NEXT GENERATION SHOPPING: CASE STUDY RESEARCH ON FUTURE E-COMMERCE MODELS Research Group for Industrial Software Vienna University of Technology

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1 NEXT GENERATION SHOPPING: CASE STUDY RESEARCH ON FUTURE E-COMMERCE MODELS Research Group for Industrial Software Vienna University of Technology supported by IFKT ABSTRACT Driven by the fast evolution of the internet, innovative technologies and web services, the user changed from a passive information consumer to an active content distributor within the whole web sphere. The buzzword web 2.0 became a synonym for this evolution which has enormously increased communication possibilities among people by enabling them to stay in touch via communities, blogs and social networks. In the same way B2C and C2C e-commerce rapidly changed within the last years. Users were integrated into existing online shops and mutated from a simple buyer to a fully integrated customer. Thus, a modern shop visitor can recommend products, leave comments, rate vendors or publish wish lists. This recent phenomenon, called social commerce or social shopping, leads to more customer satisfaction, loyalty and consequently to more revenue for the vendor. Accordingly, there is a strong demand for innovative e-commerce models and new shopping functionalities. Currently, only few vendors succeeded to launch new platforms and services, but market researchers confirm the economically expanding value of innovative user driven e-commerce solutions. In the near future, social shopping features might become a must-have for every modern shop owner. This paper presents the results of an extended case study research on future B2C and C2C e-commerce models. As a main focus, the key features as well as current trends of social commerce are identified and analyzed in detail. For successful next generation shopping, the presented trend-setting movements have to be integrated in new e-shops and platforms to meet the demands of modern customers. KEYWORDS Social Commerce, Online Retail, E-Commerce Model, Case Study Research 1. INTRODUCTION A boost of new developments pushed the distribution of the early internet, since the progress suddenly slowed down by the so-called dotcom collapse in the year Recently, numerous innovative services and applications were developed for the web of the future. This process was driven by revolutionary technologies. Well known case studies are the photo service FlickR, the free encyclopedia Wikipedia, the video portal YouTube or the endless number of communities, blogs and social networks. (Kim 2000) All these developments are summed up by the buzzword web 2.0, a term which was affected by O Reilly (2005). This term describes all internet based services and business models of the next generation, characterized by a high technical level of innovation and a strong user interaction. Generally, the term web 2.0 comprises the global evolution of the web, mainly driven by the abruptly increased number of users and their changed user behaviors. Nowadays, users produce content for other users. (Surowiecki 2004) The web is not a one-way street anymore, but rather corresponds to the main idea of a participative internet.

2 The dynamic development had also a strong influence on the field of B2C and C2C electronic commerce. Affected by the enormous expansion rate and the conquest of niche markets, online shops generated a new generation of business and sales concepts within the past few years, which differ fundamentally from conventional e-shops. (Anderson 2006) Due to new technical feasibilities like AJAX, RSS or open APIs, online shops offer interactive tools and can interact with other platforms and services of the social web. (Li et al. 2007) As a result of permanently growing integration of customers and of the strong interconnection of those e-shops, the term social commerce or social shopping was created. The shop turns to a community and the consumer to a fully integrated content distributor. Consumer generated content displays a considerable added value for other users and allows shop owners to integrate functions, which conclude new forms of interaction. (Schubert and Ginsburg 2000; Moreno Chaustre et al. 2004; Füller et al. 2006) The relevance of social commerce increases permanently. Because of that, the time of monotony in online shopping is a thing of the past. Next generation shopping models are positioned mainly in niche markets beside well known big players like Amazon. That phenomenon leads to more customer satisfaction, loyalty and finally to more revenue for the vendor. (Hagel and Armstrong 1997) Currently only few vendors are launching such new platforms and services, but market researchers state the economical importance of innovative social commerce solutions for the near future. Probably, social shopping features will become a must-have for every shop owner. Thus, every shop owner should focus on upcoming trends to be part of next generation shopping. To identify those trends, an extended analysis of best practice case studies was performed. 2. METHOD To answer the questions regarding trends and functionalities of future B2C and C2C e-commerce models, different phases of research were determined. (Figure 1) An overview of current literature as well as analyses of existing trend studies and expert opinions built the basis for the theoretical definition of business models. Due to the lack of literature on future e-commerce models, especially on social commerce, the case study research method (Yin 2003) was selected to evaluate already existing models of the next generation. In general, a case study is the development of detailed and intense knowledge on one special case or a few correlating cases. New technologies should be analyzed factually in a realistic scope. Either empirical studies may be performed or a given assumption is verified. (Stake 1999) Figure 1. Methodological approach Case studies provide guidelines how objects should be evaluated, how data has to be collected, how this information has to be interpreted and how the result of the study should be summarized and reported. (Yin 2004) Case studies should give an enhanced and deeper insight into the case. (O Leary 2004) Following this methodological approach it seems possible to answer the main questions on future e-commerce models.

3 3. CASE STUDY RESEARCH For the case study research 100 future B2C and C2C e-commerce models were selected. Because of the small number of currently existing models in the field of social commerce their heterogeneity was significant. To find an initial categorization, the business model structure of Rappa (2002) was applied. Rappa describes the following 9 possible revenue models: brokerage model, advertising model, infomediary model, merchant model, affiliate model, community model, subscription model, utility model. After an extended analysis of a standardized matrix, a one-page-summary (Figure 2) was created for every object, including criteria like meta data (foundation, revenue, functions, workflows, members, etc.), standardized rating fields and some free reserved space for a qualitative review of each commerce model. After the analysis, main findings and trends have been documented. Figure 2. Schematic process of case study research The following case studies represent an excerpt of all evaluated cases. The selected models are significant to demonstrate some of the best practice examples of future e-commerce models. 3.1 Collaborative Shopping Networks Stylehive.Com Stylehive.com is a social bookmarking platform focusing on products and shopping. It offers a network for costumers, bloggers, publishers, designers and merchants. Here the newest and most interesting products, brands and designers should be made worldwide available. Functionalities: On this social shopping platform, users can bookmark, comment, recommend or redirect online fancy products, write blogs, use forums or create personalized shopping and wish lists. Every user is a member of at least one community and shares shopping experiences with friends, family and like minded people. The platform is based on a point system with so called Stylehive points. Every community member gets points for creating or copying a bookmark or copying a copied bookmark. The users get a feedback for their trendsetting skills, and the most often copied bookmarks are listed in a popularity list. Users can use a follow feature to track the activities of other users. Business model: Stylehive.com benefits through partner companies, which take part in an affiliate program. On the platform products are not sold, but the business model is a social shopping platform, also called shopcasting, a buzzword based on the words shopping and broadcasting. This is a kind of information distribution based on tags. These tags are integrated in site and refer to products, thus leading the consumer directly to merchants, where the product can be bought. 3.2 Live Shopping Woot.Com Woot.com is an innovative e-shop and community with the aim to sell cool and cheap products. It works with the one deal per day business model, which features only one product for 24 hours. The offer ends within this time period or if the product is sold out. Besides the main portal woot.com, there are two more portals, wine.woot.com and shirts.woot.com.

4 Functionalities: Consumers have to be registered to buy products at woot.com. Every product has a detailed description, an own user written blog including user comments, a podcast and besides some static sales information. The community defines itself only through the ability to discuss about the products. Business model: Besides the one deal per day model woot.com uses Google-AdSense to generate revenue. Every user can buy up to three articles per day. 3.3 Community Driven Commerce Threadless.Com Threadless.com is an online clothing store where community members can submit and provide T-shirt motives to produce their own designs via threadless.com. The designs are rated by the community, and every week 10 out of the 300 top-voted designs are chosen by threadless.com for production and sale on threadless.com. Functionalities: The users can vote for designs, blog in a blog portal, publish news and exchange opinions. After buying a shirt the user can submit a photo wearing the shirt to his profile. The user gets one credit point for the submission. If threadless.com uses the picture on the product page as a full size product photo, the owner will get ten points. One credit point is equal to $ 1.50 which can be used to buy more shirts. Business model: The basic idea of threadless.com is crowdsourcing, as it counters on the increasing heterogeneity of needs by putting the consumers actively into the value added chain. Because of the user driven model, there is no need for trend scouts or a cost-intensive marketing department. Consumers place advertisements, pose as models or take photos for their catalogues. Only the hobby designers generate revenue for themselves in form of a flat rate. Threadless provides the platform and manages the production and distribution of the T-shirts. 3.4 Mass Customization Qoop.Com Qoop.com is a photo service, which transforms digital content into products. The main idea is an interactive value added chain and mass customization of widespread articles, with a strong focus on individualized products. Therefore every customer is integrated into the development to find optimal adaptations to personal preferences. Functionalities: Based on the long tail concept, different articles can be produced with individual chosen motives. The range of products contains several articles like calendars, greeting cards, key rings, mouse pads, cups, etc. in different variations. There is no community, blog or forum in the background of the platform because qoop.com is partner of big social networks and photo storages, like Facebook, FlickR, Photobucket, Webshots, Tribe, etc. Members of third party communities can use the service of qoop.com and directly print their external stored photos. Business model: The business model is based on a manufacturer direct model, because qoop.com produces or lets produce articles and provides its features directly for the consumers. Qoop.com also cooperates with several companies, which directly include qoop.com into their portals. 4. IDENTIFIED TRENDS Resulting from the analysis of over 100 future B2C and C2C e-commerce models, the following trend-setting findings can be determined: Crowdsourcing: Working steps are sourced out to the users and collective intelligence is used in e-shops. The grade reaches from small functions to fully integrated product life cycles and user generated marketing. Live shopping: Through real time functionalities and the use of life media, a special user experience is guaranteed. For example a consumer can see the percentage of sold products per hour. Mass customization: According to his wishes, the customer has the ability to configure products online. For example, every user can print his own logo or picture on several standard products. Shopping widgets: Little tools or applications, which have special functions, can be included in blogs or other social networks. Shopping widgets are opening new marketing channels to vendors.

5 Long tail: Shifting to interesting niche markets and generating high turnover with small and micro products. The combined value of millions of items that are sold only in small quantities equals ore even exceeds the value of a handful of bestsellers. Shopping engines: Platforms for specific pools of products, which provide innovative search and filtering functions as well as individual integrated search engines in social shopping frameworks. 5. CONCLUSION Future shopping models and social commerce applications are a currently emerging phenomenon. The spectrum reaches from smaller solutions to fancy and very subtle models, but analyses showed that only a few of the existing platforms are able to generate continuous revenue. Successful applications must be unique, entertaining, extremely useful and relevant to a huge number of users. (Buskens 2002; Machado 2005; Siomkos et al. 2006) The presented investigations clearly show that successful vendors have to focus on an increase of user experience. Users demand tools to interact with their community by presenting their personal style, funny quotes and sayings to get valued customers. The legendary killer application is required to motivate customers for active participation. The most demanding challenge nowadays is to launch a new application successfully by quickly winning a new community. However, successful platforms like Threadless, ThisNext, Crowdstorm, Woot, Qoop, etc. demonstrate that it is possible to build lasting revenues. In near future, a new prototype will be designed to derive different basic models. Based on this prototype, user motivations as well as the influence of specific functions of user experience will be identified. REFERENCES Anderson, C., The Long Tail: How Endless Choice is Creating Unlimited Demand. Random House Business Books, London, Great Britain. Buskens, V., Social Networks and Trust. Springer, Berlin. Germany. Füller, J. et al., Community based innovation: How to integrate members of virtual communities into new product development. Journal of Electronic Commerce Research, vol. 6, pp Hagel, J. and Armstrong, A., Net Gain: Expanding Markets Through Virtual Communities. HBS, Boston, USA. Kim, A., Community Building on the Web: Secret Strategies for Successful Online Communities. Peachpit Press, Berkeley, USA. Li, P. et al., Preference update for e-commerce applications: Model, language, and processing. Journal of Electronic Commerce Research, vol. 7, pp Machado, A., Drivers of Shopping Online: A Literature Review. Proceedings of IADIS International Conference e-commerce 2005, Porto, Portugal, pp Moreno Chaustre, J. et al., Building a Virtual E-Commerce Community. Proceedings of IADIS International Conference e-commerce 2004, Lisbon, Portugal, pp O Leary, Z., The Essential Guide to Doing Research. Sage Publications, California, USA. O'Reilly, T., 2005 "What Is Web 2.0. Design Patterns and Business Models for the Next Generation of Software". accessed August Rappa, M., Business Models on the Web. White Paper, Institute for Advanced Analytics, North Carolina State University, North Carolina, USA. Schubert, P. and Ginsburg, M., Virtual Communities of Transaction: The Role of Personalization in Electronic Commerce. Electronic Markets Journal, vol. 10, no. 1, pp Siomkos, G. et al., Web-Atmospheric Effects on Online Consumer Behavior: A Review of the Literature. Proceedings of IADIS International Conference e-commerce 2006, Barcelona, Spain, pp Stake, R., The Art of Case Study Research. 6th ed. Sage Publications, California, USA. Surowiecki, J., The Wisdom of Crowds. Doubleday Publishing, New York, USA. Yin, R., Case Study Research: Design and Methods. 3rd ed. Sage Publications, California, USA. Yin, R., The Case Study Anthology: Design and Methods. 3rd ed. Sage Publications, California, USA.