How can retailers better understand and harness the power of social commerce to better track the consumer journey? A recent study by MAGNA, Reprise Commerce and SNAP offers great insights and some advice.
Social commerce refers to those online activities that facilitate transactions. According to Glen Conybeare, Global President, Reprise Commerce, a "post-pandemic new normal" has fueled greater participation in social commerce, so much so that it can now account for as much as 20% of sales, more for some online-only brands. "Brands are realizing that a significant double-digit percentage of their sales are likely to be through e-commerce channels," he said. "That makes their life more complicated because while most brands are adept at selling through physical retail, having honed their approach over many years to maximize sales, their e-commerce knowledge and capability is still nascent." This poses a challenge to some retailers who are still grappling with how to best structure their online offerings to maximize sales and even more crucially, profitability.
For Kara Manatt, Executive Vice President Intelligence Solutions at MAGNA, the study addresses what retailers must do to meet the needs of consumers. "What do consumers really want and need and what is their experience like on social media? We wanted to tap into what is currently happening with consumers on social media and how this may look in the future," she explained.
This global study of 8,000 respondents spanned four countries -- the U.S., the U.K., Germany and Saudi Arabia -- and is the first of its kind for MAGNA. It revealed the following insights:
Social media is vitally important to consumers in making purchasing decisions. Manatt noted that she was surprised at "how many people use social media to make purchases and use it as a tool to discover products. There's a really strong foundation of people using social media in that way across all the markets, especially Saudi Arabia."
AR and VR are emerging as two of the most important centerpieces in social commerce. For Conybeare, they enable consumers to better curate their purchases and reduce returns that increase costs to retailers. "Consumers don't want [to buy] twelve items and send ten back," he asserted. "It's a hassle. They want to order something that works for them and not have to send anything back. AR and VR technology help with that."
There is an enthusiasm for these new technologies. "People are really excited and leaning in to try new technologies," Manatt explained. "[For example] they use AR to try on clothes. Brands need to make sure that they're meeting consumers where they are and taking advantage of those observations and behaviors that already exist."
There is a great deal of disconnect in the current consumer path to purchase. "It's about reducing the friction in the journey," Conybeare said. "We think e-commerce is easy but actually, from a consumer's point of view, it's full of friction. It's a lot easier to walk into a physical store, try on a pair of jeans, buy the pair of jeans. In addition, return rates for physical commerce are low. " Conversely, he noted, "When you buy a pair of jeans online, you'll probably buy two. Maybe one fits. Maybe none fit. It's the same with style. Technology can help reduce this friction in the online consumer journey. That's why we've seen such a positive reaction to AR and VR in the study."
The consumer appetite for new technology spans all age groups. "It's not a generational thing," Manatt noted. "While younger people lead the charge, it's not just Gen Z who realize that using social media as a tool for shopping is going to help alleviate some of that friction. It's all ages."
Profitability drives retailer decisions and new technology helps. "E-commerce is not as profitable as physical retail for the vast majority of retailers," Conybeare stated. Generous return policies eat into profitability. "If implementing AR or VR technology on your site means your returns go from 30% to 20%, that pays off very quickly," he explained. "Increasingly, retailers are realizing that they can't continue to offer amazing customer service with free returns and free delivery, or if they do, they'll need to find a way to improve profitability as their shareholders will not stand for it."
For brands and advertisers, the road to profitability lies in AR and VR. "This study shows that consumers really want it," he continued. "If brands and marketers were thinking, 'It's not going to move the needle. It's not required. We're selling our products today without it,' that may be true. But you have to ask yourself what are you potentially missing out on? Changing your onsite conversion rate from 3 to 3.5% is the equivalent of spending millions on media. It's huge. And it's just one way of reducing friction for online customers."
All this emphasis on social commerce begs the question: What happens to brick and mortar? "There's got to be a place for physical retail. We'd be in a very sad, lonely world if there weren't," Conybeare concluded. "Physical retail just needs to reinvent itself and part of that is bringing back more entertainment to shopping. In short, make it fun."
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