Jul 8, 2010
“Social commerce” is the idea that the Internet provides a marketplace at the intersection of commercial activity and virtual interactions for marketing goods and services. In this vein, Andrew T. Stephen of INSEAD and Olivier Toubia of the Columbia University Graduate School of Business offer further insights into what exactly “social commerce” entails: an emerging trend in which sellers are connected in online social networks, and where sellers are individuals instead of firms. In this conception, transactions are conducted through a virtual medium of communication and small, individual operations which are tailored to niche attitudes and customized service. Stephen and Toubia further list three distinct advantages of social commerce:
- Sellers and buyers connect over a virtual medium, generating considerable economic value with increased transactions.
- Virtual networks make shops more accessible to customers browsing the marketplace (via the creation of a “virtual shopping mall”)
- Sellers who benefit the most from the network are those whose accessibility is most enhanced by the network
Thus social commerce works by allowing individuals to bypass barriers of communication and interaction, giving small operations the reach and accessibility to acquire customers far beyond previous methods of operation. Yet, all the advantages provided by social commerce are useless if the fundamental strategies behind the business are unsound. As CEO of startup firm Garage Ventures Guy Kawasaki noted, the rash of companies selling dog food online in the 2000s failed simply because dog food was too heavy to be transported across great distances, obviating any benefits from social commerce. In contrast, computer games manufacturers found ways to move their business operations online from the physical box-and-CD model, best exemplified by the rise of multi-platform game hubs such as Steam Interactive where consumers can purchase and download multiple game systems.
As such, one of the basic tenets in economics theory is that for the law of supply and demand to work, consumers must have both the ability and willingness to trade goods and services. Social commerce still depends on these two critical factors today. The case of Shiny Orb provides a contemporary example of how entrepreneurs can leverage social commerce to achieve both innovative services and business operations.
Founded by Elizabeth Yin and Jennifer Hsieh in California, Shiny Orb aims to make it easier for consumers both to select and discuss wedding apparel. On their website (www.shinyorb.com), individuals can choose and discuss their choice of attire with friends or with other similar individuals across the world, and then make purchases through retailers. Recently, Shiny Orb launched a social “dressing room” feature, where bridal parties can come together online and add dresses to the room and discuss wedding costumes together.
Yet beyond utilizing the opportunities offered by social commerce, Shiny Orb is grounded in a solid business plan that addresses a need in the market. As Elizabeth explains, the concept of Shiny Orb was borne from planning her own wedding last year. Through the process, she discovered that choosing wedding apparel was a group effort amongst the bride’s closest friends. With modern bridal parties and friends scattered across the globe with different schedules, it was hard to get friends to choose dresses together in person. Shiny Orb was thus conceived as part discussion forum and part shopping hub – an easy way for friends to virtually shop together either in real-time or asynchronously.
Ultimately, social commerce is a tool for entrepreneurs to better satisfy consumer needs. Comparing Shiny Orb to its competitors in the physical realm, Elizabeth notes, “I think sites that can tap into social-infrastructure are poised to do well. It’s inherently free viral marketing. This will be most advantageous to newer e-commerce sites and startups, as this could help them get more traffic. That said, obviously the product itself still has to be compelling so that people will love the experience and will stay.”
Critical to this approach has been the building of the social networking infrastructure on the Internet. Indeed, by virtue of websites such as Facebook and Twitter, the Internet has taken on a social rather than functional dimension. To this end, social commerce is dependent on its audience being familiar with and being able to utilize the networking possibilities of the Internet. For that reason, Elizabeth is neutral when asked about the prospect of social commerce replacing all forms of physical commerce. “I don’t think social commerce will work for all e-commerce sites,“ she says, “there are things that people buy online that are inherently private that they don’t want to share. There are also different kinds of shoppers — some people just like to buy their stuff and leave, and these people will not be contributing to any social viral marketing. But, I do think there are a lot of people for whom there are purchases they’ll want to share.” For Shiny Orb, that is their great advantage – by bringing an inherently social activity into the internet, an infinite number of possibilities arise where friends from all over the world can help each other to make their weddings happier.
 Deriving Value from Social Commerce Networks, Andrew T. Stephen & Olivier Toubia (Columbia University – Graduate School of Business) in Journal of Marketing Research, January 9, 2009