Social E-Commerce is More Marketing Than Commerce

It isn't clear yet whether social commerce sites such as Groupon.com, Buywithme.com, Lifebooker.com and livingsocial.com are a fad or a permanent trend in e-commerce. These sites offer discounts to groups of buyers that may or may not depend on how many people respond to a specific offer.

Typically, a group coupon site operates in multiple cities and features one merchant's discount per day per city in an e-mail to subscribers.

Merchants set a minimum number of customers who must sign up for an offer to work.

If the deal doesn't get enough interest in the allotted period, would-be buyers get their money back. But some 90 percent of Groupon deals do go through. So shoppers may feel they need to rush to sign up before the quota fills, which generates a marketing buzz for the stores and sites.

But the social commerce deals might be seen primarily as marketing campaigns, more than a way to move merchandise. The websites typically give retailers half the money they get selling the deals. That means there is little to no profit from a deal.

What the deals succeed in doing is creating an opportunity to attract new customes, though.

A half-off coupon, for instance, typically brings the retailer just one-fourth the price it usually charges for a given item and could end up costing the business money.