
purchasing clothing or footwear.7 Much more is coming. browse, recommend, buy, and rate
products. This gives companies the
Wet Seal, a popular retailer serving Loyalty and Service chance to influence behavior along
teen girls, has developed a virtual After a sale, companies want to build the entire purchase path.
Booz & Company 7

10. GETTING fund an innovation group focusing
on social media. Many companies
projects, and sociographic data to
map out different social commerce
STARTED: FOUR don’t have the expertise they need to strategies to get a sense of what their
IMPERATIVES design, test, and run social commerce
projects and will need to add new
customers will see, how they will
respond, and what they like best.
capabilities. Surveys and other forms of primary
customer research can be instrumen-
Imperative 2: Develop a strategy tal in identifying needs and assessing
for getting the data you need. What how a company is viewed vis-à-vis its
would a company most like to know competitors. Together, this informa-
For most companies, social com- about social media? Is it what the tion can help determine what the cus-
merce represents a new channel, with market is saying about the company tomer base wants and how a social
much to learn and master. There are itself and its competitors’ brands commerce strategy should evolve to
four imperatives that every company and practices, or is it that a cus- deliver it.
should keep in mind. tomer prospect is in the market and
likely to buy in the next 24 hours? Imperative 4: Integrate social
Imperative 1: Jump in soon and Companies should develop a “wish commerce into an overall multi-
learn by doing. It is usually a good list” of information and then seg- channel strategy. As social commerce
idea to study a new opportunity ment it by how hard it is to get. At becomes a bigger part of the overall
closely, but given the fast pace at that point, they can identify partners sales mix, it is important to under-
which social commerce is evolving, or vendors that can provide it. The stand its position in the company’s
companies must be willing to learn key is to have an easy-to-use, flexible broader multi-channel strategy, and
while doing. They should place some platform for collecting and using in particular to determine the impact
targeted bets, particularly in the data. After all, the types and sources social commerce will have on other
areas of consideration, conversion, of data that companies need are channels. It is especially important
and loyalty and service. The ones likely to change quickly. that the social channel not be treated
that can do so should start an actual as a one-off program, but rather be
store in a social networking service Imperative 3: Define what the supported and integrated from both
where they’re doing transactions. customer experience should be. a resource and an organizational
The ones that can’t go that far should Companies should use tests, pilot perspective.
8 Booz & Company

11. Endnotes
1
“More Time Spent on Social Media Than E-Mail Worldwide,” 5
“Twitter Links Users to Apple Music Social Network,”
eMarketer.com, November 4, 2010. www.emarketer.com/Article. Reuters, November 11, 2010. www.reuters.com/article/
aspx?R=1008025 idUSTRE6AA46R20101111
2
Lora Cecere, Altimeter Group, “Pioneers on the Move: Rise 6
Sucharita Mulpuru, Forrester Research, “TechRadar for
of Social Commerce,” November 1, 2010. www.altimetergroup. eBusiness and Channel Strategy Professionals: Social
com/2010/11/pioneers-on-the-move-rise-of-social-commerce. Commerce, Q1 2010,” February 25, 2010. www.forrester.com/
html rb/Research/techradar%26trade%3B_for_ebusiness_and_
channel_strategy_professionals/q/id/56069/t/2
3
”The Future of Shopping,” Resource Interactive, 2010 Shop.org
Annual Summit. www.resourceinteractive.com/#2 7
“How to Influence Teen Girls Online,” eMarketer.
com, November 17, 2010. www.emarketer.com/Article.
4
Adam Ostrow, “Dell Rides Twitter to $6.5 Million in Sales,” aspx?R=1008048
Mashable.com, December 8, 2009. www.mashable.
com/2009/12/08/dell-twitter-sales/
CONCLUSION which to build their social commerce
capabilities as the platform evolves.
About the Authors
As always, learning what doesn’t Matt Anderson is a partner with
Booz & Company based in Houston.
work will be as important as learn-
He specializes in digital innovation
ing what does. and value chain disruption, Web 2.0,
social networking, applications and
Each step along the path to pur- e-commerce, growth strategies, and
chase—generating awareness, entic- multi-channel marketing for clients in
Now that social networking has ing customers to buy, and cultivating consumer electronics and high-tech
become embedded in the fabric of their loyalty—presents its own industries.
everyday life for millions of consum- opportunities. Companies should be
Joe Sims is a Booz & Company
ers globally, companies are keen to considering targeted efforts all along
partner based in Dallas. He is an
find ways to leverage these online this path, while integrating social industry-recognized leader in digital
relationships for commercial gain. commerce as part of an overarching convergence, including telecommuni-
Social network sites promise to be multi-channel strategy. Developing cations strategy, wireless broadband
the next generation of e-commerce an integrated and comprehensive and Internet services, and next gen-
engines and are moving rapidly strategy for gathering customer data eration applications and cloud-based
in that direction. Marketers and and mining it for insights, imagining services. Joe has served numerous
enterprise clients in healthcare, finan-
strategists are smart to feel a sense new methods for customers to decide
cial services, transportation, manu-
of urgency in understanding and and buy together, and building a
facturing, energy exploration and
experimenting with direct commerce compelling customer experience will production, higher education, and
within these platforms; early movers be essential to succeed in this new federal, state and local government.
will have a solid foundation on era of socially powered commerce.
Jerell Price is a principal with
Booz & Company based in San
Francisco. He specializes in growth
strategies, go-to-market strategies,
and sales/marketing effectiveness
for companies in the high-tech, retail,
and consumer products industries.
Jennifer Brusa is an associate with
Booz & Company based in Chicago.
She concentrates on strategic growth
initiatives and technological enable-
ment of commerce for consumer and
high-tech clients.
Booz & Company 9

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