You don’t normally buy a sweater or a pair of sneakers on Facebook (FB). But the giant social-media company is becoming the biggest factor in retail nobody is thinking about.
“You read the analyst reports and talk to CEOs, and a lot of the conversation is comparison to other retailers and to Amazon,” Tom Andrews of consultancy SY Partners tells me in the video above. “What we may be missing is the company taking a lot of our attention right now in an attention economy, which is Facebook.”
Traditional retailers such as Macy’s (M), JC Penney (JCP), Gap (GPS) and Kohl’s (KSS) have been struggling with disappointing sales, weak profits and declining stock prices since at least last summer. They face twin challenges in the rise of online behemoth Amazon (AMZN) and changing consumer tastes. On top of that, says Andrews, Facebook is commanding Americans’ attention for an hour per day, crowding out the time people might otherwise spend shopping.
“We have an oversupply of distractions … and a finite amount of time,” Andrews says. “Who’s actually producing your attention and selling it to others? It’s Facebook.“
On top of that, Facebook has rolled out a new way of using bots -- software able to converse with users -- to help with retail purcahses at the 15 million business that have an official Facebook page. If they catch on, the bots, which communicate with users via Facebook's Messenger app, could end up being an important source of business for some companies.
Surfing social media isn’t the only way retailers must change with the times in order to remain relevant and survive. The old model of simply stockings shelves with products is basically dead, since it’s more convenient these days to buy most things with a few clicks online. When people do go to a store, they expect an entertaining experience in addition to good deals and attentive service. Andrews cites Lululemon (LULU) and Nike (NKE) as examples of companies that can turn a store visit into an experience by engaging customers with staffers knowledgeable and passionate about the same hobbies the customers care about.
Facebook isn’t a sales channel, but it is a window into the things consumers care about, talk about and share. Kohl’s scored a big win recently when a customer posted a video of herself on Facebook after buying a Chewbacca mask at the store that she tried on in a parking lot, while laughing hysterically.
The company reached out to her within 24 hours, offering a pile of "Star Wars" swag and other goodies – earning itself some social cred by piggybacking on a viral video that has so far racked up 153 million views. “That’s how you take something happening in social media, and roll with it,” Andrews says. Wash, rinse, repeat.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.