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social c:ommerce

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Reinventing ShoppingOver 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 experi-

ence 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 game-

changer, 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 emer-

gent 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 Mark Plakias, VP Strategy, Orange San Francisco

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table of contentssocial customer by the numbers

social c: framework

a new world of shopping activities

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06

08

10

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18

22

26

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The conversation about social commerce is underway—pictured here, the Orange SF Future of Shopping Spotlight event.

couponEveryone Loves a Good Deal—the Meteoric Rise of Group Buying

curatorRethinking the Customer Lifecycle: From Content-Creation to Curation

cashierEvolution In Point of Sale Terminals For Small and Medium Businesses

cloudThe Social Cloud: Rebalancing the Economics of Consumer Attention

customerCasual Customer: Locality Beats Loyalty

looking aheadSocial Supply Chain

34 conclusion5 Verbs For the Next 5 Years

05 social merchant by the numbers

32 spotlightViews From the Ecosystem

4

44%

62% 35%

54%

1 in 6

62%

5 miles

88%

distance most customer will travel for deals and coupons

mobile phones with payment in 2014

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

customers review product online before

buying it locally

smartphone users checking prices of products online in

the store

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

0 10

social customer by the numbers

Sources:http://milo.com/blog/mobile-warming-hot-trends-in-mcommerce/?display=wideForrester 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

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2X$1.5 billionsales of goods via mobile devices in 2010 at eBay

79%

social merchant by the numbers

retailers using Twitter in 2010

46%

retail sales influenced by users going online

Mobile commerce sales growth Q4 2010

$14 $32 billion

growth in digital local advertising 2008 > 2013

$404 $692 million growth in local mobile ad spend from 2009 > 2011

$25 $500 milliongrowth in PayPal’s worldwide mobile transactions, 2008 > 2010

70%primary source for

new business of SMBs are other customers, friends and families

Sources:BIA/Kelsey Digital Out of Home: Hyperlocal and Hyper Growth?, November 2009Forrester 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=widehttp://milo.com/blog/the-new-face-of-retail-in-2011/?display=wideAmerican Express Open and SEMPO, Small Business Search Marketing Survey, March 23 2011

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social c: framework

customer value proposition %

socialcoupon

socialcurator

customer experience

merchant experience

companies in ecosystem

Deals!

Coupons!

Bargains!

Pushing ‘deal-a-day’

offers that are

time-sensitive,

group quota

User-generated

collections of

favorite products

to share

Groupon

LivingSocial

Offermatic

“I love this...”

“I want this...”

Polyvore

Tumblr

Pinterest

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

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$ socialcashier

socialcloud

casualcustomer

$$ Swipe your

card anywhere

Look at me,

look at my data!

Check-in!

Get Badges!

Get Points!

Plug-in card readers

for tablets with low-

friction 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

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a new world of shopping activities

CurateSelect + Organize

TransactPay + Obtain

ShareDisseminate + Show

LocalizeCheck-in + Document

ReviewWrite + Report

SaveJoin In + Pay Less

Gather and publish products, looks, and sets• 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

Conduct business or engage in a commercial transaction• Pay for merchandise via a Square device on a mobile phone

• Automatically publish recent credit card transactions via Blippy

Make known in a public way• Post in-store shopping photos via mobile app Pose

• Compose an update describing a hotel upgrade on Twitter

Broadcast location and optimize presence• Utilize Shopkick app to obtain rewards and deals for in-store presence

• Check-in via Foursquare to unlock special offers

Evaluate experience with a product, service, or business• Document customer service experience on Facebook

• Write-up dinner experience at a restaurant on Yelp

Obtain discounts, deals, & special offers• Redeem a Groupon coupon

• Receive even better deals by being a repeat customer using SCVNGR’s LevelUp

markers indicate number of companies offering the activity shown

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BagCheck

Blippy

Blissmo

Care2

Cityvox

Coupon Sherpa

Coupons

Facebook

Foursquare

Google +1

Gowalla

Groupon

IAmHungry

JustBoughtIt

LivingSocial

Pinterest

Polyvore

Pose

Quora

Scvngr

Shopkick

ShopStyle

Shwowp (Buyosphere)

Square

Stylebook

Svvply

Swipely

Tumblr

Twitter

Yelp

some of the companies reinventing shopping

CurateSelect + Organize

TransactPay + Obtain

ShareDisseminate + Show

LocalizeCheck-in + Document

ReviewWrite + Report

SaveJoin In + Pay Less

lines connect companies to the activities they support

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

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Everyone Loves a Good Deal—the Meteoric Rise of Group Buying

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 homoge-

neous 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 transpar-

ency & 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.

Chai Geller, Orange San Francisco

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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 gamifica-

tion 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.

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

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social c:ustomerthe new triple play: it’s social, local, and real-time

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Casual Customer: Locality Beats LoyaltyMark 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 merchan-

dising 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-of-

sale. 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

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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

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.

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.

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social c:urator

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

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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 all-

things-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 informa-

tion we collect; arrayed in ever creative ways for public consump-

tion 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 some-

thing 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 selec-

tion as curation has significant implications for how companies

market goods and services.

Product Content

The web and the mobile web are quickly replacing the tradi-

tional 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 hand-

selecting 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

Rethinking the Customer Lifecycle: From Content-Creation to CurationNatalie Quizon, Orange San Francisco

Lucky At Your Service—curation with local shopping features

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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.

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 land-

scape 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.

What is interesting in this new social shopping landscape is that participative curation happens on both the retailer and consumer side.

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

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

Oh Joy—curated food set with a Valentine’s Day theme

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social c:loudprivacy = exposure:shift from protection to trust generation

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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 repre-

sent 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 prospec-

tive 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 infor-

mation 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, guessti-

mates 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.face-

book.com/[username].

2. Users can’t control the accuracy of data about them.

Even though aggregators of your personal information are every-

where, 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% annu-

ally. 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

The Social Cloud: Rebalancing the Economics of Consumer AttentionTony Mignot, Orange San Francisco

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.

25

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 intelli-

gence (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 oppor-

tunity 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 short-

comings 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 repre-

sents 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.

26

27

social c:ashier

five billion cash registers: anyone can transact

via mobile/tablet

$

28

Evolution In Point of Sale Terminals For Small and Medium Businesses

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 fric-

tion 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 busi-

ness 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.

Ashish Patel, Orange San Francisco

$

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.

29

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 payment-

enabled smartphone2.

#2 Demand-driven Promotion: Knowing that over half of

small businesses use social media, the ability to tap into conver-

sations 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 real-

time 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 smart-

phones on both sides of the counter suggest that these solu-

tions will change the way small merchants will do business in the

very near future.

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.

1 Canalys: http://www.betanews.com/joewilcox/article/Canalys-Android-tops-Symbian-in-smartphone-shipments-twice-as-many-units-as-iPhone/12964913752 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.

Pricing ItemGoPayment

Low-Volume Plan High-Volume PlanSquare Mophie

Card Reader

Monthly Fee

Swipe Rate

Keyed Rate

Transaction Fee

Monthly Minimum

Set-up Fee

$0

$0

2.70%

3.70%

$0.15

$0

$0

$0

$12.95

1.70%

2.70%

$0.30

$0

$0

$0

$0

2.75%

3.50%

$0.15

$0

$0

$179.95

$12.95

1.70%

2.70%

$0.30

$0

$0

30

looking ahead

31

Aditi Karandikar, Orange San Francisco

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.

Social Supply Chain

Social Supply Chain

Social media has changed the outbound customer-facing

landscape for companies. A slower change is happening inter-

nally 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 informa-

tion 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 conversa-

tion with the ecosystem to proactively react to new opportunities

for maximum business value.

What should CIO’s be looking for; new tools that harness enter-

prise 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 store-

fronts 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 busi-

nesses to create group deals on their Facebook page. A busi-

ness 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 proximity-

based, 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.

32

Views From the EcosystemMark Plakias, Orange San Francisco

In the development of this report, Orange San Francisco partici-

pated in, and staged, ecosystem events that treated the intersec-

tion of social media, shopping, CRM, and brand management. A

symposium that creatively brought together a faculty and audi-

ence 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 strate-

gists in the marketing department, and customer care profes-

sionals 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 shop-

ping 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.

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

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.

33Michael Shim, VP of Groupon (left), Greg Ovalle from BillingRevolution react to comments at Orange Spotlight event.

34

5 Verbs For the Next 5 YearsNatalie 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 & user-

generated content, social networks, and mobile payments in the

years to come. While it isn’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 stages—knowing

how to activate this distribution platform will be a strategic advan-

tage. Rethink Rewards.

Create publishable content. This includes envi-

sioning 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 compa-

nies 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 companies’ 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.

35

acknowledgementsWe 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 partici-

pants 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

36Copyright 2011 — Orange San Francisco