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People who love to shop, also love to talk about shopping. Those who used to chat with friends over lunch to get opinions on the latest goods, bargains, and places to buy them, now have another option. And it expands the conversation considerably.

The continuing evolution of social networking and consumer generated content on websites, which, together are commonly referred to as Web 2.0, enables internet shoppers to move beyond transactions to talk shopping and obtain feedback from virtually hundreds of thousands of fellow consumers.

Social shopping sites offer that capability in ways comparison shopping sites don't and online retailers' websites cannot. Social shopping sites connect consumers and prompt discussions and recommendations, that are personal and one to one, as well as automated, based on users' likes and dislikes.

They are unlike comparison shopping sites, which typically focus on comparing prices, merchandise characteristics, and merchants' reputations. These are independent of the retailers' sites and reviews that are managed by the merchant. Therefore, in the minds of many online shoppers, they negate concerns about a dearth of negative reviews, or an abundance of positive ones.

Ecommerce is becoming more and more social, according to Boris Wertz, COO of AbeBooks Inc., an online seller of used, rare, and antique books. "Social shopping is a logical extension of eCommerce; it makes sense," Wertz said. "It may not take over the world, but it's a good way to help consumers with product discovery."

Social shopping sites are having a significant impact on how people shop, and online merchants should take them seriously, advised Jeremy Dalnes, VP of ecommerce at Panasonic Corp. of North America. "I have personally responded to consumer feedback on social shopping sites and blogs," Dalnes said. "And you could see a difference before I posted and after. People reacted in a great way, saying they were happy with the way the company was taking care of them by responding."

There are more than two dozen social shopping sites. They include Kaboodle, ShopWiki, StyleFeeder, ThisNext, StyleHive, and CrowdStorm. Users register for free and create profiles that include favorite products and product categories, as well as information about themselves. They then add links to the products in their profiles, or products they post on the site, that take fellow users to a specific product page on a retail website.

Users can also create and place personalized widgets, which are small, HTML coded boxes, with links to social shopping site profiles and products, and add them to their social network spaces, blogs, or other sites. This is significant for online retailers, because thirty percent of social network users trust the opinions of their peers when making a major purchase decision, compared with just ten percent who trust advertisements, according to JupiterResearch.

"Ecommerce is being redefined. A multitude of shoppers are able to interact, and pick and choose, and recommend products with other shoppers online," said Shyam Krishnan, Program Manager and Team Leader at Frost & Sullivan research and consulting firm. "This will go a long way in helping online retailing," Krishnan predicted.

Social shopping sites generally bring in revenue by selling advertisement space, joining programs with affiliate marketing companies and/or via direct affiliations with online merchants that give the social sites commissions on purchases made via the links. The latter is a new twist on conventional, third party affiliate marketing programs.

Some social sites, however, do not generate revenue. They operate on funds from venture capitalists waiting to see how the sites fare and determine optimum revenue models.

Venture capital backed StyleFeeder LLC, which quadrupled registered users within six months, and claims to be growing at a rate of about fourty percent every month, is focusing on growing its user base, and then deciding which financial path to pursue. It encodes links to products at web stores that users post in order to establish relationships with retailers.

"So if Steve posts and recommends a DVD player, for instance, and Bob clicks on the link and buys the item, usually within thirty to sixty days we get a cut of the purchase price," explained Philip Jacob, Founder and Chief Technology Officer at StyleFeeder. The company also operates affiliate programs through Commission Junction Inc., LinkShare Corp., the Performics division of DoubleClick, and Amazon.com.

The long term vision of the social site, which covers just about every product category, centers on data collection and aggregation, as well as understanding shoppers' preferences at a much deeper and richer level, according to Jacob. "We will help retailers interested in connecting with people who are interested in buying certain products. And we can help them understand the products they should be stocking."

Acknowledging that the program is in the early stages of development, he added, "We help people easily find cool things they like with almost no effort at all. We introduce them to people with similar tastes using their and our recommendations, and it's totally transparent to the user."

Social shopping sites expand the circle of influence from friends and family, to anyone who shops online, noted Dina Pradel, VP of Marketing at StyleFeeder. Speaking of her own experience, she said, "I'm constantly watching a 34 year old Norwegian woman living in Hawaii, and rely on her tastes to check out new things."

Another major social shopping site is Kaboodle, which has 200,000 registered users. It sells advertising space, and has affiliate marketing programs through Commission Junction, LinkShare, DoubleClick's Performics, and Amazon.com. Kaboodle also sets up direct relationships with retailers.

WineGlobe.com, for example, offers Kaboodle users special offers and promotions. The online wine merchant also added a button to its home page, and the social site offers widgets, both of which send shoppers from one site to the other. Social shopping sites enable ecommerce to step up from products to people, said CEO Manish Chandra, Kaboodle's CEO. In addition to personal profiles, Kaboodle, like other social shopping sites, offers wedding registries, wish lists, and other tools for users.

"In online shopping we have some great sites where you can compare features and price. For example, take three digital cameras and look at their mega pixels and brands, and then, once you decide, the sites show six retailers you can buy from," Chandra said. "But these sites are very much geared toward price centric and feature centric products," he pointed out. Furthermore, they offer "a male point of view for shopping, which is, if I can shop in 4 1/2 minutes, all the better."

Sales of such merchandise as fashion and accessories, and home and garden, are growing in ecommerce. And they tend to be centered on what an individual shopper wants, based on her unique preferences, Chandra noted.

"Here the whole paradigm of comparison shopping gets turned on its head. At a comparison site you cannot really get any added value to an experience. You get what amounts to an aggregated catalog with prices," he said. "With social sites, you can play to the increasing number of female shoppers online. They like to engage in shopping, and look at many items before they buy. These factors have led to a perfect storm where social shopping has started to explode in a big way."

Independence is seen as the key ingredient that set off the explosion of social shopping sites. For online shoppers, a site that is independent of retailers and allows them to network and chat, has the potential to outshine retailer site's consumer product reviews, said Kevin Ryan, CEO and Co-Founder of ShopWiki Corp. It claims to receive between 100,000 and 200,000 unique visitors every month.

ShopWiki sells advertising space, and is getting into affiliate marketing programs. "People want independent advice and reviews," Ryan said, "and they're not getting that on comparison and other kinds of sites."

Shoppers are not the only ones happy with the social shopping concept and its results. "Retailers are very happy because they're getting what amounts to free advertising," Ryan said. "Thousands of products show up on our site, and shoppers are sent from those listings straight to an eretailer's site. It's really no different from Google: is a retailer happy to show up on Google for free? Yes."

But with free advertising independently posted by shoppers unknown to merchants, comes the risk of brand damage. This requires retailers to monitor social shopping sites, and learn how best to participate, these experts said.

"Retailers have to figure out how to engage with these communities," Chandra said "In ours, retailers can create profiles and interact. They need to declare in their profile they are a retailer, though, so users know a retailer is not pretending to be something else."

Being honest and straightforward when addressing any brand concerns is the best way to make an impact on a social shopping site, advised Dalnes of Panasonic. "You should put yourself out there, and make yourself available," he said. "Many times consumers think you're a large company, and what will their individual voice do to make a difference. But when they see you respond, it creates affinity for your brand."

Protecting a brand and responding to customers and potential customers requires retailers to monitor social shopping sites. The only way to do this is to have a staff member personally dig in to user generated content. Retailers can learn a lot by keeping an eye on social shopping chat.

Information in this article was excerpted and edited from a story on InternetRetailer.com.

Article ID: 332