Decentralized Commerce

Most online stores have centralized commerce, where visitors use various methods to get to the Web site and buy something. Paid search, natural search, and affiliate networks are all geared toward generating leads and bringing more people to your storefront.

Decentralized commerce has a different paradigm. Rather than bringing more people to your site, the goal is to allow customers to buy merchandise from your store wherever they are. While affiliate networks have long gotten products in front of people via other sites, pushing the actual checkout process there as well is somewhat new.

Those of you who use MySpace might be familiar with its music partner, Snocap. It allows you to sell your own music via a storefront widget. You upload your original songs, then SnoCap creates an MP3 player you can embed on any Web page.

The MP3 player is much more than that, however. It contains dynamic pricing information and allows users to sign in, register, and buy music directly from the widget itself. Because of some inherent security issues in the way Web 2.0 technologies talk to each other, credit card information is still processed via an SSL (define) page. But that’s the only time you are brought outside the widget. Once you have an account, you work entirely within it. For companies that already have large user bases (like Amazon or your favorite retailer), users would only need to sign in via the widget and never see another Web page.

The implications of decentralized commerce are huge. On the plus side, future advertising can actually contain commerce. Instead of buying a keyword on Google and hoping it catches users’ attention, bringing them to the site, and spurring a sale, companies can place products and the entire buying process right on the Google search results page.

Effectiveness will then be measured not by click-throughs, but by actual sales resulting from the widget on that page. Word-of-mouth (WOM) marketing is an obvious target for this, because anyone can create a storefront and post it on her MySpace page, personal Web page, blog, and the like.

Editorial sites like CNET, and price comparison sites could house actual storefronts for their best vendors, allowing users to buy products directly from a CNET review page while keeping them on the CNET site.

What’s the Downside?

All of this sounds cool and interesting. What’s the problem then? Companies spend a lot of money on their brand images and strategic differentiators. A poorly designed widget that’s merely a shopping cart and checkout process distills the brand and makes the store itself a commodity. Moreover, because users no longer need to go to your site, loyalty may decline because the surrounding page will still be branded by the host (such as CNET).

To counteract this, the widgets must be much more than a product list and checkout process. They must take advantage of your core differentiators. Perhaps that includes expert advice, customer reviews, or other features unique to your brand experience. These widgets must be overtly branded, and marketing campaigns created specifically to entice new customers to your actual Web site.

The widgets act as a great convenience for returning customers who can now buy your products via the other sites they frequent. But as an acquisition tool, widgets present interesting opportunities and problems because customers acquired this way simply won’t have the brand loyalty they would have had if they came to your site directly.

Major Players Need to Lead

A major player must enter this arena and lead the way. Obvious candidates are companies with specific product lines that have ardent communities. Best Buy, B&H, and other electronic retailers would be smart to try decentralized commerce. The products these stores sell already have huge WOM communities and any number of very active message boards and social networks that exist outside their Web sites, such as AV Science Forum.

With such widgets, users could not only post messages about their ideal home theater setups but also create a store within their actual message post, enabling other users to buy their setups immediately. This is an affiliate relationship on steroids and brings WOM marketing to a whole new level.

Questions, thoughts, comments? Let me know!

Until next time…

Jack