Magento provides e-commerce platforms to small and medium sized businesses. The reason I am discussing it in this blog, is that we have a number of clients, for whom we have built Magento e-commerce sites. Some of Magento’s most prestigious clients include Ford and Swatch.

The idea behind eBay’s decision is that they want to merge Magento with the company’s own open source, online retailing platform X.Commerce. Precisely how X.Commerce will work, and what part Magento has to play in it will only be revealed in October during eBay’s X.Commerce Innovate Conference.

As far as we are concerned, we think eBay’s reasoning is sound. By buying Magento, eBay can marry this up with previous acquisitions such as Paypal, to offer a turnkey ecommerce solution, from hosting to payment processing to mobile. Mobile is a large growth area, and the leading players are staking a lot on it’s potential.

eBay now has a strong suite of enterprise-class ecommerce developer tools, through which they could offer large retailers help with building their own storefronts along with mobile and social commerce.

The biggest UK success story so far is ASOS. Another notable success is Tesco, which generated over £2m in sales with Facebook vouchers for fans.

Give to receive:

Asos have over 540,000 followers as of this morning on Facebook. These have been acquired over the past 2 years or so. How? Through a committed and consistent strategy of providing interested parties with relevant content, special offers, insight into the fashion industry, and so on. Following on from this, followers are empowered to share all of this with their networks. They can contribute their own comments and be involved with the development of the brand too. These too “social” elements facilitate commercial transactions considerably.

Altered Attitudes required:

Not everyone is a big fan of f-commerce. In comparison to the potential of m-commerce for example, many are keen to point out that the potential market size is a mere drop in the ocean comparatively. For every success story, there are numerous failures.

But I think Facebook has it all. For a start, it is invariably where your customers are. Facebook has over 500m users; half of which log-on every day.

So perhaps companies need to show a little more patience with Facebook. Amazon and ebay were once “small businesses” with no real chance of making the grade, and changing our buying patterns. Facebook has a huge headstart over these two in terms of customer base, and selling features. ASOS gave people content to share over a long-period..it is only now they can start to turn this into a sales platform.

Loyalty and advocacy need to be nurtured. Thinking your product is great, and then simply telling people to buy it, will not grow your business in the social media space.

US online sales of clothing, shoes and accessories increased 17% last year to $27bn. Growth in clothing is expected to outstrip other categories such as electronics over the next five years.

Amazon has recruited software engineers who are said to building “great new features to change the way people shop for clothing”.

Amazon’s push into fashion coincides with a drive by eBay, whose sales in clothing, shoes and accessories topped $5bn last year. eBay relaunched its clothing sales under the eBay Fashion brand in April, adding videos and comments from fashion stylists and a “find similar items” image-matching feature.

It has also launched a “fashion outlet” in the UK and created “storefronts” in the US with leading retailers selling excess and discounted stock directly to buyers.

Both Amazon and eBay clearly view this is a significant growth area; and are adopting site innovations normally deployed by more specialised clothing sites. Expanding viewing options such as zoom, multiple views and colour variation being some examples.

The success of “flash sale” sites such as Gilt, Hautelook and Rue La La, coupled with the consumer slump, has caused many retailers to revisit this market. Selling heavily discounted stock direct to consumers is on the up..so good news for us!

Many luxury groups have opted out of e-commerce altogether, believing the risks of selling online – such as brand degradation and counterfeiting – outweigh any benefits.

This whole notion of the web being a channel of discounting went against the very aesthetic of these brands.  But recent innovation has reshaped e-commerce. Luxury brands are discovering ways to reach customers without sacrificing brand integrity.

Applications on smartphones and the iPad have delivered a powerful interface for users to search, browse and buy goods. Ralph Lauren’s Rugby brand and Gap, among others, have developed their own sophisticated apps.

Indeed shopping is proving one of the most popular activities on touch devices. Sales through eBay’s iPhone app last year topped $500m. Purchases included a Lamborghini, and a Bentley.

All this shows that people are rapidly becoming used to the convenience of getting what they want, when they want it. Buyers are used to finding very expensive goods online. People are also confident enough to make big purchases without having to talk to a sales representative.

Luxury goods are among the most popular things consumers search for online, and a lot of it is their desire to know what’s going on with them, and their desire to own them. Yet meeting the demand and maintaining the luxury brand’s image was a perennial challenge.

Most high-end brands have established online sales through traditional channels, such as resellers and their own sites, and now they are gaining the confidence to venture out.

In addition to new applications, and private sales sites such as Gilt Groupe and Haute Look, one can also point to local deal sites such as Groupon and Living Social, and a new wave of companies that are bringing together location awareness, real-time inventory and deals, and social media.

It’s a huge period of innovation for consumer facing e-commerce. Customers are looking for curation, and social and mobile media are enabling real innovation and entrepreneurship today.

The Aim-listed business is trying to find ways of improving its service without having to open stores. Alliance Boots, which is increasingly teaming up with fellow retailers – such as Mothercare and Waitrose – to bring more brands into its stores, is thought to have held informal talks with Asos. Retailers have also suggested that WH Smith and Argos might be in the frame., although Asos has refused to comment on any potential partners.

The driver behind this is more and more of the high street retailers are offering in-store pick-up, ever since Argos introduced “click and collect”.

It is a proven successful model that attracts higher spending customers. The reliance of online-only retailers has long been seen as a deterrent for some shoppers; but the perceived barrier seems to be slowly dropping away.

Any tie-up would likely be with a retailer that is not a direct competitor but would still benefit from extra footfall from Asos customers who are typically fashion-focused women between the ages of 16 and 34.

We have had our own ebay operation for some time now; and from time to time, customers do ask if they can pick up from our warehouse. This has been a problem for some time in the e-commerce world. But something like this could work, because it provides mutual benefit.

Perhaps something similar could be of benefit to your own e-commerce operation? Allowing customers to pick up from your office or from other companies that you do business with. Anything that could help the customer must always be considered!

All of the panellists seemed to agree that Amazon will continue to reign supreme in “commodity commerce” but will not be able to lead in social commerce. More people are starting to crave relationships in shopping was their conclusion, and that Amazon will continue to monopolise the “boring old” way of shopping!

These relationships have captured the attention of millions of paying customers. Groupon is valued at $1.35 billion, while Gilt Groupe is expected to triple revenues this year.

Other industry giants are thinking through ways to horizontally integrate into the social commerce space. eBay is aggressively targeting the flash sales market, having recently launched the Fashion Vault. , a flash sales site that offers deep discounts on designer items.

While an acquisition may make perfect sense for a cash-rich company like Amazon (they have $5bn stashed away!) some will argue that they should continue to focus on scaling traditional online retail business. After all, revenues continue to rise as they continue to sell a ridiculous number of Kindles, and other products.  And they did recently acquire Zappos for $1.2bn.

For over a decade, Amazon and eBay have enjoyed the fruits of a market that required a greater focus on scale than on innovation. But the rise of Groupon, LivingSocial, Vente Privee, and other social commerce sites have taught us an undeniable truth that customers are ready for something different.

The question is whether Amazon will disrupt its own model in order to preserve its reign as King.

It is important to understand why it makes commercial sense to help people to connect where they buy and buy where they connect. This will give businesses a distinct strategic advantage and enable them to deploy effective social commerce strategies.

Why does Social Commerce make sense?

1. 1. By providing online shoppers with useful tools to make better and more informed choices, social commerce helps shoppers do smart and savvy shopping. This enables retailers to beat shopper expectations that drive loyalty and word of mouth advertising.
2. 2. Retailers now have an opportunity to sell where customers spend their time; ie. On social media platforms. This provides a cost-effective way to capture traffic and market reach; as well as raise the possibility of impulse e-purchase; a huge untapped opportunity in e-commerce.
3. 3. When properly used, social commerce/shopping tools, can harness the processes of social influence that take place when we are shopping. This is, in my opinion, the most effective and powerful reason for deploying effective social commerce strategies.

The Social Psychology of Shopping:

In short, it harnesses the human capacity for social learning; learning from the knowledge and experience of those we know and trust. Moreover, social commerce facilitates our ability to understand and learn from each other, and therefore profit from certain situations.

Psychologists have identified six universal heuristics (mental rules of thumb) that shoppers use to process information. Social shopping tools are powerful because they harness these heuristics to make purchase decisions more likely.

Heuristic 1: “Social Proof”/ Follow the crowd:

To resolve uncertainty of what to do or buy, we often look at what others are doing or have done, and take our cue from them. When something stands out as popular or dominant, we instinctively perceive this as social proof that it is correct or the most valid option – this is classic peer power in action.

Social Commerce Application: Social shopping tools that use social proof to stimulate heuristic-thinking shopping decisions include:

• Pick lists – wish-lists offer social proof about what people want and what is desirable.
• Popularity Lists – allow shoppers to view options by “most popular” , “most viewed”
• Customer Testimonials.
• Social Media reviews – from other customers to provide trustworthy proof about product or service quality.

Examples include Amazon, Apple (iTunes)

Heuristic 2: Authority/ Follow the Authority:

People have a natural tendency to defer to the conclusions of an expert or authority, regardless of what they say. With specialist knowledge, experience and expertise, they save us time and energy thinking things through. “Four out of Five Doctors recommend” being one example of this.

Social Commerce Application

Examples include:

• Referral programs – from people who shoppers trust.
• Social Media reviews by authoritative professional reviewers.
• Social Media services that establish the retailer or brand as an authority.
• User forums.

Referral programs such as Amazon Affiliates, ebay, Nike+ are examples of this in action.

Heuristic 3: Scarcity: “Scarce Stuff is good stuff”

Our minds are programmed to value scarce resources. We instinctively assign more value to opportunities as they become less available – part out of fear of potential loss. Limited offers, limited availability, and the like.

Social Commerce Application

• Group-Buy – tools that allow shoppers to be part of a great one-off deal.
• Referral programmes for private shopping events.
• Social Network storefronts – great deals for network members only.
• Deal feeds  – to get that exclusive deal the majority don’t know about. Or time-sensitive shopping deals (often with a count-down clock)

Heuristic 4: Liking/ Follow those you like

We have a natural inclination to emulate and agree with people we like, admire or find attractive, partly because it builds social bonds and trust, and partly because of impression management; managing our image and identity by association.

Social Commerce Application

• News feeds – to follow, share and spread social news about brands shoppers like, with people they like. (Twitter, Facebook, YouTube)
• Deal Feeds – for the same reason as news feeds.
• Share with your network – tools that allow shoppers to share shopping experiences.
• Social Network Storefronts – allow shoppers to share and discuss shopping experiences within their social network.

Heuristic 5: Consistency/ Be consistent

When faced with uncertainty, we’ll opt for the one that is consistent with our beliefs and past behaviour.  We do this to avoid “cognitive dissonance” – the discomfort we feel when our beliefs and behaviours don’t match up. The classic marketing applications here include lifestyle advertising ( demonstrating why a product is consistent with audience lifestyle), free trials (become a user for free, and stay consistent by buying later), signing up for free membership schemes.

Social Commerce Application

• Ask-your-network – tools that involve a small public commitment to an item (asking friends about it) that is consistent with purchasing it later.
• Social Gaming – stimulates behavioural consistency between playing a branded game, and later buying the branded product or service.
• Pick Lists – they are the social shopping equivalent of petitions, small free public commitments to products consistent with subsequent purchases.
• User Forums – allow shoppers to each others problems on behalf of the brand; a commitment that is consistent with a purchase.
• Social Media Entertainment, Reviews, Services – uses the small commitment of paying attention or rating to make future purchases more consistent with past behaviour.

Examples include Levi’s, Dell, Starbucks, Amazon, Apple, eBay

Heuristic 6: Reciprocity/ Repay favours

We have a natural desire to repay favours, whether those favours were invited or not. We feel good when we reciprocate favours, partly because of our innate sense of fairness and social contract. Now you know why you feel bad when you get a Christmas card from someone to whom you haven’t sent a card!

This has been used successfully in marketing through giving out samples, local Corporate Social Responsibility and sponsorship, to name a few examples.

Social Commerce Application

• Group-Buy – these tools allow friends to do their friends a favour and get them deals, which get reciprocated with participation.
• Referral programmes that allow friends to offer exclusive access or special deals to their friends to drive sales.
• Social Media services that are genuinely useful and can be passed on.
• User Forums that allow shoppers to offer each other buying support and advice – which through reciprocity translates to selling to each other.

Examples include: Dell, Amazon, Carrefour, Dell, Groupon, Starbucks.

Conclusion:

The practical use of looking at social commerce through the lens of social psychology is that it provides brands and retailers with a strategic approach to doing social commerce.

Rather than deploy social shopping tools based on a whim or sales pitches, these six heuristics provide a framework for six distinct shopper-centric social commerce strategies, with their associated tools and which can be adopted and developed based on their fit with broader marketing strategies.