Hidden Dangers: Holiday Shopping on Facebook

Well, if you were one of the millions of people braving freezing temperatures early Friday morning in hopes of scoring that perfect Christmas gift, the impact of social networks on this year’s holiday shopping comes as no surprise. First, Facebook hosted not one, but several Fan pages advertising advance posts of the coveted Black Friday ads — of course these Facebook fan pages were more hype than actual information.  Foursquare and Facebook Places had a more immediate impact on buyer behavior by rewarding customers for their check-ins. So, the question is: will you do your holiday shopping on Facebook this year?

With more big box companies embracing social networks, it’s likely we’ll see even more of Facebook, Twitter, and Foursquare — in fact, the transformation they wrought this year will probably be even more pervasive in the future.

Marketing holiday shopping on Facebook

Here are some of the ways businesses used Facebook and other social media as part of their marketing strategy this holiday:

• Facebook promotions of Black Friday — while Facebook didn’t generate all the sales on Black Friday, Facebook is credited with making a significant impact on the nearly $11 Billion retail sales on Black Friday.  Facebook is also getting much of the credit for a 16% increase in online sales on Black Friday.  Unfortunately, much of this is a result of deep discounting by big-box retailers who are still hurting from dour sales in the last couple of years.
• American Express hosted “Small Business Saturday” and despite garnering over 1 million Facebook likes, the event was pretty unspectacular from a sales perspective.
• Meanwhile, Target was the big winner when it comes to generating sales through Foursquare check-ins — with almost 25% of all check-ins on Black Friday.  Location-based apps like Foursquare and Facebook Places encouraged consumers to check in at stores in exchange for coupons, free stuff, and badges.  For instance, Toy’s R Us gave the first people checking in to their stores a 15% discount.  Other retailers, like JC Penney, American Eagle, RadioShack, and many others offered similar discounts.
• QR codes made it big this holiday season.  These undecipherable squares of black blobs can be read by special apps on your smartphone, which sends you to a website.  Once there you can get lots of information about the product, get special deals, some even allow comparison shopping across retailers.

The downside of holiday shopping on Facebook and other social media

While things look rather rosy today — Cyber Monday, it remains to be seen what the net effect of social media on holiday shopping — or shopping in general — some things already seem likely.

Increased pressure on pricing

— all the apps that tell you an item is cheaper at a store across town will put pricing competition on steroids.  This might be good for consumers, but its a disaster for retailers.  In the end, consumers will likely suffer as full-service retailers will have to cut services to compete with discounters showing up in all those price comparisons.

Increased costs

Black Friday will extend beyond the 3 days it already consumes between Black Friday, Small Business Saturday, and Cyber Monday.  Already stores competed to get customers early by starting their Black Friday sales on Thanksgiving (or opening as early as midnight on Friday).  Some retailers started sales even before Thanksgiving.  This is due to pressure to capture your share of the consumer’s wallet before someone else beats you to it.  However, this extension beyond Black Friday increases labor costs and may eventually drive consumers to spread their holiday shopping over a week or more, which reduces the impact of having a single day event.

Privacy

Privacy might be an issue for folks using social media heavily to support their Holiday shopping.  Sure, there are privacy policies, but hackers don’t care about following the rules.  Privacy will become even more of an issue next year when digital wallets are likely to become standard fare for the techies among us.

Dividing the pie differently not increasing the pie

Likely consumers have some limit on what they’re willing to spend for the holidays. The idea of Black Friday is to lure consumers in with deals too good to pass up leading them to spend more of their money with you than a competitor. That’s great until consumers demand bigger deals to drive them into your store. Then, the cost of your Black Friday doorbusters might bust your purse — have a negative impact on your bottom line.  This happened just before the dot.com bust in early 2000.  E-tailers (online retailers) were spending more to get a customer than the customer was worth.  Unfortunately, this became a zero-sum game with all the retailers trying to discount products and provide freebies to lure customers into their website. Thus, the dot.com failures.

So, is Facebook business marketing the answer to your holiday prayers?  Maybe not.

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