The Power of Suggestion

Social shopping sites turn online shopping into a group activity.

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Online marketing once was a savior for small companies, allowing businesses with limited budgets to reach a new world of consumers via banner ads and keyword searches. But marketing on the Web isn't what it used to be. A large number of search engine clicks are fraudulent. And competition from large, deep-pocketed marketers has driven up prices, pushing smaller companies to the margins.

Fortunately, there is a new alternative for online marketers, one that combines elements of yesterday's killer app, the search engine, with the best parts of today's, social networking. Known as "social shopping" sites, these services combine the networking power of MySpace with the data-crunching muscle of Google (NASDAQ:GOOG), and in the process bring a little more humanity to the act of shopping online.

What's different about social shopping? For all its power, Google can't tell shoppers what's cool or what their friends or like-minded consumers recommend. Social shopping sites, on the other hand, do just that--which provides new opportunities for small online retailers to reach consumers. A search for "men's shoes" on a typical search engine, for example, yields the most prominent brands and retailers within the first few pages of results. The same search on a social shopping site not only displays a wider array of smaller, and arguably cooler, brands, it points users toward the haberdashery recommended by the site's most fashion-conscious and influential users. These sites are geared to consumers, not marketers, so you have to tread carefully. Still, a single recommendation from a well-connected and influential user can generate considerably more visibility than many marketers could achieve on Google or Yahoo (NASDAQ:YHOO) --and, even better, it's free. On the major search engines, "it can be all but impossible for small retailers to percolate to the top of the search process," says Sucharita Mulupuru, a senior retail analyst at Forrester Research (NASDAQ:FORR). "There's no question that social shopping could be hugely beneficial to small businesses."

The medium has proved perfect for Alex Kump, co-founder of Topo Ranch, an apparel manufacturer based in Venice, California. Topo Ranch gears its T-shirts, fleeces, and jackets toward young, active consumers, who can be resistant to traditional marketing. And the start-up does not have much of an advertising budget; it gets most of its new customers via word of mouth.

Last August, Kump discovered ThisNext, a social shopping site geared toward design-centric consumers. After perusing the site, Kump decided it might be fun to post his own "Shopcast," the term ThisNext uses to refer to the personal lists of product recommendations that members post. Kump's Shopcast included an Ikea bookcase, the board game Scrabble, Niman Ranch bacon, and his own Topo Ranch hooded sweatshirt. That simple act managed to expose Kump's brand to thousands of potential customers, many of whom clicked through to Topo Ranch's website. The result of this zero-cost, ad hoc marketing? Since Kump began posting on ThisNext, the company's daily Web traffic has increased by almost a third and sales have risen 165 percent. "This is an opportunity to express what the Topo Ranch lifestyle is," says Kump. "All of a sudden, I'm not just making pants, sweatshirts, and clothing, I'm giving you a lifestyle that's made up of my favorite bands, my favorite board games, my favorite shoes, and my favorite furniture."

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