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It’s Not Amazon That Should Scare Retailers, It’s Facebook

"Facebook feels like a personal shopper," writes Euclid CEO Brent Franson. "The company’s using my data to personalize the ads in my feed - and it’s working."

Most retailers spend the bulk of their time wringing their hands over Amazon.

But they’re not spending nearly enough fretting about Facebook. The social media giant runs an advertising platform that’s the most effective on the planet (with a 47 percent increase in revenue last quarter alone, that much is clear).

Without too much fanfare or chest-thumping, the Silicon Valley stalwart has stealthily begun reshaping retail – and it’s working. Here’s how they’re doing it – and why traditional retailers must immediately step up to survive.

The thrill of discovery is there again. 

Remember when you went to the mall as a teen? It was exciting to visit a new store, and find something that you loved and didn’t know existed before you walked in.

Discovery is a powerful driver of pleasure. And although Facebook doesn’t share data, the winners seem to be those niche, online-first players because they deliver that same type of thrill.

Perhaps it’s because in the age of e-commerce, consumers are now even more familiar with brands like Macy’s, Bloomingdale’s, and Neiman Marcus – and their inventory. And in this case, if familiarity doesn’t quite breed contempt, it does spark a desire to stand out from the crowd.

Facebook feels like a personal shopper. 

The company’s using my data to personalize the ads in my feed – and it’s working. These days, I start my online purchases on Facebook and Instagram and it’s entirely unintentional, even serendipitous.

It’s functioning as a weirdly perfect wish list of products I’d never heard about that I also somehow really want. The ads don’t feel intrusive; I now actively seek them out when I need something new. Facebook has done something pretty remarkable: its ads, in this capacity at least, actually succeed in improving my experience with the company. And they catch me up-funnel, before I’m even actively shopping.

This is a total reversal of what we used to do.

In traditional retail, I might go to the mall, wander into a store, check out the men’s section, laser in on the sweaters, and buy what I want.

When I go to that same store’s website or app, it’s a similar process but just online (start with the website, find “Men” in the menu section, etc.). Facebook removes all of that work by tailoring and serving the selections right to me.

It’s that holy grail of “surprise and delight” the customer. I’m often introduced to smaller niche brands that fit my style and in return, they get more exposure and revenue, without the burden of a middleman-style department store arrangement.

It’s hard to beat the power of Facebook’s machine learning engine…And that’s precisely why it can win retail. It is reshaping how shoppers discover products they want – and shifting their buying behaviors.

Facebook’s ad platform operates so well because of massive datasets the company has on its 2.07 billion users. This extends far beyond basic demographics like age, race and marital status – and deeply into context that’s suggested by your friendship network, comparable behaviors and traits of others like you in the broader Facebook ecosystem. What’s more: the company’s machine learning is constantly feeding its impressions, clicks and purchases into the algorithms that decide which ads to run.

This nonstop feedback loop means ads have greater relevance all the time – the machine is constantly and automatically learning. Consequently, we no longer have to meander into a store to find something we need or even waste time hunting online. It’s served right to us – and it’s likely to do a pretty good job of meeting or exceeding our expectations.

So just how do traditional brick and mortar retailers compete?

The answer is simple: by leveraging Facebook’s primary lesson of intelligent data acquisition and deployment. Use data, specifically develop the roadmap to knowing the identity of 100 percent of your customers (with their permission) and having visibility into 100 percent of their touchpoints with your brands, regardless of online or in store.

Doing so successfully can help retailers create compelling, enjoyable, cross-channel experiences that feel congruent and seamless, whether consumers are in stores or on their phones.

Retailers truly committed to winning should start with the simplest of strategies: build trust with consumers and offer something meaningful in exchange for their valuable data. Then consistently use that data responsibly, deliver delightful experiences that save time and money, and repeat.

*Brent Franson is CEO of Euclid, a mobile location analytics platform. Before he joined Euclid, Franson was the Founding Head of Sales and Vice President at Reputation.com Prior to assuming his role at Reputation.com, Franson spent several years building a full-service international search engine technology agency, which ultimately grew to include offices in Philadelphia, Denver, Mountain View, and Bangalore. 

Franson previously wrote on GeoMarketing about retailers could face Amazon’s assault by revamping the current co-op marketing and data sharing models. Check it out here.

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.