June 1, 2007, 12:00 AM

Socialize First, Shop Second

Another Web 2.0 development, social shopping sites, is bringing consumers together.

For many who love to shop, the next best things to buying merchandise are browsing and chatting about merchandise-planning the next strike, so to speak. The relentless and continual evolution of social networking and consumer-generated content, together commonly referred to as Web 2.0, is enabling Internet shoppers to move beyond transactions to achieve shop-talk unlike anything they’ve ever experienced. It’s one thing to talk with a couple friends over dinner and get their opinions on the latest goods, but it’s something else entirely to get recommendations from and provide feedback to a couple hundred-thousand fellow consumers.

Social shopping sites enable just that, and in ways comparison shopping sites don’t and web retailer sites can’t. Social shopping sites connect consumers and give rise to discussions and recommendations (personal, one-to-one, as well as automated, based on users’ likes and dislikes), unlike comparison shopping sites, which typically focus on weighing product prices, attributes and merchants’ reputations. Further, they are independent of e-retailer sites and e-retailer-managed consumer product reviews and thus negate in the minds of many shoppers concerns about a dearth of negative reviews or an abundance of positive ones.

E-commerce is becoming more and more social, says Boris Wertz, COO at AbeBooks Inc., an e-retailer that specializes in used, rare and antique books. “Social shopping is a logical extension of e-commerce; it makes sense,” Wertz says. “It may not take over the world, but it’s a good way to help consumers with product discovery.”

An impact already

Social shopping sites already are having a significant impact on how people shop, and e-retailers should take them seriously, advises Jeremy Dalnes, vice president of e-commerce at Panasonic Corp. of North America. “I have personally responded to consumer feedback on social shopping sites and blogs,” Dalnes says. “And you could see a difference before I posted and after. People reacted in a great way, saying they were happy with the way the company was taking care of them by responding.”

There are more than two dozen social shopping sites to date. They include Kaboodle, ShopWiki, StyleFeeder, ThisNext, StyleHive and CrowdStorm. Users register for free and create profiles that include favorite products and product categories as well as information about themselves. They then add links to the products in their profiles or products they post on the site that take fellow users to a specific product page on an e-retailer site, where social shopping site users can make purchases.

Users also can create and place personalized widgets-small, typically HTML-coded boxes with links to social shopping site profiles and products-on their social network spaces, blogs or other sites. This handiwork could be important for e-retailers because 30% of social network users trust the opinions of their peers when making a major purchase decision compared with only 10% who trust advertisements, according to JupiterResearch, a research firm specializing in the impact of the Internet and emerging technologies on businesses.

“E-commerce is being redefined: In this case, a multitude of shoppers are able to interact and pick and choose and recommend products with other shoppers online,” says Shyam Krishnan, program manager and team leader at research and consulting firm Frost & Sullivan. “This will go a long way in helping online retailing.”

Social shopping sites bring in revenue typically through -selling advertisement space, joining programs with affiliate marketing companies and/or direct affiliations with e-retailers that give the social sites commissions on purchases made via the links. The latter is a new twist on conventional, third-party affiliate marketing programs. Some social sites, though, do not bring in revenue. They operate on funds from venture capitalists waiting to see how the sites fare and determine optimum revenue models.

Venture capital-backed StyleFeeder LLC, which quadrupled registered users between November and April and is growing at about 40% every month, the company says, is focusing on growing its user base and then deciding which financial path to pursue. It does, however, encode links to products at web stores that users post to establish relationships with retailers.

“So if Steve posts and recommends a DVD player, for instance, and Bob clicks on the link and buys the item, usually within 30 to 60 days we get a cut of the purchase price,” explains Philip Jacob, founder and chief technology officer at StyleFeeder. It also operates affiliate programs through Commission Junction Inc., LinkShare Corp., the Performics division of DoubleClick Inc. and Amazon.com Associates.

However, the long-term vision of the social site, which covers just about every product category, centers on data collection and aggregation and understanding shoppers’ preferences at a much deeper and richer level, Jacob says. “We will help retailers interested in connecting with people who are interested in buying certain products,” he says. “And we can help them understand the products they should be stocking.”

Huge promise

Right now it’s all fairly early, but the promise is huge, he adds. “We help people easily find cool things they like with almost no effort at all,” he says. “We introduce them to people with similar tastes using their and our recommendations, and it’s totally transparent to the user.”

Social shopping sites expand the circle of influence from friends and family to anyone who shops online, says Dina Pradel, vice president of marketing at StyleFeeder. “I’m constantly watching a 34-year-old Norwegian woman living in Hawaii and rely on her tastes to check out new things,” Pradel says.

Another major social shopping site is Kaboodle. Kaboodle has 200,000 registered users. In October it received 100,000 unique visitors; in March it received more than 1 million, the company reports. It sells advertising space and has affiliate marketing programs through Commission Junction, LinkShare, DoubleClick’s Performics and Amazon.com Associates. Kaboodle also sets up direct relationships with retailers. WineGlobe.com, for instance, offers Kaboodle users special offers and promotions. Further, the e-retailer added a button to its home page and the social site offers widgets, both of which send shoppers from one site to the other.

Social shopping sites enable e-commerce to step up from products to people, says Kaboodle Inc. CEO Manish Chandra. In addition to personal profiles, Kaboodle, like other social shopping sites, offers wedding registries, wish lists and other tools for users.

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