Social Shop Till You Drop: A Quick Primer

Social shopping is all the rage. Prominent startups like Twitter are expanding into this space, and newer ones like BuyWithMe are receiving large amounts of funding to pursue these opportunities. Is it a bubble or is it a sign of a shift in how folks will buy in the near future? I believe it is the latter. And despite the outward appearance of an overcrowded e-marketplace, I think we’re just starting a new era of online shopping.

Although “social shopping” means many things to different people, I think the social shopping space is comprised of e-commerce sites that facilitate interaction among customers as part of a shopping experience. Social shopping can be segmented into three major buckets:

  • Group shopping sites
  • Shopping communities
  • Recommendation engines

Let’s look into these areas in some detail.

Group shopping sites: In the U.S., Groupon dominates this segment with well-funded LivingSocial and BuyWithMe on its heels. These sites rally groups of people to buy at wholesale prices. The brick-and-mortar equivalent is Costco. I agree with Cake Financial CEO Steve Carpenter’s analysis that no one company will take this entire segment.

Today’s group-deals primarily span restaurants and activities across major cities, leaving a lot of room for deals in verticals ranging from travel to wedding photography services. Moreover, just as Walmart found untapped opportunity in smaller towns, there is ample opportunity for group deals in small-to-medium-size suburbs. Though mass marketing a site in this segment is capital-intensive, there is opportunity for more group shopping sites to come.

Shopping communities: Although companies in this space, such as Kaboodle, Stylefeeder, and Polyvore, have been around for a while and to date have been primarily fashion-related, I think we’ll see a new wave of shopping communities emerge to bring together shoppers with similar tastes in other verticals.

One such site is Listia, an online auction marketplace where users swap virtual currency for free stuff. Beyond using typical online marketplace functionalities, Listia users engage around products by commenting on items for sale and share auctions with friends via Facebook Connect and Twitter.

The analogy to shopping communities in real life is a club, where people join to spend time (and money) to talk about books, knitting, wine, etc. with like-minded people. Given just how many different kinds of clubs exist offline and how successful existing shopping communities have been to date for the fashion vertical, I expect to see an emergence of shopping communities ranging from travel to adventure sports, among a myriad of other interests. Moreover, I also expect to see more interaction among real friends, not just “friends” on shopping communities.

After all, in real life we enjoy interacting with our true friends. On Shiny Orb, the website I co-founded, we enable friends (i.e. bridal parties) to coordinate and socialize around selecting dresses for the big day. With Facebook and Twitter making developer tools and APIs more easily accessible, integrating real-friend interactions with sites is becoming even easier. I think we will also see additional shopping communities develop for existing real friends to browse, interact and shop together. There is ample opportunity across verticals in this segment.

Recommendation engines: In this segment, several companies are older, including Bazaarvoice, Power Reviews and, of course, Amazon reviews. The real-life parallel to this type of social interaction is asking advice from a fellow customer in a store. Although existing product review companies are quite entrenched, this segment is rapidly changing. Sites like Blippy and Swipely encourage conversations around purchases with your real friends. These are effectively product reviews from people you know and arguably are more trustworthy than reviews by strangers. It will be fascinating to see if this kind of model for product reviews will eventually replace traditional website recommendations.

So Why Is Social Shopping So Hot?

I think the recent growth in social shopping has largely been fueled by two phenomena:

  • So many people, including our aunts, now have an online identity (e.g. a Facebook account).
  • Social graph APIs and tools have become available and easy to use.

This means that online shopping platforms can easily and quickly connect to their users, as well as their users’ friends, through existing online identities. Listia co-founder James Fong put it well when he said social media has made it easier to reach a friend of a friend via Facebook or Twitter than in real life. It is this phenomenon that has really helped spurred the growth of new social shopping entities.

Elizabeth Yin is the co-founder of Shiny Orb, a wedding apparel social shopping site.