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The next spin on e-commerce: call it 'social commerce'

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Buying and selling online is suddenly getting a lot more interesting as it blends with social networking.

E-commerce is getting a lot more chattier and collaborative.

In the 1990s, we saw the rise of e-commerce, which burst forth a new industry of dot-com startups and divisions. The popular perception is that e-commerce withered with the dot-com bust in the early part of the 2000s. Of course, nothing could be further from the truth -- as we just saw on Cyber Monday, November 30th, e-commerce sales hit $887 million, and volume was up five percent over the previous year, according to comScore Inc.

Overall, in its most recent stats, the US Commerce Department estimates that e-commerce sales are about three to four percent of total retail sales, up from about half a percent at the beginning of the decade in 2000. Commerce puts total retail e-commerce sales for the third quarter of 2009 at $32 billion, up two percent over the same time a year ago. (Overall retail sales declined by eight percent.)

And that's just business-to-consumer retail e-commerce, not even counting business-to-business transactions. The important thing to take away from all this is that e-commerce is not going away -- rather, it's now so deeply embedded in our economy and company operations that it should no longer be considered a category in itself. It's mainstream commerce, pure and simple.

Enter the next evolution of online business, as hinted at by David Grant in Christian Science Monitor. That is, some forward-looking companies and startups are advancing what they call "social commerce."

Here's the Wikipedia definition of social commerce:

"Social commerce is a subset of electronic commerce that employs collaborative social media tools to assist in online purchasing and selling....  ..,the term social commerce has been expanded to include a variety of collaborative commerce activities such as social shopping (co-browsing), collaborative purchasing (collective buying power), collaborative filtering (social recommendations), and collaborative funding (e.g. Crowdfunder)."

The concept isn't new -- an article published in 2006 talked about the rise of social commerce as consumers and end-users increasingly share information about goods and services and companies become more engaged with their customers through social networking platforms. Now, with social networking now so ubiquitous inside and outside of enterprises, there's more impetus to move it forward.

The payback from social commerce -- integrating social media with e-commerce -- can be found in increased customer satisfaction, reduced stress on call centers, and viral marketing. In July, we reported the results of a Forrester study which concluded that a company that invests in a well-tuned social network will probably see a payback almost twice that amount within a year, and in subsequent years after that.

ROI will come from the fact that many customer inquiries and issues formerly handled by paid customer service or tech support representatives will be offloaded to "super users" or "influencers" within the community.  Customer service representatives also can see a productivity boost as well, as potential issues and problem resolutions will be unearthed and posted by community members. These community members also will tend to be more satisfied and engaged customers.

Earlier this year, Sam Decker described the prevailing thinking around social commerce coming out of the Bazaarvoice Social Commerce Summit, which focused on making social commerce an operational reality for companies. For example, he said, "anyone can be an influencer. You can unearth them by facilitating their contribution and amplifying its impact." Plus, "measurement and marketing impact is easier than most think." However, he added, we're only beginning to understand the potential, observing that "we're only scratching the surface on the database marketing opportunities with influencers."

CS Monitor's Grant reviewed several new vendors in the social commerce space, including Groupon, which, through collective buying power, "offers discounts that come into force once a certain number of consumers purchase them." Another company, Foursquare, "enables users to connect socially by seeing which of their friends might be in the same area at a given time. But businesses are getting in on the act, too, plying foursquare 'mayors' (those who have checked in from a location with the most frequency) with free grub and announcing deals through other social media to lure foursquare-ers into their shops."

Call it whatever you want: social commerce, social networking, or good old-fashioned e-commerce with more of a two-way interaction. Finding better ways to build customer involvement and interest is always smart business -- and today's social networking channels offer a new way to do so.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure