Why Fab.com Dominates Social Media Commerce While Other Brands Struggle

Why Fab.com Dominates Social Media Commerce While Other Brands Struggle

Lucy FisherThe Guardian | 17 minutes ago | 69 | 

With high profile brands such as Gap, Gamestop and, in the US, JCPenney, having opened and then subsequently closed Facebook stores (presumably because they weren’t delivering ROI) it would be easy to assume that social media is not suitable for sales – too easy, perhaps.

But those who dig a little deeper may find that opportunities abound if social media is leveraged in the right way.

“We haven’t tried to use social as a sales channel at all. It doesn’t suit our demographic and we’re not a discounter,” argues Andrew Curran, chairman at luxury homewares e-tailer Amara. “Having said that, there are examples – take Fab.com – of retailers for which social is a significant proportion of what they do and drives a large percentage of their business.”

He’s not wrong. E-commerce site Fab.com, which specialises in “everyday design” items, grew sales by nearly 300% in January 2013 over January 2012. In Europe alone, 50% of its members have come from social sharing and lead to 33% of revenue in the region. Its member base grew to 11m people, up from 1.5m at the start of last year. With social networking sites and mobile apps forming a significant part of its business model, the innovative company has won a raft of awards.Amara Curran’s claims that Fab.com has a demographic which is younger than that of his own business, and that its price points are considerably lower – hence its success with social sales. “My conjecture is that lower price and younger audiences are more suitable for social sales in today’s world,” he says.

And he appears to be right, at least when it comes to Fab.com’s target market: apparently, 60% of the site’s audience are under 35. Yet as this tech-savvy generation grows up, the next generation of digital natives is unlikely to be any less social or mobile-focused.

What’s more, those two things – social and mobile – tend to go hand in hand, and both are growing. “23% of all time spent on mobile is in Facebook,” claims the social site’s head of retail, Gavin Sathianathan, who adds that despite the apparent failure of the first swathe of Facebook stores, Facebook remains focused on building products for retailers.

Influence over purchase

James Cronin, founder and CIO of e-commerce platform provider Venda believes that, while some items are being sold successfully on social media – like concert tickets, which are inherently social – he maintains that such platforms remain about influence as opposed to purchase, at least at present.

He notes too the increasing success retailers are having with Pinterest, particularly within the fields of fashion and homeware. He describes Pinterest as “a kind of look book, similar to the Sunday supplements, and a strong source of qualified traffic.” Curran agrees that this is a platform Amara is focused on, given that its products are inherently visual.

Social is all about sharing and those who are seeing the most success have ensured that their content is worthy of being passed on. It’s human nature to share, after all. “It’s too much of a generalization to say that it’s more appropriate for younger demographics or lower price points. Fab.com is a content platform as well as an e-commerce platform, so the retailer itself is sharable. Asos and Net-a-Porter, too, provide a rich layer of content,” argues Drew Burdon, head of strategy at digital advertising agency R/GA London.

But Burdon is also clear that it may not make sense for most retailers to make social networks the ultimate transaction destination, when they often have their own e-commerce sites anyway. And he points out that it would likely incur a fee.

Nathalie Coulibeuf, head of social, and Steve Taylor, head of digital strategy, at media agency PHD UK point out that, in China, Sina Weibo (Twitter‘s equivalent) has recently shown its power in terms of social commerce. They report that Mercedes sold over 600 cars in eight hours through this platform, after creating a special edition for the Chinese New Year. The reason it worked, they say, is that the platform has created payment gateways. “That’s also why social retail is not ready to take off right now in western Europe. Our social platforms don’t incorporate technologies to make the buying process easy for the consumer,” they argue.

Many believe that, as in the Mercedes example above, social is more appropriate for special offers or promotions, perhaps limited editions or time-specific deals. When you register interest in a product on Fab.com, you are given a deadline to purchase. In any case, we appear to be some way off selling cars on social networks, at least in the UK. Yet Allan Blair, strategy director at digital agency Tribal DDB points out that it’s not necessarily the case that more expensive goods won’t shift on these media: “Perceived wisdom says it’s the lower end, younger stuff, yet Burberry is doing exciting things from the point of sharing and friendship groups. We all go on recommendations.”

Judging by the success of Fab.com, that’s very much the case. It claims that in January, traditionally a poor month for sales, 8% of every log-in to the site resulted in a purchase. Not bad for what is generally regarded as a difficult month for retailers. Its decision to think ‘mobile-first’, with about one third of its revenue coming from mobile in the US, makes it a forward-thinking brand in other ways, too. For those who claim that what sells on social channels tends to be limited to the ephemeral, clique-ish or low price-point items, take note that Fab.com sells everything from jewelery to furniture, and stocks items retailing at over £1,000. It wasn’t so long ago that the average consumer was nervous of posting their credit card details online. Fab.com proves that being brave and doing things differently can pay off.

Lucy Fisher is a freelance journalist specializing in media, marketing and technology

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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