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Social Commerce: Where Tech, Influencers and Brand Loyalty Intersect

Rodger Smith - April 5, 2021

Mass retail has changed. Before Walmart and Amazon started selling everything, consumers relied more on brand familiarity, in-store availability and friends’ recommendations when deciding on purchases. But in today’s digital-first world of shopping (the case for which a global pandemic empirically proved last year), empowered consumers are less loyal to individual brands and stores. Price switching and the consolidation of categories by companies, such as Amazon, result in shrinking sales for many brands that otherwise relied on those tried and true aspects of familiarity, availability and personal recommendations.

It’s no surprise that the internet makes starting a brand easy. Iconic direct-to-consumer brands like Harry’s and Dollar Shave Club, Blue Apron meal delivery, Warby Parker eyeglasses and Glossier cosmetics proved early in the eCommerce age that companies no longer needed an in-person buying experience to be viable. And as artificial intelligence, machine learning and the promise of a blockchain-backed future make headlines, eCommerce revenue continues to grow at a breakneck pace without the costs of operating physical stores.

But technology’s blistering growth in the sector doesn’t come without growing pains. The death of what some call “bad retail” came when some businesses failed either to seize the digital day or realize what technology could not replicate. Retailers like Nike and Apple doubled-down on their storefronts, recognizing the power of tangibility and transforming their physical locations from stores into gathering places for loyal customers.

Even as retailers have invested billions of dollars in technology and physical spaces to avoid the fate of their defunct retail brothers and sisters, certain aspects of the customer journey stay constant. Namely, 80 percent of consumers still buy on recommendations from people they know, but unfortunately, consumers are less sticky when shopping online. Cart abandonment rates are high (upwards of 80%), conversion rates are low and price switching is rampant.

Why Social Commerce?

Social commerce leverages existing social media relationships to sell more products and services. It eliminates many of those brand-weakening, price-switching moments that established brands experience online. When a consumer purchases on a recommendation from a real live human, the purchase funnel is shorter, effectively harnessing the existing relationship and trust to increase conversion rate. A case in point is referral web traffic; though lower in volume, it generates twice as much revenue for its share of traffic as compared to paid or organic search.

To improve the efficacy of online commerce, many brands have contracted with macro influencers (those with hundreds of thousands of followers on social media) to evangelize their products. Most sponsored posts on social media are clearly ads written with a high level of brand oversight. Still, marketers and their influencer partners aim to make such ads more personal using first-person voice and imagery that depicts the influencer actually using the product. 

Attribution of sponsored sales often comes by way of an influencer’s unique coupon code. Followers are incentivized by the discount and influenced by the perfectly polished social media star in their feed. Behind the curtain, brands measure the success of a relationship with a particular influencer by the number of coupon codes redeemed in addition to top-level engagement metrics (reach, link clicks, likes, comments, saves, etc.) on co-sponsored posts—but it’s far from a perfect model.

Larger influencers have earned a reputation for inauthenticity. Their online presence may be the stuff of dreams for many of their followers, but consumers increasingly lament their favorite online personalities “selling out” on their fame to make money. In fact, influencer engagement rates on Instagram, Facebook and YouTube are much lower than those on typical personal accounts with hundreds, not thousands, of followers.

Brands and influencers alike have responded with more authenticity and transparency about ads themselves and deeper discounts on influenced purchases; the former requires a significantly higher time investment to craft the right message, and the latter directly erodes profits for brands that would otherwise sell more product at full price.

The future of social commerce, if it’s to remain a lucrative business practice, will have to be focused more on 1:1 and 1:few influencing rather than just 1:many influencing. Many brands have found their influencer marketing efforts are more effective when they partner with micro influencers, or those with less than 100,000 followers, who typically have a more niche following. Here, brands can more reasonably predict the interest of an influencer’s followers in an effort to increase engagement. 

For example, a cosmetics brand would obviously be much more likely to partner with a young female lifestyle micro influencer than a male athlete micro influencer, knowing that the followers of the female are far more likely to buy cosmetics than the athlete’s followers.

From this and the previous examples, it’s obvious to see how retail and ecommerce has drastically changed over time from brick-and-mortar stores and specialty shops to online niches that reach their target audiences through social media influencers. If you hire the right influencers with an online following that trusts them to recommend and endorse the best brands, and those brands happen to be yours, that alone could easily resolve any concerns you had of not having a brick and mortar store and the right marketing campaign in this economy.

Part 2 of my 3-Part Influencer series covers more on the different types of influencers and how to pick the right model for your brand.

If you’re not sure how you’d implement an influencer strategy, check out Part 3; I explain how to implement an influencer strategy and give some tips on deploying the right one for your business.

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About DirectScale, Inc.

Based in Orem, Utah, DirectScale has been setting the standard for direct, social and influencer selling industry software platforms since 2013. DirectScale’s powerful SaaS platform boasts fully configurable management tools that are vital to not only running, but also to efficiently tracking and growing an ecommerce business.
With its focus on providing an intuitive and impactful customer experience to corporate clients, influencers, affiliates and independent sellers, DirectScale has revolutionized the way these businesses can be launched and managed. To learn more or request a demo, visit directscale.com.