Social Commerce is a new phrase which is a mash up of two of the internet’s most pervasive technologies – ecommerce and social networks, but is it a real phenomenon and what’s the size of the market?

With average conversion improvements of 40%, Social Commerce is real and there are 2 key aspects; Recommendations and the power of groups.  Recommendations is something that’s 2/3 years old on the web – it’s basically where a product shows customer reviews from real people.  Our partners at Bazaarvoice are leaders in this respect and have some interesting statistics – 85% of people will trust a customer review over the site content and having reviews increases a conversion by up to 70% (on a reviewed site, 0 reviews leads to a –30% downturn, 1-5 reviews 20% increase – even if they’re negative, 5-15 reviews 40%…).

The power of groups is all about automatically twittering / facebook status updates during the path to purchase, with the real power being that a friends list contains groups of people who are demographically similar.   For example, a customer buy’s a Plasma TVs and his Twitter account is updated:  “Jim bought a new 46” flat screen”.  Human beings are status driven animals, and posts like this will compel friends think about buying buy a 50″ flat screen.  Our partners at ATG support this automatically with version 9.0, and Bazaarvoice support this with their SocialVoice product again with measurable impact on business.

SKU based retail (clothing, electronics etc.) is taking a lead in social commerce but other industries will catch-up and as always the first to implement will benefit from being the first to market.  For instance, recommendations are becoming common for direct to consumer financial services products such as credit cards, but is not common in insurance.  The first health, general and life insurance companies to implement recommendations should see a big increase in direct to consumer sales.  Again, social network updates will also impact this market, if a friend broadcasts that they received 12 months for the price of 10 on home insurance with Provider X, it’s likely to impact sales in a positive fashion.

The next step is to embed the path to purchase into the social network.  With the ease of use of the Facebook and OpenSocial APIs this is a fairly trivial task and one which could lead to a revolution in internet commerce.

As an SME consulting company, we often come up against large offshore development set-ups and the classic accountancy argument “We’ll use them as their day rates are a fraction of yours”.  There is an obvious problem with this – software development is complicated and expertise gained over years of coding, integrating and testing can lead to orders of magnitude of improvement in speed of development and subsequent quality.

We’ve recently come up against an excellent example of this.  While on client site, we were integrating to a credit card provider in Mule via web services.  Mule supports CXF, Axis 1 and Axis 2 as Java WS frameworks, and they all have positives and negatives so we advised the client to use the same framework as their offshore supplier had used in the back-office system to ensure support and maintenance was made easier.  We subsequently discovered that, as they had no experience of Web Service integration, the offshore supplier had used HTTPConnection and DOM – i.e. they were hard-coding each web service call.

That afternoon, we integrated all 5 webservices and used Mule’s definition XML to model the control process.  In 4 hours work we had acheived the equivalent of over 200 man days of offshore development.

Expertise was obviously the clear winner here!