Retailers Embrace Social NetworksBy Clint Boulton | Posted 11-30-2007
Retailers Embrace Social Networks
Retailers Embrace the Social
Amway is the place where social networks meet e-commerce.
In any digital era prior to Web 2.0 this postulation may have seemed absurd, but it is true thanks to a new online entertainment store called Fanista. The site is the latest example of how retailers are employing social networking practices to sell their products and create connections among customers.
Fanista, which opened in beta Nov. 20, currently sells CDs and DVDs, and it will expand to video games and books in the coming weeks and months, said founder Daniel H. Adler.
Users can digitally drop by the store to shop. However, like a social network, buyers can become members of the Fanista network, creating custom profiles with lists of favorite CDs and DVDs. These members can then invite friends to join.
If those new members join and buy something, they have the option to list those friends as the reason for joining. The friends who invited them will get a 5 percent cut of the sale, good for cash or credit. Adler likened this to the commission salespeople get when shoppers tell a cashier who helped them on the shop floor.
It is this monetary motivation that is not available on Facebook or MySpace, which together boast more than 150 million users. However, Adler doesn't expect users to flee Facebook or MySpace for Fanista. Rather, he sees it as a complement to those networks, which are more general interest.
"Shopping is an incredibly social experience and unfortunately that has never translated well online," Adler said. Adler, whose resume includes stops at Creative Artists Agency and Walt Disney, said he targeted entertainment because it's the vertical where people are most influenced by their peers instead of marketing spiel.
It is that social network aspect that Fanista, appropriately based in entertainment-centric Beverly Hills, Calif., is driving home.
Any user can go to Amazon.com, read and post reviews, and buy music, DVDs and anything else they can get at Wal-Mart. But where Amazon is Wal-Mart, Fanista is the local independent music shop, populated by music and movie fans willing to share their tastes, or even best and worst concert or movie experiences.
"It brings out the storyteller within everybody around the thing that is a shared experience for all of us," Adler said.
Improving Brand Visibility
Fanista is the latest of many retail sites looking to use computer-based social networking to sell products, or at least improve brand visibility.
Pepperidge Farms, a maker of baked goods based in Norwalk, Conn., has created Artofthecookie.com, a site to help women bond to improve their social lives. Women can connect and get tips from a social connections expert on the site.
Pepperidge Farms believes the connections could lead to better brand awareness and ultimately greater sales of its cookies and other baked goods. To support the site, the company created a national advertorial that is running in November in Good Housekeeping, Redbook and Country Living.
Forrester Research analyst Jeremiah Owyang said it's not so much that retailers are turning to social networks but to where people currently are sharing their lives. Marketers follow crowds; millions of people are turning to social networks.
Echoing Fanista's Adler's comments about peer groups and entertainment, Owyang said people trust their friends far more than any marketer, resulting in a disruption for marketers trying to reach customers directly.
"The traditional marketing funnel is inverted; customers pass recommendations directly to their friends using these social networking tools," Owyang said.
Adler won't disclose exactly how much parent company Amway has pumped into Fanista, which he has been working on for a few years. Fanista currently runs ads from the One Laptop Per Child initiative but will eventually run ads from multiple parties on the site in a similar fashion to other social sites, Adler said.
With privacy issues at Facebook and others of its ilk looming large, Adler said Fanista does not share personal information. Moreover, there is very aggressive self-policing on every Fanista page, as well as the standard "report abuse" links.
Though Fanista may be novel now, don't discount it as a novelty. Forrester's Owyang said many brands are starting to evaluate whether to join social networks such as Facebook or MySpace, or create their own social networking site. For many, the answer may be both.
"Looking forward, while the first reaction will be for brands to join social networks where their market exists, we're seeing a trend where a network of friends will be able to separate from a social network and move onto brand Web sites," Owyang said.