The Value of 'Social' Commerce: We are Stronger than Me

Keep Calling Groupon “Social Commerce”

Is Groupon “real” social commerce?  Yes, of course it’s a nonsense question, since “social commerce” is ultimately only a label for something that varies with the changing power relations of people choosing to define it, but it is a question that is exercising a number of minds – and wallets right now.

Take venture capitalist Sarah Tavel with Bessemer Venture Partners, who is calling for everyone to ‘stop calling Groupon “social commerce”‘ already. Just because Groupon is hot, and social commerce is hot, does not make Groupon social commerce. What’s social about a couponing site?  In terms of social, Amazon out-socialed Groupon years ago with its social recommendations, recently (and amusingly) culture-jammed by Harvey Nichols.  And we know what people think of Amazon and social (although we politely disagree – Amazon did’t miss the social boat, it built it).

What makes Groupon work, according to Sarah is not the tricksy social/group buying ‘minimum-number-of-purchasers-needed’ marketing gimmick, nor the member-get-member referral program, nor the integration with social networks – that’s just a social layer on a business driven by low prices and immediate gratification – the two critical success factors driving e-commerce.  Strip out the social layer and Groupon is still the disruptive upstart redefining local online advertising.  Don’t confuse the social sizzle with the smart business steak.

Whilst we concur with Sarah that the social bells and whistles on Groupon are little more than marketing decoration right now, the idea that consumers can group together to get better prices from manufacturers, service providers and retailers if they buy in bulk, either directly or via an intermediary such as Groupon – is a big social – collective action – idea.  It changes the balance of power from seller to buyer – it is about consumer empowerment, demand-driven-pricing that can reshape markets, and about ‘we’ being stronger than ‘me’.

The Value of 'Social' Commerce: We are Stronger than Me

We’re not professional investors, but we’d suggest the sin0-social idea behind Groupon – known an tuangou – is bigger, more disruptive, and has more long term potential, than couponing-as-advertising.  Local advertising will earn Groupon a quick buck, but long term, with it’s subscriber base and infrastructure, Groupon is well placed to take up the mantle of the ‘together-we-are-stronger’ people’s champion of demand-driven pricing.  For us – group-buy is where we see the future of social commerce as a distinctive phenomenon; otherwise social commerce is no more than a social layer added to e-commerce to help discovery and decision – in other words, just best practice e-commerce.  So, if you’re an investor or consumer – keep calling Groupon ‘social commerce’ – not for what it is, but for what it could be.

But where we are in total agreement with Sarah is in total disagreement with Om Malik suggesting, along with investor Jeremy Liew, for saying “The next phase of e-commerce is about recreational shopping, and as a result, it needs to be a more fun and social experience.” Rubbish, says Sarah, online shopping is about lower prices and availability – recreational online shopping has a poorer prognosis than the dodo. Do not invest.  Social is not about fun, it’s about utility (go, Sarah, go!), specifically as an aid to discovery (and we’d add, decision).

So forget all that nonsense about fun and recreation, that’s social getting in the way of shopping – smart social commerce in our opinion is about Assistive Consumer Technology – helping people shop smarter (discover, decide, buy) with their social intelligence.

Written by
Paul Marsden

Chartered psychologist specialising in consumer behaviour, wellbeing and technology. Certified CX professional experienced in Design Thinking. A researcher, writer and speaker, Paul is head of Digital Insight at SYZYGY.

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  • I started reading this article with the thought that Groupon is not ‘social commerce’. Social commerce to me is communicating transaction or intent to transact to one’s own network. Its not the same as the group buying model which can be considered social because its a group of people making the same decision. The personal connection is missing which removes the social aspect – for me anyways. I am more likely to play into social commerce i.e. a Facebook like from someone in my network, someone tweeting something than to buy something on a site like Groupon if my intentions were not already there. Consider the psychological aspects of social commerce. What you do and how you act after you see your best friend ‘like’ something. Now take that experience and consider how you use Groupon. What comes first, the deal or the social interaction with the group of buyers? Are you more likely to buy or be inspired to buy just because a large group of people (you may or may not know kep in mind) bought it? Not convinced its the same bucket.

    • Thanks Christina, good points, well made. I agree that group-buy is distinctive to communicating [intended] transactions to one’s own network. Which is why we take social commerce to be more of an umbrella term to include various quite distinctive transactions with a social component. If others call it social commerce, and If there is a transaction, and a social component to that transaction – then for us, it counts a social commerce. At this early stage of the industry – inclusiveness might be a good thing, as whatever it is – social commerce is likely to evolve.

  • I agree, “helping people shop smarter (discover, decide, buy) with their social intelligence has value for business. Therefore retailers should look at technologies that offer a utility, make decision making process easier, while leveraging the social graph. The real value in ecommerce is extracting data from the experience to drive merchandising decisions. The “social” layer provides the behavioral component that enables new data mining and potential incremental sales and long-term customer value!

  • So much research in increase the “fun” of shop…actually are better things in the life…I mean increase the efficience of buy a product just for save the money and the sustainability of the planet have sence but in the USA way is just for make the 1% more rich…

    Fun is surf, design, help, work, research…buy is just another way to save the money…!!!

    Muchas Gracias…

  • Great article Paul! Thanks. For people who want to experience the REAL sense of social commerce, just try I promise that your vision about social commerce will change immediately!

  • I dont think you should call Groupon Social becasue of potential. It is succesful becasue they offer very discounted coupons in a location based model to help promote SMB’s.

Written by Paul Marsden