South-Western - Management  
Social Shopping Sites Boost Holiday Sales
Topic Electronic Commerce – Online Business
Key Words Social networking sites, opinion leaders, viral marketing
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News Story

According to estimates, Americans will spend $100 billion online for retail goods this year. Nearly one-third of that amount will fly from wallets during the holiday season. To capitalize on Yuletide binge shopping, some marketers are promoting products through a new development in e-commerce: social shopping Web sites.

Whereas shoppers of past holiday seasons frequented price-comparison sites like Pricegrabber and Shopzilla to buy books, apparel, and other Christmas gifts, today's holiday shoppers congregate at online destinations centered upon social interaction. Social shopping sites like ThisNext.com and Stylehive.com are flooded with enthusiastic consumers looking to chat-it-up about hot products. With their blogger-styled functionality and friend-finding focus, these sites are like MySpace for shoppers; they are as much about personal taste and online conversation as they are about buying. Notably, the sites don't sell products.

But if these new social shopping sites don't sell products, what marketing purpose do they serve? According to industry observers, they are all about generating buzz--and the results speak for themselves. Stocks of Wee Ninjas depleted rapidly when social shopping site ThisNext.com highlighted the cuddly black dolls with the cream-colored faces. ''Can't resist his tractor beam of cute,'' wrote an online trend-spotter enamored by the dolls. Wee Ninjas creator Shawn Smith credits ThisNext and Stylehive for the dolls' rocketing sales. "Until August, we were just getting our normal orders of a few dozen at a time," said Smith. "Then came the mention on ThisNext.com. All of a sudden, stores are ordering hundreds at a time."

Though social shopping sites have been instrumental in boosting sales of individual products, questions remain as to how the sites will generate profits. For the most part, social shopping sites seek a piece of the $250 billion that vendors and retailers spend each year on brand marketing. Owners of ThisNext.com and Stylehive.com say they expect their sites to earn revenue from a combination of streams: fees from marketing agreements with vendors and retailers, display ads, and the sale of market information posted online.

As for the enthusiastic community-oriented shoppers that are driving this new online phenomenon, they are content leaving it up to pitchmen to figure out how to monetize the sites. These holiday shoppers are merry so long as they have a place to chitchat with other online shoppers.

Questions
1.

Visit a social shopping site mentioned in the article and identify characteristics that make it a powerful tool for marketers.

2.

How do social shopping sites add a social dimension to the online shopping experience, and why is this important?

Source Keith Schneider, "Word of Mouth Helps Them Fly Off the Shelves," The New York Times, Nov 1, 2006 pG6(L)
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