Socialize First, Shop Second

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.

“In online shopping we have some great sites where you can compare features and price. For example, take three digital cameras and look at their mega-pixels and brands and then once you decide, the sites show six retailers you can buy from,” Chandra says. “But these sites are very much geared toward price-centric and feature-centric products, as well as the male point of view for shopping, which is, if I can shop in 4 1/2 minutes, all the better.”

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Sales of such merchandise as fashion and accessories and home and garden are growing in e-commerce; these are centered on what an individual shopper wants based on her unique preferences, Chandra adds.

“Here the whole paradigm of comparison shopping gets turned on its head. At a comparison site you cannot really get any added value to an experience. You get what amounts to an aggregated catalog with prices,” he says. “With social sites, you can play to the increasing number of female shoppers online. They like to engage in shopping and look at many items before they buy. These factors have led to a perfect storm where social shopping has started to explode in a big way.”

Independence

Independence is perhaps the key ingredient that set off the explosion. For online shoppers, having a site independent of retailers on which they can network and chat has the potential to outshine retailer site-based consumer product reviews, says Kevin Ryan, CEO and co-founder of ShopWiki Corp., which receives between 100,000 and 200,000 unique visitors every month. ShopWiki sells advertising space and is getting into affiliate marketing programs.

“People want independent advice and reviews,” Ryan says, “and they’re not getting that on comparison and other kinds of sites.”

Scanning social shopping sites, one quickly sees there are a great many users quite happy with the concept and the results. But shoppers aren’t the only ones with smiles on their faces.

“Retailers are very happy because they’re getting what amounts to free advertising,” Ryan says. “Thousands of products show up on our site, and shoppers are sent from those listings straight to an e-retailer’s site. It’s really no different from Google: Is a retailer happy to show up on Google for free? Yes.”

But with “free advertising” independently posted by shoppers unknown to merchants comes the risk of brand damage. This requires retailers to monitor social shopping sites and learn how best to participate, experts say.

“Retailers have to figure out how to engage with these communities,” Kaboodle’s Chandra says. “In ours, retailers can create profiles and interact. They need to declare in their profile they are a retailer, though, so users know a retailer is not pretending to be something else.”

Being honest and straightforward when addressing any brand concerns is the best way to make an impact on a social shopping site, says Dalnes of Panasonic. “You should put yourself out there and make yourself available,” he advises. “Many times consumers think you’re a large company and what will their individual voice do to make a difference. But when they see you respond, it creates affinity for your brand.”

Monitoring chat

Protecting a brand and responding to customers and potential customers requires retailers to monitor social shopping sites—and there’s no way to do so other than to have a staff member personally dig in to user-generated content. Whether it’s done on a routine, weekly basis or a more periodic schedule, retailers need to keep an eye on social shopping chat and recommendations, retailers and experts say.

At AbeBooks, members of the marketing team regularly scan numerous social shopping sites for references to their shop as well as to better understand what shoppers are looking for and follow the larger trend of Web 2.0 activity. The responsibility to monitor and respond if deemed appropriate or necessary was given to -marketing staff members because they, by nature, know the goals of the company and how to reach out to shoppers, COO Wertz says.

“You could have a full-time person looking at all these social web opportunities all day, every day with the volume of information out there. There are so many social things being tried that you have to take a step back and see which are playing out and which are not,” Wertz says. “You have to carefully evaluate sites first and then decide what merits time and attention.”

Chandra of Kaboodle suggests retailers have affiliate managers keep an eye on social shopping sites because these staff members are intimately familiar with following customer desires and wrangling shoppers to their e-commerce sites.

In general, monitoring is not an option, it’s a necessity, and brand protection is not the only reason merchants should keep an eye on social shopping sites.

“Retailers should be -monitoring these sites—all retailers,” says Mary Brett Whitfield, senior vice president at Retail Forward Inc., a research and consulting firm specializing in retailing and consumer products marketing. “It’s a way to tap into what the current -thinking is and what the trends are,” Whitfield says. “There is a generation of consumers in their tweens, teens and twenties that are heavily using these sites. And as they move into prime spending years, they will become important references for retailers.”

10 years ago it was very unusual for someone to go to an e-commerce store and be able to figure out if there was anyone else using the site—but that has changed, StyleFeeder’s Jacob says. “Now it’s quite normal for people to -collaborate online—YouTube being a perfect example,” he says. “It’s not a relationship between a web site and a user anymore, but between users and other users.”
bill@verticalwebmedia.com