Young, rich and social: Is this the future of retail?

Heather McIlvaine

15th Nov 2017

This is the first part of a feature on social commerce. Come back tomorrow for part two. 

You may have noticed a shift in the type of content appearing on Facebook and Instagram over the years. In between funny anecdotes shared by friends, eye-roll inducing political rants from relatives and all those puppy pics, you’re probably seeing a lot more ads for businesses.

Many of these businesses offer a few niche products, sell online only and advertise almost exclusively through social media. But don’t let that fool you. Though they may not be widely known, they are often doing millions of dollars in revenue a year.

Take HiSmile, for instance. Started by millennials Nik Mirkovic and Alex Tomic in 2014, the Gold Coast-based teeth whitening company is a global phenomenon on the cusp of achieving $40 million in annual revenue. 

But if you’re not part of HiSmile’s target audience, you’ve probably never seen their colourful ads and celebrity endorsements, much less heard of the brand.

Indeed, it is this ability to efficiently reach just the right customers through social media that is propelling new businesses to success so quickly. 

You might ask what’s so different about the way businesses like HiSmile use social media. After all, it’s not uncommon for major Australian companies like Myer and Woolworths to be on Facebook and Instagram.

What’s different is their size relative to their reach.

Businesses used to need to have large customer databases or organically build a big following to ensure they were seen by people on social media. But now they can target people they never knew existed using algorithms developed by Facebook and Instagram, enabling them to punch well above their weight when it comes to generating revenue. 

To be fair, Facebook has had this technology for a few years already. It’s just that now the early adopters are beginning to reach critical mass.  

“Even five years ago, if you didn’t have followers on your Facebook Page, you wouldn’t have been able to connect with potential customers. There’s been significant change over the last few years to allow businesses to target audiences they didn’t even know existed,” Laura Qureshi, co-founder of DO Commerce, says.

Qureshi says she is currently working with an e-commerce company that will rely entirely on Facebook and Instagram advertising to reach its audience at launch.

“Never before have I seen people build a business from the ground up, without having a single Facebook fan or follower, or customer in their database, and be able to generate revenue immediately,” she says.

HiSmile, Showpo, Cycology

Indeed, HiSmile’s head of marketing Justin Gaggino attributes 100 per cent of HiSmile’s website traffic and transactions to its social media presence. The business works with around 3,000 influencers at any given time and uses essentially every ad format available on Facebook and Instagram.

“You don’t need to buy a customer list like in the old days. The world is your list, because Facebook allows you to target any group under the sun. All you have to have is an understanding of your target market,” Gaggino says.

Showpo is another multimillion-dollar online business that has grown largely through social media. Launched by Jane Lu in 2010, the women’s fashion brand sells apparel and accessories and is omnipresent on Facebook and Instagram.

“We find that Facebook in particular is a great platform for us, but Instagram is as well. We’re quite aggressive, we use pretty much all of the available formats. It’s a combination of stuff that’s more engaging and fun and some stuff that’s more ‘show me the money’, which is more product-driven,” Showpo’s chief marketing officer, Mark Baartse says.

Citing the difficulty of accurately attributing sales to a specific activity, Baartse estimates that around half of Showpo’s sales are the direct result of a post or ad on social media.

Dean Rushton, director of marketing at Cycology, an online retailer selling casual and technical cycling apparel, attributes around 70 per cent of monthly sales to social media.

“The growth of the business has been off the back of Facebook. Social media has been a really critical component to our business. Eighty per cent of new-to-site customers come from social media platforms,” Rushton says.

Though he declined to provide exact sales figures, Rushton says the five-year-old business is generating in the single-digit millions in revenue, and doubling year-on-year.

One thing all these retailers have in common is that they remain relatively unknown outside their target market.

“Kids in their parents’ garage or mums who start a business on ‘mat’ leave are targeting customers in the same way Amazon is. They can grow to quite significant sized businesses, but it’s only their target customers that have seen or heard of them. But it’s because they’re so efficient at [targeting the right audience],” says Kate Box, Facebook’s head of retail in Australia, adding that it’s largely due to social media being mostly viewed on mobile devices.

“Because mobile is such a personal device and you consume content in a one-to-one way, it doesn’t always drive awareness in the same way [as traditional media],” she says.

Social media is undoubtedly a vital part of building an e-commerce business today. But what are the dangers of relying too heavily on social media to reach customers?

Come back tomorrow to read part two of our feature on social commerce. 

A version of this story first appeared in issue 2166 of Inside Retail Weekly. To subscribe, click here.