8 Reasons Why Online Communities Are The Next Big Thing For Retailers
By Tom Leung, CEO, Yabbly
About five years ago, branded communities were the talk of every brand agency. The theory from brand executives was: “Why drive potential customers to Facebook, when we could host them within our sales channel on our own web site.”
Dell launched Digital Nomads, a community for office-less workers; Sony launched VAIO Nation, a community for new and established artists to share skills; Ford launched syncmyride.com, a community for users of its voice-activated entertainment system. By and large, these communities, and many other branded communities launched around this time, were failures. Most are now defunct. The reason?
The majority of first generation, branded communities centered on restricting the community to a very narrow band of products, rather than ensuring there was enough breadth and depth of topics to justify habitual usage. Secondly, the brands behind many of these communities had short-term outcomes in mind rather than long-term visions.
When they didn’t become Facebook-sized overnight or were unable to illustrate a correlation to increased sales, the plug was pulled. Finally, they really were before their time — both in terms of consumer interest and the technology available for implementation.
Today, we’re seeing a renewed interest in online communities from brands, and especially retailers. Best Buy launched Shoppable Hangout, a pop-up community over the holidays that gave consumers last-minute shopping advice through Google Hangouts.
Net-A-Porter recently launched The Netbook, an invite-only online community that lets consumers follow their favorite fashion trendsetters. Sephora’s Beauty Talk community has over 300,000 conversations.
So why are retailers starting to create their own online communities? Here are eight reasons:
There’s a consumer hunger for human-sized communities. Facebook has more than a billion users today. However, since everyone is on it, it lost its sense of closeness and intimacy hundreds of millions of users ago. Consumers want a personal connection and feel like they belong. As an example of this, there are more than 6,000 subreddits and with an average of 400 logged in members per community.
We live in a world of Amazon, eBay and free delivery. It’s nearly impossible to differentiate yourself or compete solely on price and delivery. Retailers can leverage communities to illustrate their mission-driven approach, rather than a typical sales-driven approach, and differentiate themselves. Not surprisingly, 75% of consumers do not feel emotionally connected to their favorite retail stores today, according to Yabbly’s 2013 Consumer Survey.
You may already have a community in waiting. Retailers already have customers who have chosen to shop at their stores, part with their hard earned money and share their email address. So a store’s existing customers are a self-selected group that would naturally form a seed community. Our research found that 45% of consumers would try an online community from their favorite retailer and 85% would find a retailer curated community helpful.
This may be a land grab opportunity. There probably won’t be hundreds of viable communities in every retailer category. More likely, the market will support some fixed number of outdoor products communities, cooking products communities, mom product communities, etc. In fact, the first few will likely be disproportionately larger than the rest and in the formative years these, early movers will have a big advantage over the smallest communities, which may have trouble getting liquidity on their conversations and member engagements.
It’s easier and more cost-effective to acquire lifetime members than one-off customers. It’s been widely reported that only 2% to 3% of Facebook fans see your page’s posts and that most retailers’ customers are one-time buyers. So one of the only ways to get them back these days is to spend money on sponsored content, promoted posts, SEM, etc. which is pricey. If your owned and operated community had people coming back on their own volition on a regular basis, you could save millions on paid ads or redeploy those funds for other purposes.
Building a robust online community is an increasingly solvable problem and its success is measurable. Because of advances in software development infrastructure (ironically, thanks to Amazon web services), retailers can roll out new web experiences faster than ever before. Whether you build it in-house or partner with a technology vendor who specializes in it, you could now launch a pilot in months or even weeks, not years.
Communities unlock key customer insights and enhance personalization. We’ve seen typical members author 10-20 items of original content per year. This is data like what products they recommend, what products they’re asking about, what products they don’t like, what they love, why they recommend certain products, etc. Furthermore, more people will contribute content in a community environment instead of submitting the “n-hundredth” review on a product detail page they have no reason to visit.