London: Even as US Christmas shoppers have spent record sums online this year, one of the biggest disappointments for some internet entrepreneurs has been a company that is otherwise hot property: Facebook.
Retail executives and consultants say Facebook has yet to take off as a retail platform, defying excited predictions that "social commerce" — jargon for shopping via social media sites — would be the next big thing.
Jonathan Johnson, president of Overstock.com, an internet retailer, said: "I agree that the commercial aspect of social media is overhyped and no one's really caught that rabbit yet."
Sceptics say social commerce was a rhetorical fad inflated by Silicon Valley self-belief. Advocates say it is merely in its infancy and that someone will soon find the right combination of technology and attraction to make it work.
They use the term "F-commerce" to describe the potential crossover between online social networks such as Facebook and internet shopping, but as retailers experiment with it, their options fall into three broad categories. First, they can use Facebook as an advertising tool to draw customers to their own websites. Second, they can use it to gather data about shoppers and recommend products based on Facebook interests — as Overstock.com and Walmart's Shopycat service are doing for gifts.
Third, they can set up fully functioning stores within Facebook itself.
Yet Kevin Ryan, chief executive of Gilt Groupe, an online fashion retailer, said there is less commerce on Facebook than many people had anticipated just nine months ago.
No purchasing platform
"It's an extraordinary place where people go and connect with their friends," he said. But "to date, they are not using it really to make concrete purchasing decisions and they are certainly not purchasing things on Facebook".
On Cyber Monday, a post-Thanksgiving shopping day in the US when retailers offer big online discounts, just 0.56 per cent of buyers were referred from social networks, according to IBM.
Facebook itself, which is due to float on the stock market in 2012, shows no interest in being a retailer. It is focused on advertising. But it says 88 per cent of the top 200 internet retailers are "integrated" with its site and have seen traffic from Facebook increase by an average of 236 per cent from the holiday season last year.
Joel Bines, a retail consultant at AlixPartners, is sceptical: "It feels like flavour-of-the-moment . . . It's [growing] off a tiny base and very soon it'll revert to the mean and be just another way of marketing to people," he said. Only a few retailers have created genuine stores within Facebook, including Aéropostale, a US teen clothes retailer; Asos, a UK online fashion store; and 1-800-Flowers.com.
Against a backdrop of privacy concerns, Jason Taylor of Usablenet, a software company that sets up such stores, said retailers run them off their own systems and do not share sensitive financial data with Facebook.
Facebook itself wants to draw advertisers' attention to how its site can inspire shopping ideas — even though it's impossible to pin down a causal link between, for example, one person clicking the "Like" button on a Tiffany & Co ring and a friend who noticed and a month later bought a Tiffany necklace.
Booz & Co, the consultancy, forecasts social commerce in the US will grow from $1 billion (Dh3.6 billion) this year to $14 billion in 2015, but it uses a loose definition that includes purchases influenced by Facebook and product buys on deal sites such as Groupon.
Johnson of Overstock.com said: "We're not trying to use it as a sales piece as much as an information-gathering piece. Finding out what our customers want; whether they like a product; how could we sell it better."
Siva Kumar, chief executive of comparison shopping site TheFind, said data gleaned from Facebook's Like function has helped improve searches by highlighting the most-liked products on the web. While he acknowledges social commerce has not been very successful so far, he updates the optimistic forecast heard from others at the end of last year: "I expect 2012 is really the year social commerce is going to take off. It's like crawl, walk, run. The running should happen next year."
Advertising: Soon on main feeds
Normally relegated to the ad column on the right side of the page, advertisers will soon be able to pay their way into the main Facebook news feed, a move that will help companies reach more potential customers and Facebook to generate more revenues ahead of its flotation.
However, it might also alienate users who have come to rely on the free service to protect their socialising from ads.
— Financial Times
