Business model analysis for online social shopping companies. Case study: RunToShop Oy.
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School of Economics | Master's thesis
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AbstractOnline social shopping is a new business model emerging in E-Commerce world and becoming quite popular in recent years. Online social-shopping website is where people can recommend their favorite products for others to discover and purchase online. Online social shopping combines Business-to-Business, Business-to-Consumers and Consumers-to-Consumers services together and blends two powerful elements of real-world shopping otherwise lost for online consumers: word-of-mouth recommendations from trusted sources and the ability to browse products in the way that naturally leads to discovery. Attracted by the market perspective of online social shopping, many start-ups have entered in the market in recent years. In addition, some large Internet media companies have seen the potential in the market and tend to take a share of the market, such as Amazon’s aStore. The goal of this study is to analyze the business model of the case company and compare its business model with its selected main competitors’ (namely YELP, Kaboodle, and Zlio) in order to find out the success factors for an online social shopping company in the fiercer competition. The research framework is adapted from Osterwalder’s business model framework. Qualitative research methods, e.g. case study and interviews, are applied in this research. RunToShop Oy, the first Finnish social shopping company is the case company of this study. According to the business models analysis, YELP’s unique business model which emphasizes on providing localized reviews in USA has achieved great success in the USA market. Kaboodle’s business model which focuses on facilitating online shopping for consumers makes it very popular among young females so that it is acquired by Hearst as an online marketing channel in May 2008. Zlio’s business model which aims at building the largest sales forces in the world with high commissions rewards seems not to be accepted in the market. Its aggressive money making business model causes problems in trust from consumers and conflicts with its business partners. RunToShop’s business model would like to bring personality and trust which are missing in online shopping. At the beginning of the business development, the biggest challenge for RunToShop is how to attract more users in order to build up an active and loyal online community. Based on the lessons learnt from the selected International competitors, some managerial recommendations are made to RunToShop’s management team. It is important to propose a unique value proposition according to the actual needs of consumers. Startups should consider focusing on niche market in order to gain competitive advantages over International competitors. It is critical to focus on developing an active local community and encouraging the loyalty and trust. Maintaining good relationship with business partners is a key to success. The revenue model should be carefully designed to get as many revenue streams as possible in order to make good profits. Fast International expansion does not always guarantee success so it should be considered only after the business model is accepted in the local market.
Business models, online social shopping, E-Commerce