In the last two years, a trio of online services has experienced eye-popping hypergrowth: Groupon, an aggregator of daily deals; Zynga, a producer of social games; and Gilt Groupe, a purveyor of private sales. These three companies have each generated revenues approaching $500 million in two years. They also share another common element: they cater predominantly to women. According to MediaMetrix, women represent roughly two-thirds of visitors to Groupon and Gilt, and a much larger percentage of buyers.
E-commerce has evolved through three phases that we collectively refer to as the three P’s: the Pioneer era, the Purchaser era, and the Power shopper era. The Pioneers were driven by daring, the Purchasers by data, and the Power shoppers by dollars. Today, with women dominating social and commercial activity online much as they do in the offline world, the Power shopper era is in full swing.
When consumer Internet services first emerged in the Pioneer era of the late 1990′s most of them failed. In retrospect, the reason is clear: only early adopters were rattling around on the Internet trying to do things like group buying or coupon clipping. Technically-inclined men dominated the Internet population, especially with regards to hours spent online. It’s no surprise that Amazon.com, which in its early days sold only books, CDs and DVDs, thrived. In our portfolio, BlueNile, an online jewelry merchant that launched in 1999, built its business selling diamond engagement rings to men. During this era, women were found principally on women and teen magazine sites, health sites, and apparel and baby goods retailer sites.
In the Purchaser era of the early to mid 2000′s, consumer Internet services emerged to address major life events and big considered purchases. Whether a consumer was looking to buy a house, plan a vacation or find a new job, the Internet began to play an important role in particular for research and increasingly for purchase. E-commerce winners in this era were comparison shopping sites like NexTag and Shopping.com and review sites like TripAdvisor. At the same time, men and women availed themselves of these services in an increasingly more balanced way.
Fast forward to today, the Power shopper era. According to a June comScore study, women now spend more money online shopping than men. In February 2010, women, who represent 49.8% of the U.S. online population, accounted for 58% of dollars spent online. Women dominate spending across a number of online categories, but most dramatically in apparel and accessories, where women account for 71% of dollars spent, and toys and hobbies, where women account for 67% of dollars spent. In contrast, there are only a handful of categories, such as events and movie tickets, where men still dominate spending and then only marginally.
At Trinity Ventures, we have invested in online companies that cater to women across these eras. In the late 1990′s we backed BabyCenter, recognizing that expectant women and moms are passionately interested in learning about child development. More recently, we have invested in Care.com, which helps moms find great caregivers for their families, and thredUP, which allows moms to conveniently swap second hand kids clothing.
The Power shopper era was ushered in through the rise of social networks, most notably in North America by Facebook. Women in the U.S. spend roughly 40% more time on social networks than men, and it has become a dominant way that they fill idle time whether at home or at work. Through social networks, traditional word of mouth among women regarding favorite products and services has transitioned to faster and more far-reaching online “viral” marketing as women invite their friends to play social games or post their latest purchases to their facebook walls.
The growth of social networks also resulted in large quantities of relatively inexpensive ad inventory on social networks that allowed e-commerce sites to reach female audiences cost-effectively. In contrast to a search environment where women are intent-driven, women on social networks are in a browsing mindset and are open to impulse purchases.
The power of driving impulse purchases through social networks is illustrated by comparing Woot! to Groupon and Gilt. Woot! is a daily deal site that launched in 2004 offering limited quantities of deeply discounted home electronics products. Woot! targets men and successfully grew its business over a period of six years to over $100 million in sales. In comparison, both Groupon and Gilt have achieved five times the size of Woot! in two to three years, benefitting from the social network marketing channel and the strong appetite among women on the Internet to make impulse purchases (particularly when they are good deals) and share them with their friends.
As the generation of American women who “grew up” on the Internet comes of age and has increasing spending power, we see no signs of these trends abating. Indeed, according to comScore, total minutes spent on Facebook grew 139% last year and has reached 42.6 billion minutes, eclipsing Google and Yahoo. The Power shopper era is here for the foreseeable future and has sparked an ecommerce revolution. We’ve seen the first success stories emerge but certainly not the last.