Visa: Does Social Networking Drive E-Commerce?

The study, which compared the shopping habits of consumers who purchase online to those of consumers who use the Web but buy only offline(2), indicated that more online buyers use networking tools and platforms to share opinions, insights, experiences and perspectives than their offline-buying counterparts. Compared to Web surfers who did not make online purchases, online buyers in the study were more than twice as likely to have written a product review (29 percent versus nine percent), twice as likely to have posted video content to the Web (19 percent versus eight percent), and more likely to have written a blog (35 percent versus 21 percent).

The importance of this user-generated content is evident: Sixty percent of online buyers selected "consumer reviews" when asked to note their most trusted information source compared to 31 percent who indicated newspapers or magazines. "Consumers are increasingly turning to their online community or network for advice instead of traditional mass media," said Jim Okamura, Senior Partner at J.C. Williams Group. "It is indicative of the shift to an empowered consumer and the rapid fragmentation of media channels. It definitely presents a challenge for online marketers."

The key question, according to Yahoo!'s Hunter Madsen, is "whether the information-sharing habits developed in online communities are creating a secondary benefit, by somehow raising propensity to shop online as well. You could call it the Social Engagement Effect on E-Commerce." Madsen, a former social scientist who directs marketing for Yahoo! in Canada, noted that "marketers have been somewhat hesitant up to now to advertise in the Web's community sites, for a variety of reasons. But this study suggests that, other things being equal, social networking sites are where they'll find some of their most responsive shoppers. When one considers that the 'social networking' phenomenon is just taking off in Canada, the potential benefits for online commerce look promising." Over half of all respondents in the study reported having used social networking tools for one year or less.

The overall growth of E-commerce in Canada is also evident from the study results. Online shopping behaviour was compared to last year's study, with the most notable growth in the breadth of product categories purchased online. "It's interesting to see online shopping habits evolve as it's a positive reflection of consumer confidence," said Michael Bradley, vice president, Products at Visa Canada. "Retailers are improving the online experience for their customers by incorporating better online functionality to their sites and providing shoppers with tools, like the Verified by Visa service, that add an extra layer of security to the check-out process and helps protect Visa cardholder information."

According to the survey, more Canadian online buyers made purchases in high-value categories such as clothing and accessories (23 percent bought in the past six months, a gain of two percent versus 2006), consumer electronics (21 percent; an increase of five percent), tickets (24 percent; up four percent), and furniture, home and garden (six percent; an increase of two percent versus 2006).

While Canadians are varying the types of purchases made online, more online buyers are taking the time to comparison shop. The survey found that 38 percent of online buyers will visit more than one online store, an increase of four percent over 2006, before finalizing a purchase and 37 percent (also an increase of four percent over last year's results) use a search engine to find a retailer. Canadians are also spending slightly more than they did one year ago ($454 versus $447 in the past six months).

The intersection of E-Commerce and Social Networking will continue to provide a glimpse into changing consumer priorities, including how they shop and buy products and services. As retailers and marketers embrace both trends, consumers will determine the winners and losers with a click of their mouse.

The study was conducted between April 19-27, 2007 with 1,500 online buyers and 500 offline buyers. The margin of error for online buyers is +/- 2.6 percent at a 95 percent level of confidence and among offline buyers it is +/- 4.5 percent at a 95 percent level confidence.

(1) See appendix for types of 'social media' activities online.

(2) Online buyers are defined as those who personally complete E-commerce transactions, while offline buyers are Internet users, but do not transact online.

Email: acole@visa.com