The advent of social commerce has resulted in a new business model for e-commerce. Although studies on this business model have increased over time, they have paid less attention to its core business model: consumer-generated social influence on sales on a social commerce site. Therefore, in this paper, we examine the effect on sales of social sharing, such as Facebook “likes” and Twitter tweets, which generate social influence, using data from major social commerce companies. We find that consumer-generated social referrals regarding deals significantly boost sales in social commerce. When we examine deals involved in national sales, this finding holds only for Facebook but not for tweets. These findings have the implication for managers that not all social referrals are meaningful in increasing sales for their business.
Social commerce, from deals on Groupon.com to buyable pins on Pinterest, has grown to a value of several billion dollars (Dholakia, 2011a) and continues to grow at a significant rate (Anderson, Sims, Price, & Brusa, 2011). For example, in 2012, Groupon.com reported annual revenue of approximately $2.3 billion1 and tens of millions of registered users (Byers, Mitzenmacher, Potamias, & Zervas, 2011), serving more than 500 markets in over 48 countries. In 2015, Pinterest launched “buyable pins” to allow customers to shop on its social media platform. The rapid growth of social commerce has been driven by synergy between e-commerce and social media, which has enabled existing e-commerce business models to successfully utilize and adapt to the changes that resulted from the rise of social media.2 To amplify the use of social media in e-commerce business models, social commerce firms such as Groupon.com employ a strategy of offering deep discounts as a decoy (Mason, 2013) and focus more on products or services from local merchants. Using this attractive business model during the early period of social commerce, social commerce firms acted as online distributors of deals offering significant discounts, and they aggressively increased their business by seeking to operate in multiple locations (Liu & Sutanto, 2012). However, they have begun to depart from that initial business model, retaining the use of social influence but discarding the use of the tipping point3 and focusing less on local merchants to introduce goods and services for sale nationwide. Social commerce is a new phenomenon, prompting studies to examine it. On the empirical side, a recent study examines the effects of other customers on sales in social commerce, focusing on word-ofmouth (WOM) (Amblee & Bui, 2011; Ullah, Amblee, Kim, & Lee, 2016 ; Ullah, Zeb, & Kim, 2015). Other studies also consider social influence from online WOM (Okazaki, 2009) and suggest that it changes customers’ attitudes about a product, which in turn affects sales. However, the focus of WOM is mostly online product reviews, which rarely spread through social networks. Furthermore, reading online reviews at the online store implies that an individual already has an intention to purchase a product. A recent report shows that the main traffic to content articles is driven via social referrals, rather than Google searches (DeMers, 2015), and some e-commerce firms receive high amount of referrals from social media (Shields, 2015; Yang, Kim, Amblee, & Jeong, 2012). So it is questionable whether this widely employed business model utilizing social referral actually plays a significant role in sales. From a behavioral perspective, previous studies investigate the relationship between social media and social commerce based on users’ trust and the intention to use social commerce. Specifically, they consider the perspective of social support and social presence. Social support is based on reciprocity among social network users and the perception that how others care about a user affects the intention.