تحت چه شرایطی مدل های کسب و کار تجارت اجتماعی زنده خواهند ماند ؟

This study provides a model that captures the essential features of the social commerce business. The model focuses on the relationship between key decision issues, such as marketing expenditures and the revenue streams that are created. As more social commerce businesses enter the marketplace, they are faced with fierce competition, which may lead to sharp increases in marketing and advertising expenditures. This type of competition may lead the industry away from its optimal development path, and at worst, toward a disruption of the entire industry. Another goal of this study is to examine the possibility that the tragedy of commons may occur in the industry. The basic analysis presents Nash equilibrium results with homogeneous and heterogeneous players. The analysis further specifies the conditions that the tragedy of commons can occur. I discuss the strategic implications and policy directions that may be able to overcome the shortcomings of current business model, and help the industry to achieve more sustainable development.

Social commerce is an emerging category of e-commerce, based on social media platforms like social network services. It allows its users to participate in buying and selling products and services through the platforms ( Marsden, 2010 and Curty and Zhang, 2011). Many social commerce providers started their business by combining group-buying with selling discount coupons offered from their partners over the Internet. These social commerce providers split the revenues with their business partners at a predefined rate. Groupon initiated this business model in 2009. It required more than a certain number of customers to buy the coupons for future delivery of goods or services. This has been referred to as a form of group-buying. Social commerce services also involve daily deals and flash deals; these service offerings are usually valid for a short period of time. Social commerce has grown rapidly in the past 3 years, and more customers, business partners and investors have joined the industry. More than 500 providers are running social commerce businesses worldwide now (Reibstein 2011).1 In South Korea, the associated transactions amount to more than US$200 million (Digital Daily, 2011 and Lee, 2011). According to Kim (2011), the sales revenue for these kinds of businesses in the country has increased from US$45 million in 2010 to almost US$500 million in 2011. These figures suggest that the industry has grown ten times in terms of sales revenue and twenty times in terms of transactions over a year. By the end of 2011, more than a third of the population in South Korea subscribed to and experienced the service (Kim 2011). Similar figures reflect industry growth in East Asia, where the social commerce business has gotten very popular (Chung and Chen, 2012, Kim, 2011 and Lee, 2011). Over the past few years, sales revenues have increased from US$1.2 billion dollars to US$3.55 billion dollars in China, and from US$8.4 billion to US$11 billion in Japan (Financial News 2011). In addition, they have gone from US$780 billion to more than US$1 trillion in the US. The emergence of social commerce reflects the collective bargaining power of end-users as the Internet has shifted the bargaining power from sellers to consumers (Gu et al., 2012 and Wei et al., 2011). An exemplar of this change is what social networking services brought to the distribution channels and marketing efforts. Thanks to this new opportunity, consumers and the younger generation who are now initiating and shaping market trends have been exposed to more deals, discounts and new information around their local areas (Stephen and Toubia, 2009 and Stephen and Toubia, 2010). Accordingly, they have been easily attracted to the service proposals from social commerce firms and boosted the industry in its early stage. Some criticisms about social commerce firms are emerging now though. For example, MacMillan, 2011a and MacMillan, 2011c reports on the diminishing popularity of Groupon in the US and China. Reibstein (2011) asserts that the fundamental weaknesses of the group-buying business model is that its success will eventually limit growth due to a huge increase in competition that is likely to arise, as well as a sharp decrease in its capability to deliver the original value business proposition that was promised to consumers. Webster (2011) suggests that operational cost is one of the weakest links of the group-buying business model. “… Groupon’s cost line will increase as more staff are needed to find new merchants, expand to new geographies or both. And according to the FT article, that is just what is happening. In Q1 of 2011, administrative and marketing expenses rose from US$11 million to US$387 million against revenues of US$270 million, creating a cumulative deficit of US$522 million” (Webster 2011). Last, Wheeler (2011) also addresses problems beginning to surface in Groupon’s current business practice that requires massive upfront investments for customer acquisition. Social commerce startups have also drawn skepticism due to their unusual accounting practices, rising marketing costs and quality assurance issues. This has made it more difficult for social commerce firms to lure investors now. Groupon, for example, experienced fluctuation of stock price after its initial public offering, and LivingSocial decided not to do it. However, the most critical views on the social commerce industry point out that the industry’s growth rate is unsustainable (Reibstein 2011). Some observers have argued that the business model has flaws and valuations cannot be justified in the market (Webster, 2011 and Wheeler, 2011). The resulting instability has left customers, business partners and investors disenchanted. According to the Korea Consumer Protection Board, the number of cases involving problems and customer complaints reached 500 in 2011 (Kim 2011). Many social commerce firms seem to have been suffering under a large load of marketing expenses and low average revenue per user (ARPU). This result has been predicted since the firms’ business practices have to invest a big portion of revenue on advertising and promotion. They also have maintained a wide range of service offerings, but the assortment is too broad, and the operational costs are too high, while user revenues remain low ( Kim, 2011 and Lee, 2011). The prosperity and adversity of the social commerce industry has implications for other e-commerce industries. The business model of social commerce may seem to be IT-intensive, but it heavily relies upon other things too. Human resources and manpower are critical and costly in the competition that occurs in this industry. The business model needs to operate effectively across different regions, requires negotiation and contracting with partners, and needs advertising and promotion of its service offerings to attract consumers. All of these activities require human intervention. This explains why average sales per employee is lower than in other e-commerce sectors, such as social networking services, search engines, and business portals (Financial News, 2011 and Lee, 2011). These features allow social commerce providers to lower the initial fixed cost. On the other hand, low capital investment also diminishes the entry barriers making it easier for late-comers to copy the business model. The low barriers to entry make it difficult for a marketing campaign to be effective. One possible outcome is that the business model could end up with a bubble and the entire industry may collapse. Social commerce firms in this new phase of the industry should revise their value propositions and develop a differentiated niches in comparison to online shopping malls and open markets. This study presents model to capture the essential features of the social commerce business model. I will analyze the model to see whether social commerce is sustainable, and discuss conditions for stable evolution of the industry. First, I will focus on the relationship between a firm’s marketing effort and the revenue stream that it produces. As more social commerce firms have joined the industry, fierce competition has ensued, resulting in additional sharp increases in the firm-level marketing and advertising expenditures. This type of competition may lead the industry away from its optimal development path, and at worst, result in disruption. So one intended contribution of this study is to examine the possibility that the tragedy of commons ( Greco and Floridi, 2004 and Hardin, 1968) may occur in the industry. In Section 2, I present a model to demonstrate the essential features of the social commerce business process and the competitive landscape. I will analyze the model in the next section and investigate the possibility that the tragedy of commons occurs in the industry due to an excessive competition in market share. The implications of my findings and analysis follow in Section 3. Section 4 discusses the future development of the social commerce business model to overcome its limitations, and concludes.

My analysis work reveals the weak points in the group-buying business model associated with the social commerce industry. I will review the main results and suggest some practical implications. I will focus on the value proposition that social commerce firms should deliver to the market: they should seek a niche that is different from online shopping malls and open markets. Some social commerce firms have revised their prospectuses to clarify how they are differentiating themselves, but they have not yet proved to investors that their businesses can achieve sustainable growth (Webster, 2011 and Wheeler, 2011). I also will present some guidelines and policy directions to address these difficulties. First, my basic analysis under the symmetric competition assumption argues that there will be a significant possibility of the tragedy of commons. Although there is a gap between practice and my assumption of homogeneous firms with symmetric strategies, leading firms in the industry nevertheless seem to actually be implementing fairly similar strategies. For example, the top three social commerce firms in South Korea constitute almost 90% in market share in terms of sales revenue, and their marketing expenses in 2010 to 2011 ranged from US$5 million to US$5.5 million (Baek 2011). Further, their service configurations and consumer participation threshold levels, controlling for category of commodity or service, also look remarkably similar (Kim 2011). Thus, a symmetric model appears to be a good approximation of the current situation. I also have claimed that, under a certain conditions, the social commerce industry is likely to experience a tragedy of commons and face disruption. My findings suggest that the critical number of firms for the tragedy of the commons to occur is quite small. A small number of large social commerce firms in the industry may lead the market toward problems. The arguments that I have made suggest that the explosive growth of the social commerce business may become too great to allow an effective business model to continue to exist. Prior research offers insights on how to deal with the potential for excessive competition and diversify social commerce business models so that the original intention of social commerce can be recovered. Liang et al., 2011, Stephen and Toubia, 2009 and Stephen and Toubia, 2010, and Westland (2010) have demonstrated the potential of social business, but increasing marketing expenses need to be addressed to remedy future problems. Since the relationships between key ratios in my analysis, View the MathML sourceδc and View the MathML sourceβα, play an important role in determining whether the outcome will be a market failure, further analysis will be useful to understand the mechanics a little better. For example, if the unit costs of marketing are much larger than the average capabilities of firms with similar ratios, then the opportunity to avoid market failure will improve. Thus, social commerce firms need to be aware of the real costs of marketing in their business and industry. The current levels of marketing expenses are too high because the firms are spending on activities that are beyond the point of social optimality.5 This distortion in the marketing-related efforts of social commerce firms needs to be addressed. If these firms were forced to abide by the rules and practices that normally are implemented among exchange-listed companies, their costs would increase further. My comments suggest a policy direction to overcome the shortcomings of the current business model, and to encourage the industry to develop sustainable business models for the future. A set of regulations may be required to curb the unnecessary advertisements and promotions to reduce overall marketing expenditures. In fact, excessive competition in the social commerce industry is becoming the focus of monitoring and regulation in many countries. For example, the UK Office of Fair Trading investigated Groupon’s British unit after receiving a complaint from the country’s advertising watchdog (Larson 2011). The Korean Fair Trade Committee also has shown serious concerns about social commerce firms’ ability to comply with proper advertising codes (Digital Daily 2011). There are a number of different activities that tend to increase the marketing costs of social commerce firms.6 The costs of running a customer care center and operating a help desk tend to be subsumed into overall marketing costs. Some major social commerce firms in South Korea are starting to operate logistics centers and implement refund policy for unused coupons too. Institutional and legal devices to establish and enhance trust between social commerce firms and customers are another example of such measures. These may include quality assurance through careful selection of partners and service opportunities, self-inspection systems for confirmation of service specifications and other agreements, a legal obligation that forces social commerce firms to subscribe to insurance for damage compensation, and so on. All of these measures should have been employed in the early stages of the social commerce industry. For example, Groupon introduced a deal evaluation system to build trust with its customers and partners. After deploying this system, Groupon’s expenses decreased due to a sharp increase in other kinds of marketing costs (Patel 2011). Similar trends have been observed in South Korea after the Korean Fair Trade Committee strongly encouraged that social commerce firms should establish standardized refund policies, together with damage compensation plans. Actual marketing expenses diminished and over-issuance of free coupons also declined after institutional measures were introduced to raise the real costs of marketing. Last but not least, we seek for technological innovations to strengthen the potential merits of the social commerce business model. One of my results implies that it is necessary to reduce the gap between a firm’s capability index and its service configuration threshold to avoid the tragedy of the commons, or at least diminish its likelihood. For example, the new launch of location-based services for smart phone users may narrow this gap since the service will provide more information to consumers, and increase the chance of successful service offerings. Some players such as Groupon Mobile in the US and TicketMonster Now in South Korea are already moving in this direction (Baek 2011). These firms sell real-time mobile coupons to smart phone users and provide customized service packages targeted to specific consumer segments. Such activities differentiate these social commerce firms from online shopping malls and other e-commerce sites, as discussed by Heidemanna et al. (2012). When 4G networks and interactive mobile communications proliferate, location-based services will be one of the most promising areas for social commerce. The technology will give the firms more capacity to configure service offerings with a wide variety of negotiation and coordination capabilities to establish partnerships with local firms. One of the most promising directions along this line of development will be integrating location-based, personalized social commerce services with mobile payment systems using near field communication. In conclusion, my analysis suggests that social commerce firms should return to their original value proposition, where the marketing activities focus more on word-of-mouth diffusion through social networks than through aggressive multi-media advertising campaigns. We believe that this will be the best way to strike a balance between the “social” and “commerce” aspects of the social commerce business model (Knowledge at Wharton, 2006, Kumar and Rajan, 2012a, Kumar and Rajan, 2012b and Urstadt, 2008). Although social commerce firms have engaged in massive advertising campaigns to generate public awareness and interest in the early stage of the industry’s lifecycle, it is time to return for them to emphasize the social aspects of their business models now.7