Consumers get together: from Group Buying to Collaborative Consumption

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Original Flickr photo by badjoni

E-commerce was at first a personal activity, where each user performed economically rational decisions regarding products and services. With wishlists, customer reviews and ratings, recommendations and referrals and shopping communities it evolved into what is now usually called Social Commerce.

The past few months have brought some new consumer patterns, that further confirmed the importance of the social graph for e-tailers as confirmed by recent studies by comScore and Performics/ROI Research , with consumers connecting with brand channels (40%), recommending products and services (32%) and finding out about new deals on social networks (37%).

Another study by Sage Pay, revealed that while on average 7% of visitors to an online store make a purchase, when directed from social media network, the percentage of visitors who will go to the transaction section goes up to 71%. Social proof is even more important for e-commerce, as Simon Black, managing director at Sage Pay, says: “The modern shopper often looks for reassurance from a positive review, a special offer to make it more affordable, inexpensive delivery options and a quick, easy and secure way to pay.”


Video case of Levis Friends store

Adding the social dimension to e-commerce website was once difficult, but with the release of social plugins by Facebook (Like buttons, Recommendations, Activity Feed) e-tailers have now instant access to a network of more than 400 million people, used with succes by global brands like Levis or TripAdvisor. It has also expanded the reach of social services and platforms like LivingSocial, SocialAmp or Fluid Fan Shop . And you’re not limited to Facebook: with Cheap Tweet, the best deals right are delivered to your Twitter timeline, with the site picking the best ones ranked by users’ votes and re-tweets. Altough this latest service risks becoming obsolete with the announcement by Twitter of @earlybird.

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Image by Emarketeer

Entertainment, by definition, is one of the more promising areas where to apply this social dimension of shopping. Take for instance the Facebook app Tickets Together created by Disney that lets users buy tickets fo Toy Story 3, not only for themselves, but also inviting their friends.

ticketstogether
Not only does this app makes it easy to choose where to watch the movie (local listing) but it lets you engage with the ones you’d probably will watch the movie with, and invite them right on Facebook, by integrating with ticket-buying services like Fandango.com
Exciting as it is, these are only tools and technologies. What’s really interesting are the new behaviors brought by the social web and connected consumers.

Group Buying

Making purchases together is one of the biggest web trends in 2010. It’s easy tounderstand why: when users reach for their friends to activate a deal (usually a minimum number of buyers is required), a viral loop is created. New models of authentication to social networks (Facebook Connect, Friend Connect, OAuth) have only made it easier and faster. From limited time offers, to price anchoring (show how much it would cost on a normal purchase), it’s one of the most effective ways to generate word-of-mouth.
These deals are available on social web services like Groupon, This Next, Tippr, LivingSocial, TownHog, Homerun , Milo or even as integrated applications such as ‘Special Deal’ group-buy app by preferred Facebook partner Wildfire.

Groupon

Groupon.com

Groupon is the biggest player, with a simple proposal: advertise a special business offer, only valid if a certain amount of users purchase it immediately.
Launched in November 2008, it has sold over 7 million online coupons in 70 cities and is now expanding worldwide (UK, DE, ES, PT). Paying attention to small details is their main strenghts: from putting a phone number on every coupon to 2 way ratings (customers rating merchants and vice-versa) it created a vibrant community. Even unsusbcribing from their newsletter is funny.

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Graphic by Compete.com

From June 2009 to January 2010, the number of monthly visitors went from 26,000 to over 2.1 million, increasingly engaged with an average of 2.5 visits per month for each user. And what’s really amazing is that these visits are not coming from unexpected sources. Last January, Facebook represented 44% of all referrals, Twitter 8% and search only around 3%.

And growth is not only in visits but also as a platform, helping third-party developers and affiliate members get the word out about its daily specials. Groupon’s API has become available both as Division API (about cities) and Deals API (about daily deals for specific locations), further explored by integrating with Groupon’s geolocation service.

Woot

Another example on how groups and communities will become increasingly important in shopping is Woot.

The basic idea behind Woot is to offer only one discounted product each day, a “One Day, One Deal” policy until the stock is sold out, with no announcement of what’s the next offering. Innovative events and product specials like “Woot-Off”, “Bag Of Crap” or “2-for-Tuesday” coupled with bold marketing have built one vibrant community where it’s members actually have fun shopping.


Woot shows their different business culture, on their Amazon’s acquisition wicked celebration rap

Recently acquired by Amazon, much of the coverage focused on how Amazon captured the opportunity of real-time shopping, but the real value might be on the social side, venturing into new business models where communities represent a bigger role than the usual 20th century e-commerce.

Collaborative Consumption

The concept of collaborative consumption is the subject of the upcoming book “What’s Mine is Yours: The Rise of Collaborative Consumption” by Rachel Botsman and Roo Rogers.


Recently speaking at TEDx Sydney, Rachel explains that “collaborative brands make it easy for communities to act on behalf of their brands”, where we are no longer defined as consumers by our personal possessions, but also by what we are part of, what we share and the groups we belong to.

"Wearing a t-shirt from Threadless expresses who we are and what we like, beyond the t-shirt itself." — Rachel Botsman

Original Flickr photo by boostventilator

New trends like swaptrading (Such as Swaptree.com, sort of online dating service for all of your unwanted media), reveals new models of commerce, where trust mechanics and collaborative behaviors are principal. This groundswell of collaborative consumption, is further accelerated by the rise of mobile communication.

Rachel Botsman defines 4 big drivers of the shift to collaborative consumption:
1. A renewed belief in the importance of community
2. A torrent of peer-to-peer social networks and real time technologies
3. Pressing unresolved environmental concerns
4. A global recession that has fundamentally shocked consumer behaviors

People are starting to share resources without sacrificing their lifestyles or personal freedom, supported by 3 clear systems:
1. Redistribution markets (stretch the lifecycle of a a product, reducing waist)
2. Collaborative lifestyles (sharing of resources like money, skills and time) – coworking, couchsurfing or even landshare (http://www.landshare.net/) will become mainstream
3. Product Service Systems, where one pays for the benefit of a product without needing to own the product outright. Examples include rental services like Netflix or Zipcar .

You can get an overview of this new model of consumption on the promo video below:

Collaborative Consumption Groundswell Video from rachel botsman on Vimeo.

"The trend is clear: access trumps possession. Access is better than ownership." — Kevin Kelly
After the financial crisis, consumers are adopting new behaviors that will impact e-commerce for the years to come. Group buying and collaborative consumption are the latest of these behaviors that brands will need to pay attention to and embrace the value of social capital and not only the monetary side of commerce.

If you know more examples or want to discuss how communities are impacting e-commerce, please drop a note in the comments.