Online retailers turn to social networks for holiday profits

Buying things has always been social.

That’s the thinking at Zappos.com, one of the largest online shoe and clothing stores. And that’s why the Nevada-based company turns to social networking sites like Facebook and Twitter to answer customer questions and complaints, and to tell fans about their funky company culture.

It’s also why Zappos executives have tried to make the site itself more social and by investing time, money and staff to grow the company’s presence on Facebook and Twitter.

According to Nate Luman, Facebook marketing lead for Zappos, all of these social efforts have been paying off – especially during this holiday season.

“We definitely see social networks as a source of traffic to the Website leading to sales,” said Luman, adding that Zappos has had more social networking-driven traffic this year than ever before. “We recognize the importance of Facebook and see a lot of opportunity driving traffic and sales, as well as facilitating top-of-funnel brand interaction. Over the course of the year, we structured our team to support the growth of these efforts.”

The marketing and sales teams at Zappos aren’t the only ones working hard to tie their online sales in with social networking.

Many major retailers are integrating online sales with social networking during the holiday season.

“This is really just the beginning,” said Rob Enderle, an analyst with the Enderle Group. “Some retailers are reporting up to 300% growth as a result of social networking and that makes this technology likely the difference between success and failure during these hard times. It has become critical to the survival of some retailers.”

Many retailers have turned to sites like Facebook, Twitter and Google+ to offer online fans sales alerts and special offers. They also use social media to push some of the hottest — or even slow-moving — products.

Target, Macy’s, Best Buy and Dell are all working to integrate their sales efforts with social networks.

“With online commerce revenue rocketing forward at 15% growth this year, it is incumbent on brands to create and leverage any advantage they can generate for themselves among online shoppers,” noted Hadley Reynolds, an analyst with IDC.

Reynolds and other analysts agree that Facebook seems to be the most influential social network, largely due to its massive global reach with an approximate 800 million worldwide user base.

“Wal-Mart, for example, has developed a gift recommendation Facebook application,” said Reynolds. “Facebook is clearly the sweet spot, with its audience reach, the success of its “like” program and the level of activity….”

Zappos’ Luman noted that Facebook has become a great social network to support many of their retail initiatives, like customer service, customer outreach and marketing.

“Customer service is natural and conversational on our fan page wall,” he said. “We make it a point to respond to every post on our wall. We see Facebook facilitating another level of our customer service by enabling fans to interact with us and take part in our culture.”

When it comes to dollars and cents, Facebook is the leader there, too.

“Facebook has the largest direct impact on Website traffic and sales,” Luman added. He did not specify how much of the company’s sales can be attributed to Facebook or any other social network.

To take advantage of the surge in social networking and the positive effect it can have on a company’s bottom line, Zappos has worked hard to deepen that integration.

“Compared to previous years, this year our teams that work with social networks are better structured and have more resources to have a bigger impact,” explained Luman. “The use of Twitter by our customer loyalty team has increased in relation to the growth of Twitter among our customer base. The area where we have made an investment to grow is Facebook.”

Retailers are smart to reach out to customers since shoppers already are using social sites, along with social features — such as “+1s” and “likes” — to poll their online friends about what products they like and dislike.

With that kind of power in play, retailers need to put some muscle into social efforts.

“We are entering a unique and empowering era for consumers,” said Patrick Moorhead, principal analyst with Moor Insights & Strategy. “Only now can they receive frictionless and immediate feedback on holiday gift ideas from trusted sources. Research shows clearly that trusted friends and colleagues who have actually purchased and used products carry the most weight.”

And shoppers can quickly and easily turn to their online friends to get advice and hear about personal experiences with the products they’re considering.

On Twitter, for instance, users can search for product names and get a good sampling of what users are saying about them. And Facebook users can post questions about products in their status updates and let friends fill them in on their experiences and preferences.

“The smartest companies employing social media for the holidays are acting as personal concierges, scouring social media sites for comments on their products,” said Moorhead. “Social media acts not only as an early warning radar system, but [lets companies] personally respond to questions and complaints from a shopper. A direct communication on Twitter goes a long way in swaying consumer choice. It makes them feel special and because it isn’t a mass email, they feel taken care of.”

There definitely is a double-edge sword in this new social situation.

When an unhappy customer lays into a clerk in the confines of a brick-and-mortar store, people who witness it may tell a few friends. However, when an irritated customer complains on a social network, thousands of people could see the comment and be influenced by it.

That means companies are spending a lot of time to closely follow what is being said about them online. It’s critical to ward off a firestorm of complaints before it takes off.

“Next year,” said Enderle, “I expect we’ll see more companies doing more with social as best practices float to the top at the end of this quarter.”

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon’s RSS feed . Her e-mail address is sgaudin@computerworld.com.