What social shopping teaches us about the future of content
In June, Etsy committed to one of the largest ecommerce industry acquisitions of all time when it announced it would pay $1.625bn for the UK-based fashion marketplace Depop. It’s a bold move that represents an enormous vote of confidence in the future of peer-to-peer selling.
Marketplace platforms like Depop are not, of course, entirely new. In fact, eBay might have been the first truly breakout dotcom success, making the idea of buying online familiar to millions. Even so, we can foresee a much more social future for retail. Depop, after all, is distinguished partly by a user experience which is much more like using social media than traditional retail channels. A big component of what Etsy is buying isn’t just the revenue that Depop draws, but its style and userbase, which The Guardian describes as ‘mostly under 26 and mark[ing] out the future direction of retail: more online, sustainable and social’.
Between the acceleration of digital adoption brought about by the pandemic and a growing consumer concern with sustainability, the appeal of Depop is clear. This does not, however, mean that things will necessarily be plain sailing for Etsy’s new acquisition. Indeed, brands with similar offerings to Depop have struggled recently, with Poshmark losing over half of its value since going public at the start of the year.
A question of freedom and trust
The question, then, is how these business can become truly sustainable – not only reducing their users’ carbon footprints, but finding the growth they need to thrive in the long term and continuing to demonstrate positive social impact. It’s something that many CFOs and finance teams, of these and other disruptive industry players, will be weighing up as they balance the pressures for short-term expansion and long-term security.
One key to doing that successfully will be to fully understand that for these businesses revenue is driven not just by the quality of the physical products people are trading, but by the quality of the user-generated content (UGC) that people create to represent them.
The UGC-powered revenue model is unique to the internet age; it’s the bread and butter of the social networks which Depop’s interface aims to mirror. While other forms of mass media have opened the door to interaction with their audiences (as with readers’ letters to newspapers), only since the internet became ubiquitous has it been possible to place that content centre stage. For social media, that means relying on your users to share engaging ideas. For peer-to-peer selling, that means handing your users the task of creating engaging merchandising content.
At the same time, all of the requirements placed on ‘traditional’ retail – whether in-store or online – are still in play for peer-to-peer selling. Shoppers need to be able to trust that the products they see are being accurately represented. They need to believe that the prices they are paying are fair. The need to know that they will be supported if and when things go wrong.
All of this means that the highest of business standards will be required of something which is, by its nature, difficult to control. Much of the commercial power of UGC lies in the fact that it forms a personal connection, and – just as when we talk to people socially – the results can be surprising, joyful, and at times anarchic.
Building sustainable growth for long term success
Sustainable growth, then, will mean finding a way to have it both ways, upholding UGC’s potential for self-expressiveness and imbuing it with the reliability that retail demands. It would be a mistake to see this as something which can be figured out on the fly, waiting to see what kinds of problems arise and then developing responses to them. While there are times that customers will accept this style of working, a poor interaction with a retail business is likely to mean losing not just that customer, but a build-up of negative brand perception that can be fatal.
A proactive and preventative approach will place the quality of UGC at the heart of metrics like brand loyalty and user lifetime value, seeing it as a precondition for strong revenue, not as a secondary factor. No two businesses will be the same in this regard. For example, what constitutes a high-quality listing on Poshmark, which deals in homeware as well as fashion and focuses on luxury brands, will be different to Depop’s ideal listing of fun, youthful street fashion.
The contrast between the positioning of these two brands which offer fundamentally similar services highlights the fact that UGC is not simply a risk: while everyone is aware that bad content can damage a business, we also need to recognise that good content – however that is defined – is how these businesses thrive. This is content moderation as a core capability.
It’s not a challenge that’s unique to marketplaces. Other sectors, like online dating, are based on UGC, while others such as gaming are becoming increasingly reliant on it. Just as the future of shopping is more social, opportunities to find value in UGC are arising across industries. The implications for finance in these businesses will be a learning process: just as they now look at pipelines, funnels, and run rates, they may soon be tracking content health.
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By William Singam
Regional Sales Director – APAC + France