Social Shopping

Prepared for Ian MacInnes. IST 642. School of Information Studies.
Syracuse University

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Introduction

Social shopping websites have a very short history. Though these types of websites did not appear on the web until only about two years ago, they have quickly spread since then.  Because of the novelty of social shopping, it is difficult to offer a stable definition for this phenomenon. Indeed, the concept behind this new breed of companies is still evolving, as companies keep adding features and experimenting in different partnerships with already established companies.

 

Meanwhile, wikis and blogs provide with a starting point to define social shopping. According to Wikipedia, social shopping is "a method of e-commerce in which consumers shop in a social networking environment" and "... where a large group of users can recommend products to each other and between them work out what to buy and which ones have the most buzz" (2007).  The growing number of companies which currently describe themselves as social shopping include Kaboodle, CrowdStorm, This Next, Stylehive, MyPickList, Wists, FiveLimes, Chitika, StyleFeeder, Yahoo’s Shoposphere, and more.

Social shopping--or social commerce--constitutes a hybrid of social networking and e-commerce (Belcher, 2006) where people can become members of the community and maintain a profile associated with a list of friends. In general social  shopping "... means creating places where people can collaborate online, get advice from trusted individuals, find goods and services and then purchase them. It shrinks the research and purchasing cycle by creating a single destination powered by the power of many " (Rubel, 2005). Though each social shopping site has a slightly different theme and features, what all sites seem to share is the ability for users to collectively discover, organize and recommend products.

 

This paper will explore this new phenomenon of social shopping and will try to identify some of the present challenges for the sustainability of these companies in light of the key determinants of performance for Internet businesses. We will take a closer look at the biggest players in the online social shopping scene and will try to speculate on the overall performance and sustainability of these companies. To evaluate the performance of social shopping websites, we will follow the framework offered by Afuah and Tucci (2003). According to this framework, firm performance will be considered as accounting profits and will be mostly determined by a business model, the environment, and change.

 

A business model is the first determinant of firm performance, defined as “the method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so” (Afuah &Tucci,  2003). The business model is a key element for achieving sustainable competitive advantage. The competitive environment in which social shopping firms operate will also be analysed as this has a significant influence on business performance. Existing and potential competitors, suppliers, customers, and potential substitute products will be taken into account, following a classical Five Forces analysis (Porter, 1979).  We will finally look closer into specific industry success drivers and will explore how each company is or is not fully exploiting them.

 

This paper will offer a descriptive and strategic look at a new breed of companies which had not been covered in the literature before. Because of the novelty of the phenomenon, the literature on the topic is scarce and mostly composed of informal studies. Because of the accelerated rate of change within this industry, managers planning to invest in these types of enterprises should follow up closely on new developments that may arise. In fact, this paper will only capture a moment in the evolution of this industry which promises significant transformations.

 

Overview

As mentioned above, there is a large and growing number of companies who define themselves as social shopping platforms. These companies are competing side by side for customer’s attention. In order to better explore social shopping websites business models and to understand their proposal and ability to perform, we will look and contrast four companies: Kaboodle, CrowdStorm, Stylehive, and ThisNext.

 

 

Kaboodle defines itself as "...a fun shopping community where people recommend and discover new things". This company offers tools for the discovery of new products based on other users' recommendations, the ability to recommend and discuss products and brands as well as to create wish lists. Kaboodle features a toolbar which allows users to collect shopping items from different websites. Users can organize these items into collections and share them with other users. This company is presently partnering with eBay as an added service for members of the auction site (Bogatin, 2006). Kaboodle seems to be one of the companies with the largest number of users among social shopping sites and it has also been recognized as the most user friendly (Iskold, 2007). 

 

According to the company’s own statement, Crowdstorm is “a social shopping network that helps you find what to buy by measuring the buzz around products. You can also see recommendations from friends and people you trust". Crowdstorm includes a rating system through which “good” products go to the top of the list, and less appealing ones disappear. The site also measures the “buzz” around a product in terms of how many times it has been viewed, how many bloggers written about it, and how many users have commented on it. This site offers a "buy it on Amazon" and “Buy it on eBay" links which serve to drive traffic to those sites even though not all featured products are actually available for sale at those sites. Other than eBay and Amazon, CrowdStorm does not link to places where users can actually make purchases.

 

            With a similar concept, this California-based company which presents itself as more oriented towards fashion, managed to secure $2.62 million in funding only months after launching its Alpha version in early 2006 (Cashmore, 2006). Self-described as "a global social shopping community, dedicated to discovering and sharing the most exciting products, the stores that sell them, and the people that find them." Stylehive also offers a toolbar which allows users to quickly bookmark products while surfing the web. This toolbar features the ability to collect a product description and images from the originating website. Users can also tag products, add them to a wish list, and follow a link to complete a purchase. The company maintains a blog where popular products are reviewed.

ThisNext describes itself as "a shopcasting network where you can recommend, share and discover great products. Similarly to the other sites, products are added and recommended by a community of users by using a browser button. Also, the site allows users to create lists of favourite products which are tagged and searchable. These lists are called “shopcasts” since they intend to broadcast information about products that users are able to blog about.  Currently, the site supports Amazon.com, Amazon.com.uk and Commission Junction as affiliate networks.

 

At a first glance, all four companies seem to have a similar proposal. First, they constitute places for product discovery. The sites showcase a number of products which have been chosen and reviewed by members of the communities. They include toolbars and browser’s buttons to allow users to bookmark product descriptions while they navigate other websites. They all offer registered users the ability to vote and comment on the products posted as well as to tag them and organize them in wish lists and other sorts of lists.