Right now there are two primary tracts for social shopping.
For lack of better terms let’s identify and define them thus:
- Social Shopping Services
- Social Storefronts
Social Shopping Services
These are the third-party services that rely on cool technology, social networking and crowdsourcing to offer exclusive deals to their members.
This category includes LivingSocial and Groupon – two companies that are experiencing explosive growth (Groupon reportedly has more than 35 million members). But Facebook has entered the race with Facebook Deals (released last month in the UK) and Google jumped in with Google Offers.
These services work like a Sam’s Club on social networking steroids. The concept is simple. Let’s look at Groupon as an example of how they work.
Groupon offers one deal a day. They vary widely from restaurant coupons for 50 percent off, to deals for back massages, to cut-rate vacation getaways. The deals are often based on location so members in Boston get a different offer than those in San Francisco. Groupon alerts members via email, but also through social networking channels like Twitter and Facebook.
If a certain number of people sign up for the deal then it is released to everyone. Good offers thrive, bad ones die. Brands are assured of a certain number of people buying – so the deals act like quantity discounts. Groupon then takes a cut of the money it collects from its members.
In a recent interview with ReadWriteWeb, Groupon CTO Ken Pelletier said the reason for his company’s success lay in the viral nature of people sharing deals with family and friends:
“(Groupon) has a really strong word of mouth element… People like to share a deal with friends for a variety of reasons. Maybe to help them save money, or maybe they want to plan to do something together. Or for a lot of social reasons.”
This is when brands use their own social networking channels to sell goods and services. For example, brands providing exclusive coupons to Twitter followers or providing giveaways, sampling or coupons on Facebook Tabs in exchange for liking the company.
The concept is simple – and powerful. Fans of brand are already interested in buying their products and services. So why not keep these fans loyal and happy by providing exclusive deals in exchange for interacting and engaging with them on popular social networks? The brand gets massive publicity and awareness by fans sharing the deals with friends and consumers get reduced rates on brand items they like and use.
This is also an excellent way for brands to strengthen their reputation and awareness while building out a huge sales promotional tool.
This category is already evolving. Rather than redirect fans to websites with links or providing downloadable coupons, brands are now opening up storefronts directly on their social network pages. And right now Facebook has got a big headstart. With more than 500 million users, direct sales on Facebook simply makes sense.
One of the first Facebook stores was opened by Asos in January. Other brands are already following and software companies are lining up to offer technology solutions to create Facebook Stores.
Both Social Shopping Services and Social Storefronts are going to continue to have explosive growth. There’s room for both – at least for now. But eventually it is going to be Social Storefronts that win the battle. Why? Because Social Shopping Services are random – users can’t control the brand offers or what type of deals are generated. Most of the deals are also limited in supply and time.
Once users get over the novelty and end up with too many purchased deals that they failed to redeemed, they’ll get more picky about buying this way.
Second, once Social Storefronts mature and get more sophisticated brands aren’t going to offer their best deals to third-party vendors who take a cut. Brands can make their offers directly to consumers on their own social networks and rely on their own fans, friends and followers to spread the deals virally.
In any case, social shopping is going to big in 2011 – expect to hear a lot more about it.
But I’m interested in what you’re seeing on this front. Are you using Groupon or LivingSocial? Have you bought directly from Facebook? Would you buy directly from Facebook? I’d enjoy hearing your thoughts on this topic.
ReadWriteWeb interview with Groupon CTO
MarketingWeek story on Asos’s Facebook store
Social Media Today post on social shopping