For all the talk of a consumer spending slowdown triggered by increased economic uncertainty, Britain's online shopping market is set to continue booming over the next year.  More consumer than ever before are supplementing high street shopping with the internet, where they can read reviews, compare costs and buy products at significantly lower prices.

The last remaining areas where bricks and mortar had an advantage over the virtual shopping mall are increasingly coming under assault.  Price comparison sites like Kelkoo and online review centers such as CNet  have cashed in on the predominantly male gadget and technology market, but until now had relatively little success in the more profitable fashion and homeware sectors; consumers want to see these products in the flesh, not read reviews about them.  Online shopping has also struggled to recreate the social aspect of a day out on the high street.

Hearst – the America media conglomerate that publishes Cosmopolitan and Good Housekeeping magazines – is hoping to change this.  In August, it acquired Kaboodle, a so-called social shopping site, for around $40m (£19m, €28m).  Described as the MySpace of shopping, it launched in 2006 with $5m in venture capital from investors including Ron Conway, an early bankroller of Google.  The site has grown steadily ever since; in October 2006 it had just 100,000 monthly unique users, a figure that jumped to 3m in September 2007.

Users who join Kaboodle are asked to rate a variety of products before being placed in to a network of users with similar tastes.  The site’s best feature is a plug-in that installs a button at the top of a user’s browser; each time they see a product they like on another site – such as eBay, Amazon or TopShop.com – they can click the button and save or “clip” the product to their Kaboodle profile.

The system is almost identical to social bookmarking sites like Digg and Del.icio.us; the most popular products will move to the top of the rankings as they receive more votes.  But unlike Digg et al – which are text-based sites – Kaboodle focuses on images, with products being represented by thumbnail pictures in an attempt to create the internet version of window shopping.  When a product has been clipped to a profile the user can ask their friends for advice, compare prices and buy.

As a user clips more and more products, Kaboodle builds up an increasingly accurate snapshot of their tastes, allowing it to target consumers with impressive accuracy.  This kind of business model will integrate perfectly with Hearst’s print business.  For decades, readers of Cosmopolitan and Good Housekeeping have been snipping things from magazines, be it a certain style of shoes they want to track down on the high street say, or to build up a folder of ideas and tips when doing up their home.  By including pages for these tiles on Kaboodle, Hearst hopes its readers will start doing this online, enabling them to sell the data to advertisers and firms keen for a snapshot of consumer tastes.

Hearst is not the only company to cotton on to social shopping.  California-based StyleHive is another site aimed at women shopping for fashion and homeware on the internet.  It recently gained the interest of investors, securing $2.62m in venture capital in July 2006, and now clocks up an impressive 1m unique users a month.  It too focuses on pictures, not texts or titles.  Although technology products have a specific product code, making them easy to research online, fashion items need to be seen.

StyleHive also offers firms the chance to buy virtual store space and market their products directly to the audience.  The theory is that, when a product is liked, the users will market it virally, a method that is cheap and effective.  This will always work well because it is based on recommendation, something online consumers trust.  But too few of StyleHive’s users actually vote on products, making its business model less secure.  Even the most popular items only have around 15 votes, hardly a ringing endorsement.

British site Crowdstorm could have the answer.  The problem with all types of social websites it is that they require users to constantly add and update information.  If a user forgets to clip pages for a couple of months, then their profiles on Kaboodle and StyleHive will become inaccurate.  Instead, Crowdstorm hopes to provide a one-stop destination for all online shopping. 

Its beta version – due for release in the next couple of weeks – will let users search all the big shopping sites, including Amazon, eBay and Kelkoo, from within the Crowdstorm site.  Meanwhile, it will automatically analyse their browsing habits and place them in a crowd that can help them choose which product to buy.  Importantly, there is no emphasis on the user to constantly clip and bookmark.

Crowdstorm also has a canny advertising strategy.  It argues that if a users had done a hundred searches for different jeans from usc.co.uk, the chances are that they are going to buy that brand; an advert from usc.co.uk itself will have little value.  Instead, it will offer space at a premium rate to a competitor, say River Island, which wants to change the customer’s mind.

But despite their protestations, these sites are going to struggle in their battle with the high street.  While their focus on images makes it easier to browser and buy fashion and homeware, consumers of these kinds of products also want to touch and try, something the internet cannot offer.  Social shopping sites will fill a valuable niche in the online shopping market, but the death of the sales is still someway off.

David Crow, The Business Magazine -  13 October 2007