Will Online Sales Brighten a Bleak Holiday Season?

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One new force emerging in this year's holiday shopping spree is the increasing popularity of social shopping sites like Kaboodle, Etsy, ThisNext and Stylehive. Such online communities make buyers feel more comfortable opening their wallets. "People are reaching out for like-minded souls," says Wendy Liebman, CEO of WSL Strategic Retail, a New York-based retail consultancy. "Psychologically, it feels better if someone else is buying a product too." Kaboodle, the largest of the 25 or so social shopping sites in existence, lets community members discuss products, give one another shopping advice and receive feedback, like which item makes a better gift. "It's MySpace meets Amazon," says Ken Cassar, analyst at Nielson Online. (See the Top 10 social-networking websites.)

Other sites, like the month-old Wishabi, involve members acting as personal shoppers. People post wish lists while deal hunters (anyone can serve as one) search the Net to find the best bargains for those items. The results are then rated by the site's Deal Rank software. If the person ends up buying an item, the deal hunter who found the price gets a small percentage of the commission. "People are leveraging other people to determine if deals are good," says Wehuns Tan, CEO of Wishabi. Adds Resource Interactive's Rollins: "The retailer that accepts that social media can be a revenue driver is the one who is going to win."

In fact, brands are noticing that online communities have more buying persuasion power than store sales clerks. And they're forming more partnerships with social sites now that traffic numbers are at an all-time high. In October 2007, Kaboodle had nearly 3 million unique monthly visitors. By October 2008, it tripled that number to 10.8 million and also logged its highest numbers for revenue, traffic and registered users. "We have seen a lot more deals and discounts this year happening across the site," says founder and CEO Manish Chandra. Likewise, Etsy, a site where community members buy and sell handmade goods, pulled in $8.4 million in gross merchandise sales in October 2008, compared with $2.96 million during the same period in 2007. That's a gain that can elicit holiday cheer.

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