Wednesday, April 20, 2011

Stop calling Groupon “social commerce”.

There is a lot of enthusiasm and attention around “social commerce” right now. People point to companies like Groupon, Living Social, ShoeDazzle and others as examples of the promise of a new generation of social commerce companies. The explosive growth of these companies has certainly been incredible, and I have no doubt that many new, fantastically successful e-commerce concepts will emerge that will leverage social in some way. Nonetheless, I think people have been giving social too much credit when it comes to the “social commerce” examples we have thus far, and have been misplacing our emphasis on "social" in e-commerce.

In e-commerce, there are two truths: Customers will always want lower prices, and once they’ve spent their money, they’ll always want as close to immediate gratification as possible. (A third principle, that customers will always want more selection, though I think probably true, is up for debate. It might asymptote given the paradox of choice.) If an e-commerce company forgets either of these two maxims, they’ll soon find that their customers have gone elsewhere.

With “social” however, the same is not true. It’s not the case that a customer will always want their e-commerce experience to be more social. Will customers want and enjoy some social features? Sure. There absolutely is utility in social features (more on that later) not to mention fun/entertainment, but it’s just not the case that consumers will always ask for more social features in the same way that they’ll always ask for cheaper prices and faster delivery (or even, more SKUs). In the customer’s hierarchy of e-commerce needs, social must surely be #3 at best (and frankly, I think breadth of SKU selection would be #3).

What does this have to do with “social commerce” darling Groupon?

Imagine a world in which Groupon had no social elements that form part of the user experience (i.e., no “tipping” once a certain number of people bought a deal). Would the company be the same one it is today? It might not have grown as fast, but with its brilliant and disruptive product offering, I have no doubt it would still be a fantastic business. Now imagine if Groupon had all the social features and more, but no discounts. It might still be around today, but Groupon would have been a shadow of its current form.

Groupon’s current success is not because of the social elements on the site. Consequently, I think it’s incredibly generous to "social commerce" to call Groupon a social commerce site. Its success has always been because of Groupon’s ridiculously low prices and immediate gratification. The same can be said for other “social commerce” examples like ShoeDazzle (fantastic deals on knock-off designer shoes thanks to their vertically integrated business model), and Woot (probably the first e-commerce experience with social elements). The social features integrated into these sites enhance the user experience, but they play second (or even third) fiddle to the real value proposition of these sites: lower prices and availability.

Why then is “social commerce” important? E-commerce is about lower prices and availability.  Social is about discovery. I believe the companies that will emerge in the near future as the true "social commerce" leaders will leverage social for discovery.  Not for fun, not for recreation, not for being social for the sake of being social.  So, please, enough calling Groupon a "social commerce" leader.  Amazon out-socialed Groupon years ago.  What do you think Amazon's feature "Customers who bought this item also bought" is?

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