Saturday, August 11, 2012

Survey Says: Facebook to Take 6.1% of E-commerce Market by 2015

Image representing Facebook as depicted in Cru...

After last week’s most excellent New York Times article on f-commerce (e-commerce on Facebook) as a smart SMB play (it’s easy and inexpensive for small businesses to set up a Facebook store), new research from market research giant TNS predicts that e-commerce on Facebook will account for 6.1% of the UK e-commerce market in three years.
The study, commissioned by e-commerce software company Ecwid, also found that whilst only 4% of UK customers have ever bought through Facebook, but 40% would be happy to buy if the experience was similar to buying through an online store.
For small businesses, a Facebook store can be useful first step into the world of e-commerce – offering a more personal experience than Amazon marketplace or eBay store.   Sucharita Mulpuru from analyst Forrester reports that Facebook stores in the US doing well tend to be from small businesses who have less than $100,000 in revenue and fewer than 10 employees.
  • Painter Patrick Skoff sells 90% of his paintings on Facebook, last month he painted 10 paintings a day for 10 days and sold all of them through Facebook
  • Boutique jewellery designer Méli Jewelry makes 15% of sales on Facebook
  • The Baby Grocery Store makes 35% of sales on Facebook (to supplement sales in a kiosk in SouthPark Mall in Charlotte)
  • Got What It Cakes orders tripled when cake maker Mandie Miller opened her Facebook store
  • Tutu Cute which sells hair accessories and clothing for mothers, babies and toddlers makes 50% of sales on its Facebook store
So Facebook stores can make sense for SMBs as a first step into the world of e-commerce.  But Ruslan Fazylev, chief executive and founder of Ecwid reports that businesses that set up a Facebook store in addition to an existing e-commerce presence can expect to generate an extra 17.7% revenue.  But success is dependant on what you sell and how it.  As we’ve reported before, the key to success is differentiation – simply replicating your e-commerce store on Facebook is unlikely to drive sales.
A Facebook store needs a unique value proposition to makes sales
  • Something new (something new, not available elsewhere yet – a fan-first offer)
  • Something different (unique not available elsewhere at all – a Facebook exclusive)
  • Something more (additional value – such as a free gift with purchase)
  • Something for less (better pricing – fan-pricing)
So will Facebook stores really represent 6.1% of the e-commerce market in three years?  For some businesses – small businesses selling word-of-mouth worthy products in a smart way (fan-first, fan-exclusives) – we think Facebook stores could generate a far greater proportion of their online sales.  But overall, for e-commerce giants and the total e-commerce market by value we’d be very surprised if e-commerce revenue generated on Facebook ever exceeded 1-2%.  Larger brands and retailers, we think, should see Facebook commerce as a self-funding marketing initiative designed to drive trial and advocacy.  But for SMBs – a 1-2% slice of a £50bn UK e-commerce pie ($200 billion in the US) is anything but insignificant.

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