Social Commerce by Orange Silicon Valley

social c:ommerce %

Reinventing Shopping Over the past 18 months, forward-thinking entrepreneurs have leveraged several converging societal shifts, driven by new technology and experiences, to reinvent the shopping experience. These trends: social media, location-based mobile services, and casual games, have been blended in ingenious ways with local commerce to create a new experience of shopping: what we call Social Commerce, or as we discuss in these pages, the Social C. This experience is about fun, it’s about the thrill of getting amazing ‘deals’, it’s about discovery across a multi-channel continuum of the online world, the mobile world, and the real world. As is true of many aspects of social media, major retailers and brands have been largely caught unawares, with the innovation coming from startups, some in Silicon Valley and some from other places. The intent of this publication is to assist Orange customers and partners in the retail and commerce sectors to frame and understand this activity and what it means for their customers that walk in the door. This study is structured as five ‘C’s underneath the umbrella of Social Commerce. The first C is Coupon, which has been radically reinvented to become a social phenomenon, inverted to focus on a single, collective ‘deal’, most famously by Groupon, but also a plethora of other platforms, all in the business of providing radical discounts that are activated by the collective purchasing power of a minimum required quota of buyers. The results of this reinvention have been nothing short of astounding, leading to a multibillion dollar market capitalization for Groupon, after turning down a $6 billion offer from Google. As a result of this trend to driving massive in-store traffic, most of it from new, promotion-driven customers, we have the idea of the next C, the Casual Customer. Perhaps the reader has heard of Zynga, the creator of Farmville and Cityville, which is the best-known online purveyor of ‘casual games’ on Facebook—free, often rather simplistic, but highly addictive due to their social nature. This ‘gamification’ trend has spread to shopping, and takes on a particularly potency when used on mobile devices. Retailers need to rethink the dynamics of welcoming ‘casual’ customers that are in their store as the result of a fun, social experience: loyalty is not a reason for these customers to be shopping with you. The next C is Curation, a word that has gained significant cachet for several reasons, but its power to transform shoppers into ambassadors and even outside sales force for a new kind of advertising model is growing in power. The idea here is that the Internet’s growing social dimension allows prospective and current purchasers to arrange their preferred brands and products in ways that create discovery for others. Curation creates status for the curator, but more importantly for us, it creates buzz for products. Adjacent to the C of Curation is the idea of the Cloud, which in this context means the ability to expose personal consumption information in a social platform. Innovations from startups such as Blippy or Swipely allow customers to easily and safely expose their credit card purchase history in push-button fashion, which then allows them to comment on their purchases to their social graph and others. Like Curation, this creates buzz around products and status for the customer. While this may seem radical to a certain demographic, it is natural for GenY, which has grown up with similar push-button control of address books, for example. Over time—and we don’t know how much time—this evolves into a fuller, more expansive Personal Cloud. For our final C, we need to be mindful of where the money goes; and here too the mobile revolution is a gamechanger, transforming a smartphone into a low-cost, intelligent and Internet-connected Cashier. The initial implication of allowing tens of thousands of hyperlocal merchants to swipe credit cards is clear, but larger implications of turning power customers into casual merchants, or merging promotions with payments on the phone are still unfolding. The disruptions and rapid evolution of this new social commerce landscape is accelerating. Like all such emergent phenomena, the latest insights are best obtained through tacit knowledge flows exchanged in person-to-person conversations. Such conversations are a core part of our methodology and raison d’etre at Orange San Francisco, and we include in this report coverage of two such events focused on the emergence of social shopping in which we either presented or produced the interactions. On one level, retailing has always been about access and choice—what is fundamentally new is that the choices are not about what to buy but how to buy. We hope this is useful to our partners as they explore this new frontier.

Georges Nahon, CEO, Orange San Francisco 2

Mark Plakias, VP Strategy, Orange San Francisco

The conversation about social commerce is underwayâ&#x20AC;&#x201D;pictured here, the Orange SF Future of Shopping Spotlight event.

table of contents 04 social customer by the numbers

18 curator

05 social merchant by the numbers

22 cloud

06 social c: framework

26 cashier

08 a new world of shopping activities

30 looking ahead

Rethinking the Customer Lifecycle: From Content-Creation to Curation

The Social Cloud: Rebalancing the Economics of Consumer Attention

Evolution In Point of Sale Terminals For Small and Medium Businesses

Social Supply Chain

10 coupon Everyone Loves a Good Dealâ&#x20AC;&#x201D; the Meteoric Rise of Group Buying

14 customer

Casual Customer: Locality Beats Loyalty

32 spotlight Views From the Ecosystem

34 conclusion

5 Verbs For the Next 5 Years

social customer by the numbers

1 in 6

mobile phones with payment in 2014

44%

54%

62%

smartphone users checking prices of products online in the store

customers review product online before buying it locally

mobile wi-fi users searching online store locators on their phone

62%

88%

35%

smartphone users sending pictures of products in the store

of all impulse purchases are items on sale

smartphone users reading product reviews in the store

5 miles

distance most customer will travel for deals and coupons

Sources: http://milo.com/blog/mobile-warming-hot-trends-in-mcommerce/?display=wide Forrester Research US Online Retail Forecast 2009 - 2014 as cited by Internet Retailer, March 8, 2010 Juniper Research Digital & Physical Goods Players, Markets & Opportunities, 2010-2014, JiWire Mobile Audience Insights Report: Q3 2010 http://milo.com/blog/the-impulse-shopping-fact-sheet/?display=wide

social merchant by the numbers

$1.5 billion sales of goods via mobile devices in 2010 at eBay

79%

46%

retailers using Twitter in 2010

retail sales influenced by users going online

$25

Mobile commerce sales growth Q4 2010

70% primary source for new business of SMBs are other customers, friends and families

$500 million

growth in PayPal’s worldwide mobile transactions, 2008 > 2010

$404

$692 million growth in local mobile ad spend from 2009 > 2011

$14

$32 billion

growth in digital local advertising 2008 > 2013

Sources: BIA/Kelsey Digital Out of Home: Hyperlocal and Hyper Growth?, November 2009 Forrester Research US Online Retail Forecast 2009 – 2014, March 5, 2010 http://www.emarketer.com/blog/index.php/year-phone-wallet/ BIA/Kelsey US Mobile Ad Revenue Forecast 2009 – 2014 http://milo.com/blog/mobile-warming-hot-trends-in-mcommerce/?display=wide http://milo.com/blog/the-new-face-of-retail-in-2011/?display=wide American Express Open and SEMPO, Small Business Search Marketing Survey, March 23 2011

social c: framework the balance of this report will examine these five basic consumer value propositions in social commerce

customer value proposition

customer experience

merchant experience

companies in ecosystem

social coupon

social curator

Deals! Coupons! Bargains!

“I love this...” “I want this...”

Pushing ‘deal-a-day’ offers that are time-sensitive, group quota

User-generated collections of favorite products to share

Groupon LivingSocial Offermatic

Polyvore Tumblr Pinterest

social cashier

social cloud

casual customer

Check-in! Get Badges! Get Points!

$$ Swipe your card anywhere

Look at me, look at my data!

Plug-in card readers for tablets with lowfriction merchant processing

Managing linkages from personal information to the Social Graph

Social Game mechanics applied to store promotions

Square Intuit Mophie

Blippy Swipely Shwowp

SCVNGR 4Square ShopKick

a new world of shopping activities markers indicate number of companies offering the activity shown

Save

Obtain discounts, deals, & special offers • Redeem a Groupon coupon • Receive even better deals by being a repeat customer using SCVNGR’s LevelUp

Join In + Pay Less

Broadcast location and optimize presence

Localize

• Utilize Shopkick app to obtain rewards and deals for in-store presence • Check-in via Foursquare to unlock special offers

Check-in + Document

Conduct business or engage in a commercial transaction

Transact

• Pay for merchandise via a Square device on a mobile phone • Automatically publish recent credit card transactions via Blippy

Pay + Obtain

Make known in a public way

• Post in-store shopping photos via mobile app Pose • Compose an update describing a hotel upgrade on Twitter

Disseminate + Show

Review

Evaluate experience with a product, service, or business • Document customer service experience on Facebook • Write-up dinner experience at a restaurant on Yelp

Write + Report

Gather and publish products, looks, and sets

Curate Select + Organize 8

• Post a look on Polyvore that includes shoes, clothes, jewelry, and other accessories • Gather favorite camera gear on Bagcheck and recommend tripod, camera, lenses, camera bag, flash, and photo-editing software

some of the companies reinventing shopping lines connect companies to the activities they support

Save Join In + Pay Less

BagCheck Blippy Blissmo Care2 Cityvox Coupon Sherpa

Localize Check-in + Document

Coupons Facebook Foursquare Google +1 Gowalla

Transact Pay + Obtain

Groupon IAmHungry JustBoughtIt LivingSocial Pinterest

Share Disseminate + Show

Polyvore Pose Quora Scvngr Shopkick ShopStyle

Review

Shwowp (Buyosphere)

Write + Report

Square Stylebook Svvply Swipely

Curate Select + Organize

Tumblr Twitter Yelp 9

social c:oupon %

all discount, all the time: purchases will be even more deal-driven

% Everyone Loves a Good Deal—the Meteoric Rise of Group Buying Chai Geller, Orange San Francisco Discounts have long been used by merchants to get people in the door. A new crop of companies however have come out of nowhere to disrupt the way millions of shoppers purchase by combining great deals and powerful mechanics at the right time. Group buying includes both Deal-A-Day sites, led by Groupon, LivingSocial and an army of clones and Flash Sales (aka: Private Sales) sites, led by Gilt Groupe, Rue La La (acquired by GSI), HauteLook (acquired by Nordstrom), Privalia and One Kings Lane. Deal-A-Day sites combine an amazing deal (50% discount) with short term availability (24 hrs), long redemption period (1 year) and a convenient location (hyperlocal) and the result is purchases, lots of them! Flash Sales sites connect a homogeneous group (usually invitation only & upscale) of shoppers with short term deals on specialized items that appeal to them. The growth achieved by these companies in such a short time is on a scale never before seen: Groupon has been the most impressive, after two years it is now serving over 50M+ subscribers in over 400 Markets (10.7M unique visitors in Dec 2010). With over 35 million coupons sold, generating estimated annual revenues of $4B in 2010 the company not only has a stock valuation of up to $25B, but has generated imitators that are gaining significant traction as well. One of these, LivingSocial holds the single day sales record with $14M in sales (1.4M buys @ $10, Amazon deal). Others in this category include Gilt Groupe, HauteLook (acquired by Nordstrom for $270 million), and Rue La La (acquired by GSI Commerce for $350 million). To achieve this level of success, group buying needs to appeal strongly to both shoppers and merchants. For shoppers it’s a great way to discover and even try new activities & places ranging from restaurants and spas all the way to horseback riding and indoor skiing. The current state of the economy, with the financial crisis playing a role, is driving more shoppers to seek discounts. Beyond discounts, it is the local emphasis, curation of the deals and highly binary impulse nature of the deals (buy now or pass on it) that makes these services so alluring. For the merchant, the number of new shoppers that hear about their service is important but even more so is the fact that they actually try it as well. Furthermore, although the discount is steep,

shoppers usually end up spending above and beyond the cost of the deal (~60% more) and some do go on to become repeat customers (~20%). Lastly it also provides much better transparency & trackability for the merchant as to the performance of their deal as opposed to more traditional advertising. Flash Sales sites more specifically provide merchants with a quick way to clear out inventory. Beyond the appealing experience, the critical user growth that has fueled these companies can be attributed to several other key factors including attractive customers—typical profile is of a young, well educated woman (77% for Groupon, 70% for Gilt Groupe) with a high income who is also a habitual social media user. These customers are comfortable with the current state of technology, including multiple touch points such as email, smartphones, and tablets, and are expert with online payments and having a credit card on file (enabling an impulse purchase). The social aspect of services means people naturally like to talk about the great deals they’ve gotten. To capitalize on this even further many of the services encourage people to share the deals with friends and even buy them as gifts. Some services even go as far as giving the deal for free if the shopper can get 3 of their friends to buy it as well.

With over 50% in savings and only hours to act this is impulse shopping at its finest.

Moving forward, as the novelty wears out and more and more companies and deals become available, some key concerns will need to be addressed, including: Deal quality, diversity and personalization—shopper fatigue is inevitable and will need to be solved by better matching of deals to individuals. Furthermore, there’s already some gamification of the deals by merchants (such as inaccurate portrayal of discounts) that will need to be addressed. The value of the deal for merchants—many companies don’t plan their deal properly and some even end up going out of business because of it. A deeper analysis has shown that the most correlated factor to the success of a deal has been the business’ Employee Satisfaction (the stress the deal puts on the employees can result in a negative experience for shoppers who then don’t return) and highlights the need for proper education and preparation. Some industries also do better with deals than others (spas do very well while restaurants don’t). Lastly, the question of long term value; are we building a healthy ecosystem and maintaining margins in the process? Groupon’s margins are around the 50% mark. Redemption levels of purchased deals are also short of 100% (more like 80%). Finally, we need to monitor this trend to see if, like all promotional activity, shoppers just go for deals instead of full time purchases, or whether they actually drive spending above previous levels and become long-term valuable customers.

social c:ustomer the new triple play: itâ&#x20AC;&#x2122;s social, local, and real-time

Casual Customer: Locality Beats Loyalty Mark Plakias, Orange San Francisco The connected mobile phone is replacing online usages. For retailers this is critical, considering that 54% of purchasers research online before purchasing offline. So-called “geoloc” apps that started out as social recreation—showing friends where you are by checking into venues seamlessly with automatic GPS location inside the app—has morphed into a potent merchandising and promotional tool. Companies such as Foursquare and Gowalla have created a double-sided business model, offering social game-like experiences to mobile users, and monetizing the check-in by selling promotional media to venue owners such as retail stores, restaurants, and even major brands. Foursquare has experienced 3400% growth in check-in volume in 2010 from its 6 million users worldwide to reach over 400 million to date (including one from outer space). This growth in user activity creates corresponding growth in venues on the platform—there are over five million venues on Foursquare that can be classified as retail locations. While Foursquare may have started out as a single-sided, social geoloc experience for users, it has embraced the social shopping experience with a vengeance. Today, it is considered a must-have for local and chain retailers who want to leverage social media. As can be seen from the illustration, promotional offers can be pushed from the very beginning of the check-in process—the original list of ‘nearby’ venues.

The truth is, any mobile app you care to name can add check-in as a feature as long as the phone is GPS-enabled: that’s why local search/reviews leader Yelp has made check-ins a top priority, as has Facebook. The activity is fun, and brings game dynamics into the real world (also known as offline). The corollary is that new startups are taking the idea of shopping as one aspect of the check-in experience and putting it center-stage: companies such as Shopkick and SCVNGR are deliberately combining game elements with shopping activity. Shopkick, co-founded by ex-CBS Mobile exec Cyriac Roeding, is explicitly aiming at the gamification of offline retail shopping: “This is the intersection of the mobile and the physical world,” Roeding says. “You turn an offline store into an interactive experience.” Shopkick offers the retailer a sensing capability—whenever a Shopkick user enters the store the platform connects the user to promotions from the retailer, which also features virtual currency in addition to deals. Likewise, incumbent electronic coupon players such as XCoupon.com have taken the mobile app closer to the point-ofsale. This company has integrated a mobile app to supermarket loyalty programs, so that the user can scan a barcode on a product and have the purchase automatically discounted by the time she gets to the cash register. What Customers Do Anyway

Companies such as Foursquare and Gowalla have created a doublesided business model, offering social game-like experiences to mobile users, and monetizing the check-in. Customer behavior is ahead of retailers, and whether they make use of the new wave of apps or leverage native functions like SMS, the smartphone’s impact on shopping is huge, swift, and unstoppable. According to mobile shopping app provider Milo, at least once a month 62% of all smartphone users send pictures from within a store during the shopping journey, to gain advice or opinions. The smartphone is now a major driver of offline commerce—44% of smartphone users read product reviews, and/or compare prices for products while shopping. According to ABI Research, mobile shopping volume tripled from just under $400 million in 2008, to $1.4 billion in 2009, and then more than doubled to $3.4 billion in 2010. This is a serious phenomenon, so why do we discuss this under the heading of Casual Customer? The idea of ‘casual’ is a cohort of the On-Demand Economy: when everything can be accessed in realtime (best price, nearest store, best deal), the idea of loyalty starts to morph. Some might say loyalty erodes under this kind of realtime model, and they may be the same people who remind us that

promotional activity in general does not generate loyalty, but only short-term stimulus. One thing for certain is that—just like casual games (think Zynga)—the gamification of shopping produces data about customers. GPS traces transformed into check-ins that create badges are still basically data about frequency of visits to a venue—valuable information for most retailers. Being able to see in almost realtime what kind of redemption rates are being obtained on promotional offers beamed to mobile shoppers currently in the store is the kind of performance feedback on promotions that we only could have dreamed of a few short years ago. As is true generally of the new Web—which increasingly is a realtime data cloud—the breakthrough is not technology, it is behaviors at scale. People are sharing location, and connecting to the Web inside the store, and retailers have mandate to be there as well as behind the counter or on the shop floor.

social c:urator

store of my dreams: users curate their own SKUs for fame & glory

Rethinking the Customer Lifecycle: From Content-Creation to Curation Natalie Quizon, Orange San Francisco We live in a culture of abundance (even in times of scarcity). From data to information, from graphics to images, from products to services, and from companies to people, we have a lot of choices to make on a daily basis in what we decide to process, participate in, or purchase. The changing landscape of the internet and allthings-digital mirrors the shift from Search to Sort. Increasingly our digital footprint is less preoccupied with searching for an answer or the one right result. Instead, we spend more of our time sorting an overwhelming number of images, text, links, media, and content into sets, lists, folders, or channels. Life is becoming more and more an assortment of things and information we collect; arrayed in ever creative ways for public consumption or reuse, and our own aspirational archive of wishlists. For retailers, these changes need to be understood as the shift from Content-Creation to Curation. User-Generated Content (UGC) focused on the original production or remixing of content (e.g., in the form of song mashups), resulting in something altogether original. Customer-Curation, on the other hand, has a decidedly consumer- and product-focus in its approach to content, valuing selection over creation. The notion of selection as curation has significant implications for how companies market goods and services.

Product Content The web and the mobile web are quickly replacing the traditional catalogue. Indeed, the idea of the web as a distributed catalogue is an underdeveloped and untapped area for most companies. The proliferation of fashion apps for smartphones represents new opportunities for retailers who must begin to think of their merchandise not just as products but as content as well. Examples abound of consumers, magazine editors, and retailers’ products filling screens and webpages with products as curated content. Gap’s Style Mixer app not only allows you to mix and match styles but it also enables you to unlock discounts. Stylebook organizes your outfits on a daily basis by displaying sets of looks. Lucky Magazine’s free iPhone app, Lucky at Your Service, curates clothes and other products. In addition to handselecting what to promote, the app also finds the items online for readers, or sometimes at stores nearby, via GPS, and can even reserve them for pickup the same-day. The manner in which products are encountered or located on the web can be optimized to drive traffic to actual store locations. Truth be told, consumers are the ones paving the path to new forms of curation. Fashion is an obvious choice for curation and

Lucky At Your Service—curation with local shopping features

What is interesting in this new social shopping landscape is that participative curation happens on both the retailer and consumer side. sites like Polyvore make it fun for fashionistas to put together looks along with links to retailers to purchase from. Consumers now have access to visual bookmarking and curatorial sites like Pinterest. And tumblelogs like Tumblr are accommodating more shopping-related behaviors on their pages. Pinterest, for example, has a specific category for gifts with prices clearly marked on the corner. It is important to note that the curative impulse is not only confined to fashion. For bloggers, like OhJoy, who generate income through advertising on their sites, curation goes beyond fashion into the realm of food and home accessories. Newcomer Bagcheck crowdsources product sets based on activities and interests like photography or beauty.

Bagcheck—curated product sets based on hobbies, interests, and themes

L’Oreal Polyvore Contest—curated fashion sets based on eyeshawdow shades

Conversation-Starter Some of the more exciting areas of curation has to do with companies approaching their products as conversation starters and beginning to curate content as well. Take for example Intel’s My Life Scoop: Tips For A Connected Lifestyle. Spanning categories like Family Life, Personal Life, and Tech Life, it draws from bloggers and writers to curate lists of products from “The Top 7 Solar-Powered Bags for Back-to-School” to “Top 10 Stylish Gadgets for Your Kitchen.” So not only do companies need to start thinking of themselves as curators and approach their products/services as content for curation, they must also enable curation for customers by contextualizing their products, producing high-quality accessible images, and developing curation-based marketing campaigns (as in the L’Oreal/Polyvore example). What is interesting in this new social shopping landscape is that participative curation happens on both the retailer and consumer side. A rethinking of the consumer lifecycle, not just from a consumption perspective but also from a curatorial perspective, enriches not only the consumer experience but makes room for emergent marketing practices. Oh Joy—curated food set with a Valentine’s Day theme

social c:loud privacy = exposure: shift from protection to trust generation

The Social Cloud: Rebalancing the Economics of Consumer Attention Tony Mignot, Orange San Francisco Data is the new currency. Tweets, comments and likes, locations and photos, wish-lists and shopping habits, lists of friends and online social games, combined with web browsing behavior represent a goldmine to companies trying to sell their products whether it be online or off-line. Click-stream and social gaming datasets are some of the biggest datasets known to exist. All this data can be correlated to become highly valuable to direct marketers, political campaigns, and also insurance companies or prospective employers. As Meglena Kuneva, the European Consumer Commissioner said in March 2009, “Personal data is the new oil of the Internet and the new currency of the digital world.” With 15PB created daily worldwide, the volume of information is not only astounding, it’s also growing at an unprecedented pace. With the rise of a new generation of mobile devices that fosters the creation and sharing of digital content, the market for information and data that can be collected about users will keep expanding. Information and revenues are highly correlated. The more information becomes available about users and where they go and what they watch, the more it is possible to present them with advertising that resonates, and therefore, the more likely they are to end up buying the products or services being advertised. Facebook is now the main source for user-generated content on the internet: 9 out of 10 social network users are on Facebook in the US. The social network is reported to have generated $600M profits in 2010, including $250M in Q4 only, on track to generate about $2B of EBITDA in 2011, with revenues coming primarily from advertising based on user-generated content. Social Networks’ Interests and Members’ Privacy On a Collision Course But the availability of all this data and potential for profit portends a crisis. All appears well, except that the interests of social networks (e.g., Facebook, Twitter, and Foursquare) and those of its members are on a collision course. The former must walk the fine line between enticing the latter to broadcast personal infor-

mation in order to extract value from the data they collect, and respecting their privacy preferences just enough to keep them on board. Recently, Facebook announced that it would share users’ phone numbers and addresses. Taking a closer look reveals more shortcomings to today’s approach. 1. Users can’t control who accesses data about them. Users share more content than they think. From just a name and an email address, searching across multiple online databases can turn up extremely personal information such as education, siblings, marital status, address, photos with friends, guesstimates about salaries, etc.—even for a very private person who carefully guards his/her online identity. Most of us as users go with the default privacy settings, and take the risk of exposing even more. You can check how much of your own information is visible through Facebook’s social graph API: https://graph.facebook.com/[username]. 2. Users can’t control the accuracy of data about them. Even though aggregators of your personal information are everywhere, there is no mechanism to update the information they have collected, or even know who is maintaining that information on their servers. 3. Fragmentation makes it complex to manage content. The proliferation of social networks leads to a fragmentation of users’ content, making it harder to keep track of where things are. Once your information is out, it is impossible to know who has a copy of it. Furthermore, personal data production in a world of sensors, smart cars and homes, is advancing ahead of any comprehensive storage solutions. 4. Users leave money on the table. Put simply, consumer attention on the Internet is translated into wealth for the platform providers who capture that attention. The incentives to capture, measure, and segment that attention can be measured in billions of dollars for platform providers like Facebook, who are part of a $26 billion online ad marketplace that is growing by 10% annually. This monetization makes every consumer online the target of data miners, or aggregators, who crawl the web to gather up personal details given voluntarily and create and establish profiles

Users leave money on the table. Put simply, consumer attention on the Internet is translated into wealth for the platform providers who capture that attention. 24

of individuals without the user’s explicit permission (e.g. RapLeaf scandal last fall). Regardless of what changes Facebook makes in its terms of service, motivated data harvesters like Acxiom, Intelius, Spokeo, Merlin Information Services, and PeopleFinders will always fill the void, with minimal or no consumer benefit. From a Facebook-centric to a User-centric Approach: Taking Ownership of Personal Data Recent research from Aricent/Frogdesign shows that consumers are willing to give away some of their personal information (the less they value information, the more they’re willing to share it) in exchange for free community services. This is an important first step in having consumers understand their data has monetary value. But rather than having your own information stored on Facebook (and other social networks), wouldn’t it be a better idea to store it all in one place—a cloud that you would control entirely for access and accuracy? Selectively sharing your personal information, by giving access to it, as opposed to uploading it on third-parties servers, could actually prove extremely valuable. Why? Because any merchant who wants to reach you online with an offer would know that this information is accurate, and is being made available specifically for commercial communications. Likewise, you would know who is asking for your information, and could approve or reject the request. If the complexity of managing our fragmented and exploding personal data online is as described, taking ownership of it and assessing its value will be a daunting task. At Orange’s Silicon Valley center, research of user interfaces, and middleware technologies to enable and manage this value discovery, is well underway. It is not just a question of technology but innovative

business models as well. Tapping into a pool of collective intelligence (data shared anonymously by others), self-service analytics could help you pick from multiple options, and even reward you with discounts on your next purchase, in exchange for advertising the products and services you love to your friends. Some companies, like Diaspora, Sing.ly, and Personal.com, are already hard at work to turn information sharing into an opportunity for users instead of a risk of violation of their privacy. This represents a major shift from privacy management, to property rights management. Online Merchants are Key Players in Giving Data Ownership Back to the Customer Adopting a user-centric approach is key to address the shortcomings of today’s personal data management. A combination of ubiquitous computing power (PCs, laptops, smartphones, tablets, etc.), and high bandwidth availability are key technology enablers of the target-distributed architecture. It certainly represents an important disruption to media giants such as Facebook, Google, or Amazon, and will take several years to mature. Part of this transition will be determined by the online advertisers and merchants who today subsidize the major platforms’ practice of appropriating user information without compensation. Why should retailers switch from trusting Facebook to directly connecting with customers? The answer is exciting: better access to even more information of higher quality. Opportunities to better understand customer preferences, estimate demand, and increase conversion rate, while preserving users’ privacy, is a win-win for the buyer and seller. As the public policy debate about consumer privacy and tracking online escalates, remember, there is an alternative way forward. 25

social c:ashier $

five billion cash registers: anyone can transact via mobile/tablet 27

$ Evolution In Point of Sale

Terminals For Small and Medium Businesses Ashish Patel, Orange San Francisco

Small scale merchants face challenges in terms of processing and managing transactions. There are roughly 30 million merchants in the U.S. who make less than $100,000 per year and only 20% of them are accepting credit cards. That indicates considerable friction still exists for the hyperlocal merchant or small business. The “on boarding” process for small merchants to start processing credit cards is not straightforward: merchants are required to go through complicated approval processes and pay upfront costs for credit card processing terminals without knowing whether it will make business sense. On the other hand, 49% of small business owners use smartphones, according to a survey conducted by MerchantCircle of 100,000 small businesses in its network. Today, the news is that companies such as Intuit, Square, Mophie and Verifone are offering solutions to enable these small businesses to turn their smartphones into point of sale terminals. Let’s look at some of the solutions that enable merchants to convert their smartphones into point of sale terminals. Prominent in this new arena is Square. Founded by Twitter cofounder Jack Dorsey, Square offers an adaptor which plugs directly into an iPhone, enabling the merchant to swipe cards. Within one year of launch 50,000 small merchants have subscribed to Square service and now it is adding more than 60,000 merchants a month. Also entering this domain, small-business giant Intuit is offering its GoPayment solution which enables point-of-sale terminals for merchants with Blackberry, iPhone, Symbian, and Palm based smartphones. Intuit offers this solution to 4 million businesses that already use Intuit accounting software QuickBooks. A merchant can be approved for an account with Intuit within 15 minutes. Thus overall on-boarding experience for merchants is extremely simplified. Mophie also offers an adapter and it targets small merchants dealing with high volume transactions.

The table shown to the right explains the pricing offered to small merchants. For low-volume merchants, Square and Intuit’s Go Payment are the most appropriate for low-volume plans, while Mophie and Intuit’s high-volume plans fare better at higher transaction volumes. According to Business Insider, there was 88.6% growth in worldwide smartphone shipments between 2009 and 2010, with just under 300 million smartphones shipped in 20101. The impact of these online or in-store transactions grows as consumers increasingly turn to smartphones. Small merchants may lead larger enterprises in understanding this development, and importantly, are plugging it into the associated rise of social media as a way to reach these consumers. According to MerchantCircle’s survey of 100,000 small merchants in its US network, 40% plan to reach consumers through mobile, 56% of the merchants have created social networking profiles and 32% of the merchants use Yelp.

Within one year of launch 50,000 small merchants have subscribed to Square service and now it is adding more than 60,000 merchants a month.

Pricing Item

GoPayment Low-Volume Plan High-Volume Plan

Square

Mophie

Card Reader

$179.95

Monthly Fee

$12.95

Swipe Rate

2.70%

1.70%

2.75%

1.70%

Keyed Rate

3.70%

2.70%

3.50%

2.70%

$0.15

$0.30

$0.15

$0.30

Monthly Minimum

Set-up Fee

Transaction Fee

This convergence of mobile customers, mobile merchants, and social media leads us to examine three use cases: #1 The Casual Merchant: Smartphone-based point-of-sale terminals with smooth on-boarding and low-to-zero initial cost means that anyone with a smartphone is a potential merchant. This could lead to substantial increases in person-to-person transactions, transforming smartphones into social cashiers for casual, peer-to-peer business. Indeed, the peer-to-peer casual merchant concept transforms ‘brand ambassadors’ or advocates into potential cashiers, transforming word-of-mouth interest into actual swipes on the brand ambassador’s paymentenabled smartphone2. #2 Demand-driven Promotion: Knowing that over half of small businesses use social media, the ability to tap into conversations and customize offers according to demand is no longer rocket science. Imagine a solution that enables merchants to consolidate the wishlists of people available on various social

networking sites—or even more simply just ask consumers what they want—and deliver custom deals and promotions to contextually-relevant customers. When we add mobile and realtime presence into this mix it gets even more interesting. #3 Supply-side Adhocracy: If we focus on the supply side rather than demand, then the combination of mobile and social media enables merchants to create ad-hoc promotions that move time-sensitive, overstocked inventory, or just items that the merchant wants to get off the shelf. Again, with the social cash register, these can be pushed out beyond the store itself, and even beyond store employees. This short list of three generic use cases involving smartphones on both sides of the counter suggest that these solutions will change the way small merchants will do business in the very near future.

Canalys: http://www.betanews.com/joewilcox/article/Canalys-Android-tops-Symbian-in-smartphone-shipments-twice-as-many-units-as-iPhone/1296491375

A related spin-off use case is the use of smartphones in pop-up stores or even ambient situations by medium-to-large enterprises, albeit with tighter integration

into supply-chain management and inhouse financials.

looking ahead

Social Supply Chain Aditi Karandikar, Orange San Francisco Social Supply Chain Social media has changed the outbound customer-facing landscape for companies. A slower change is happening internally and within their supplier-facing landscape. Supply Chain Management (SCM) has implicitly contained the notion of paths through a network of companies and information flows between value chains: supplier  company, company  customer, etc. “Simple chains” are evolving to “supply networks” where dual relationships such as company supplier advance to network relationships (supplier network) and all entities use information flows to optimize and react quickly to new opportunities. Social Supply Chain applies the principles of Social Network Theory to redesign businesses from an ecosystem perspective (customer, employee and partner relationships), harvesting social data to increase value from its business activities. Supply Chain Reconfiguration With its daily deal Groupon creates a new on-demand channel for suppliers at close to zero cost. To serve this channel, suppliers need to reconfigure their supply chain for volume and staff. In this new world, the ability to meet the surges of deal-driven ‘group’ social buying becomes a new challenge—and an opportunity. Businesses need to assess upstream and downstream capacity and create new supplier networks that are agile and responsive to real-time information. If a SMB has had the same supplier for 15 years they may not be able to fulfill a sudden spike in demand. In this case sourcing new suppliers or a network of potential suppliers in a region may be the answer. Another scenario illustrates a more proactive, dynamic response: Kellogg introduces a new cereal for distribution in Texas and finds through social network feedback, indications of high demand for the product in Virginia. With this information it could dynamically alter its distribution to reach Virginia by tapping into its supplier partner network. The key is altering the supply chain based on real-time social data to fulfill demand. The adjustment would require existing supplier network connections to share this socially-sourced information and negotiate the most efficient way to address new demand. In the future niche social networks will emerge in the enterprise (e.g. supplier networks) where the business is in continual conversation with the ecosystem to proactively react to new opportunities for maximum business value.

What should CIO’s be looking for; new tools that harness enterprise and supplier data with capabilities for posting questions and sharing information transparently, and the ability to tap partner’s social networks to source suppliers via these tools by asking questions about the social capital of a supplier—have you partnered with supplier A and and do you have stories to share? SAAS, Mashups & Cloud Computing Mashups are unique to the internet in that they combine modules from other businesses to create a new product or service. For example Payvment provides a platform for businesses to create a storefront on Facebook. It integrates a Facebook page with a storefront including a shopping cart to allow consumers to buy products directly from within Facebook. Businesses with storefronts can engage users for product opinions (via Like buttons), discounts etc. Other companies include Dot Blu which provides a white label deals platform for businesses to create their own Groupon-like service for their customer base (SFGate uses Dot Blu for their deals’ services). eWinWin is another company that allows businesses to create group deals on their Facebook page. A business that has a Facebook page can target these deals to its “fans”. Retailigence is an API for participating retailers’ SKUs to be served to any geoloc app that wants to provide proximitybased, SKU-level search. There are several other examples of innovative social commerce mashups that allow small and large businesses to quickly and inexpensively create new sales channels (Facebook, mobile, iPad app. etc.). Sense-Making Supply Chains The challenge on the supply chain side with these new channels is fulfillment. The real-time, location-aware mobile Web means the store shelves can be emptied in disruptive fashion, at least until group purchasing enablers can provide better guidance on what to expect. Until retailers plug social signals into their supply chain, they will still be behind the curve.

With its daily deal Groupon creates a new ondemand channel for suppliers at close to zero cost. To serve this channel, suppliers need to reconfigure their supply chain for volume and staff. 31

Views From the Ecosystem Mark Plakias, Orange San Francisco In the development of this report, Orange San Francisco participated in, and staged, ecosystem events that treated the intersection of social media, shopping, CRM, and brand management. A symposium that creatively brought together a faculty and audience from all of these disciplines was Opus Research’s C3 event, where the title referred to a “collision of marketing and customer care.” Several of us from Orange SF were on the panels, which were curated to reflect an eclectic but inter-related progression from search to social media, to customer care and how it has been impacted by phenomenon such as Facebook and Twitter, to how organizations are and should be treating information about customers. The goal of the organizers was to create this intersection where the different disciplines could meet and cross-fertilize perspectives. Indeed, many of us outside the specialized realm of search engine optimization (SEO) may look at it as a black box technology that has something to do with increasing the visibility of your company in search results; but in the context of an interaction with customers over the Internet, search is indeed the opening of that conversation. Likewise, the common ground between social media strategists in the marketing department, and customer care professionals in the contact center is getting broader and deeper every day as social media becomes the place where customer

dissatisfaction surfaces outside the toll-free call. There is a rich discussion about where those socially-generated complaints should be directed and resolved—after all, brand managers are not customer care professionals. For those of us who are thinking about how social shopping involves new forms of solicitation—including place-based realtime offers—the issue of customer data is very real. This was the topic addressed by Orange SF researcher Julian Gay, who spoke on a panel about a new model known as VRM (Vendor Relationship Management). The issue of the customer taking ownership over ‘her’ data was also a hot topic at a Spotlight event hosted by Orange. The Spotlight format is described by Orange SF evangelist Pascale Diaine as “a maximum of interaction at a high level of knowledge: everyone is a panelist. That said, we have a ‘core’ group of five to six companies that discuss their views…” In March of this year, Orange SF convened a Spotlight on “The Future of Shopping” which invited a hand-picked group of thought-leaders working on social commerce to explore “the evolution of social commerce and related topics (such as personal data ecosystems).” Groupon and Yelp immediately accepted the invite to join the discussion, and the stage was set for a fascinating look at what was happening, and what the collective panelists saw down the road.

For those of us who are thinking about how social shopping involves new forms of solicitation—including place-based realtime offers—the issue of customer data is very real.

Yelp, Groupon, and the next wave of their competitors compare views at the Orange Spotlight event.

Michael Shim, VP of Groupon (left), Greg Ovalle from BillingRevolution react to comments at Orange Spotlight event.

5 Verbs For the Next 5 Years Natalie Quizon, Orange San Francisco Our tour through the current art in Social Commerce has brought us to a changing landscape that foregrounds Coupons, the Casual Customer, Curation, the Cloud, and the Cashier. Merchant innovations, changing consumer practices, and technological inventions are disrupting and shaping the future. Companies and businesses will no doubt encounter even more changes in the form of near-field communication (NFC), crowdsourcing & usergenerated content, social networks, and mobile payments in the years to come. While it isnâ&#x20AC;&#x2122;t easy or simple to predict the exact changes that will alter the Social Commerce landscape, we can start to imagine what the next 5 years might look like and begin to develop some best practices to deal with these imminent shifts. With this in mind, we conclude with a manifesto of sorts, in the form of 5 Verbs For The Next 5 Years:

Activate

buyers and customers. Despite technological innovation and emergent user behaviors around publishing and sharing practices, consumer influence is still an underutilized and underdeveloped area. Connecting deals to the crowd, through the cloud, is still in its nascent stagesâ&#x20AC;&#x201D;knowing how to activate this distribution platform will be a strategic advantage. Rethink Rewards.

Create

publishable content. This includes envisioning products and services as content to be used across multiple platforms. As well it requires a storytelling mindset in which these things become part of a narrative that could take on a life of its own. Companies will be required to think of their brand as a flexible asset when they cede control over the narrative to customers. Rethink Brand Management.

Localize

products and services. Even as companies invest huge sums of money on building brand recognition and equity, more work needs to be done around the convergence of social and local. What does a big brand mean on a local level? How can local differentiation be parlayed into marketing and sales initiatives? What new forms of consumer experiences can emerge from an internet-connected form of mobile payment and local businesses? Rethink store operations.

Extend

and broaden the consumer touchpoints. The lifecycle of companiesâ&#x20AC;&#x2122; relationships with consumers needs to be rethought to accommodate shopping practices that encompass the aspirational, the conversational, the curatorial, and even the critical. The consumer lifecycle today transcends the commercial act of buying. Rethink data warehousing.

Adapt

to new forms of marketing and advertising. This includes incorporating the curatorial impulse that comes with a visually intense and graphic-driven consumer culture that is focused on aspirations, audiences, and associations. These new marketing and advertising strategies recognize the need to adapt to content, people, and products that are interconnected in real-time, sometimes co-located, other times distributed, and all the while archived and easily accessed. Rethink media planning.

acknowledgements We would like to thank the people and customers of Orange Business Services from the retail sector who have visited Orange San Francisco center over the past year to dialogue with us about trends affecting the future of shopping. Hopefully in these pages we have articulated these trends—including the impact of social networks, mobility, gamification, and local content—on how people are shopping today and in the future. We look forward to continuing and expanding this dialogue. Speaking of dialogue, we also want to thank the participants of the Orange Spotlight on the Future of Shopping, and especially the thought-leaders who shared their perspectives, specifically: Michael Shim, VP, Groupon; Jay Villegas from Yelp; Brian Weisfeld from Coupons.com; and Greg Ovalle from BillingRevolution. The inputs from these companies, who have been the founders of social commerce, will continue to be influential as social and local features become an integral part of the shopping experience.

We’d also like to thank our many colleagues here at Orange San Francisco who are actively developing projects and analyses around this topic, including contributors to this report: Chai Geller, Ashish Patel, Julian Gay, Tony Mignon, Xavier Quintuna, Aditi Karandikar, and Amit Goswami. And of course, our thanks to Obreanna McReynolds and Lucinda Waysack for their visual design acuity. Finally, we’d like to thank the creative community here in Silicon Valley, where this is being written, for taking the same third-party, ‘apps’ approach to the broad platform that is shopping in the offline world. We urge all readers to consider the fact that the third-party developer approach takes the Internet (online) and the built (offline) worlds as its playground, and doesn’t stop to ask permission before reinventing how we experience these domains. Our call to action is clear. By embracing the creators of new shopping experiences, and active collaborations, we can deliver even greater value for customers, and love for the brands they are now interacting with in new ways.

—the Editors, Pascale Diaine, Georges Nahon, Mark Plakias, Natalie Quizon