Chums’ Case Study – The Difficult Path of Revolutionizing Social Shopping

Chums

Chums, a social commerce platform launched in early 2021, aimed to blend social interaction with e-commerce by allowing users to recommend products and earn commissions.

Despite securing $3.5 million in pre-seed funding and introducing its mobile application, Chums faced significant challenges that led to its closure.

Key issues included intense market competition, difficulties in user acquisition and retention, monetization challenges, and technological and operational hurdles.

Founding Year: 2020​

Headquarters: New York City, New York, USA

Industry: Retail Trade: Non-Durable Goods

Business Model

B2C, Two-sided, Product

• Clients: Digitally active individuals, particularly younger demographics, who frequently engage in online shopping and value input from friends and family in purchasing decisions.
• Suppliers: Online retailers across various categories.

It’s like Pinterest but for pre-purchase recommendations from friends.

Chums aimed to replicate the social shopping experience of seeking recommendations from friends, similar to how Pinterest allows users to discover and share ideas, but with a specific focus on facilitating purchasing decisions.

With some differences, though:

• Focus: Pinterest is broader, encompassing various interests, while Chums specialized in product recommendations for purchase.
• Functionality: Pinterest primarily revolves around visual discovery and saving ideas, whereas Chums incorporated features like shared shopping lists, real-time discussions about products, and direct links to e-commerce platforms to streamline the purchase process.

Challenges Identified

• Information Overload: Consumers are bombarded with choices in the online marketplace, making it overwhelming to make informed purchase decisions.
• Declining Trust in Advertising: Traditional advertising methods are becoming less effective as consumers grow increasingly skeptical of marketing messages.
• Lack of Social Validation in Online Shopping: Online shopping can be an isolating experience, lacking the social interaction and validation that comes with seeking recommendations from trusted sources.

Proposed Solutions

• Curated Recommendations: Chums enabled users to receive product recommendations from friends they trust, cutting through the noise of online marketplaces.
• Collaborative Shopping Experience: The platform facilitated social interaction around shopping, allowing users to discuss products, share opinions, and make decisions together.
• Streamlined Purchase Process: By integrating with e-commerce platforms, Chums aimed to simplify the journey from product discovery to purchase.

Founding Story

When and How: Chums was founded in 2020 by Noah Elion, coinciding with the rise of online shopping during the COVID-19 pandemic.

Founders and their Problem: Co-founders Noah Elion and Dick Fickling identified a gap in the online shopping experience, aiming to make it more social and collaborative, akin to in-person shopping with friends.

Past Experience: Dick Fickling brought valuable experience as an early engineer at Honey, a shopping-focused startup that achieved a significant exit.

Why they were able to start: The founders secured $3.5 million in pre-seed funding by March 2021, indicating a compelling vision that attracted investors.

Who Joined them: The founding team included Lauren Williams as Director of Engineering and Lena Gasilina, focusing on Product.

How they decided to solve the problem: Chums developed a mobile application designed to make online shopping more social, enabling users to follow product categories of interest and suggest items to friends, aiming to recreate the spontaneity and diversity of in-person shopping experiences in a digital environment.

Challenges: Building a user base and achieving engagement are common hurdles for social platforms.

How they achieved first results: Chums successfully launched its mobile application in December 2020.

How they used innovation or technology: Chums’ key innovation was integrating social interaction into online shopping, creating a platform for collaborative browsing, discussions, and purchase decisions.

Key Growth Milestones

• 2020: Founding of Chums.
• December 2020: Launch of the Chums mobile application.
• March 2021: Secured $3.5 million in seed funding.

Market & Competition

Target Market

• Geography: Chums was headquartered in New York City and participated in the Y Combinator accelerator program, suggesting an initial focus on the U.S. market.
• Demographics: Chums targeted digitally active individuals, particularly younger demographics, who frequently engage in online shopping and value input from friends and family in their purchasing decisions.
• Specific User Groups: The app appealed to those who enjoy the social aspects of shopping but prefer the convenience of online platforms. This includes groups of friends who regularly shop together, families seeking input on purchases, or individuals who rely heavily on peer recommendations for products and brands.
• Market Size and Growth: Chums operated within the growing social commerce segment. The global social commerce market was valued at USD 727.63 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 31.6% from 2023 to 2030. ​
• Potential New Markets: Given the global nature of online shopping, Chums could have potentially expanded to international markets with similar demographics and shopping behaviors.

Growth Trends:

• Increasing Online Shopping: The COVID-19 pandemic significantly accelerated the shift towards e-commerce, creating a larger potential user base for platforms like Chums.
• Growing Influence of Social Commerce: Platforms leveraging social interactions and peer recommendations are gaining traction, particularly among younger demographics. Social commerce revenues are forecast to surpass one trillion U.S. dollars by 2028, up from over 570 billion in 2023.
• Demand for Seamless Shopping Experiences: Users increasingly expect smooth integrations between different online platforms and services. Social media platforms like Instagram, TikTok, and Facebook have incorporated functionalities that allow users to purchase products directly within their applications, facilitating a more authentic and personalized shopping experience.

Competitor Landscape

Chums operated in the competitive social commerce market, aiming to integrate social interactions into the online shopping experience.

Key competitors included:​

• Wanelo: Founded in 2012 by Deena Varshavskaya, Wanelo is a community-based e-commerce platform that allows users to discover and share products from various retailers.
• Rodeo: Launched in 2024 by Lindsay Perper, Rodeo is a social shopping app that mimics TikTok’s vertical feed, enabling users to scroll through photos and videos with embedded product and shopping links.
• LTK (formerly LiketoKnow.it): LTK is a social shopping platform that connects influencers with consumers, allowing users to shop products recommended by their favorite creators.
• Flip: Flip is a social commerce app that combines user-generated video content with e-commerce, enabling users to discover and purchase products through video reviews and tutorials.
• Pinduoduo: Launched in 2015, Pinduoduo is a Chinese social commerce platform that combines group buying with e-commerce, encouraging users to share deals with friends to obtain discounts. ​
• Temu: Owned by PDD Holdings, Temu is a Chinese discount retailer that offers a wide range of products at low prices, utilizing aggressive social media advertising to build a substantial user base. ​
• Shein: Based in Singapore, Shein is a fast-fashion retailer known for its affordable and trendy clothing, targeting young consumers through social media influencers and a vast online presence.

Marketing & Sales

Main Positioning Values: To revolutionize online shopping by integrating social interactions, enabling users to discover and purchase products collaboratively with friends within a digital environment.

Website & Socials

The website was www.chums.co (Nonfunctional and cannot be accessed)

Media Coverage

Chums’ $3.5 million pre-seed funding round ahead of Y Combinator’s Demo Day was highlighted by TechCrunch. ​

The company’s innovative approach to social shopping was also covered by AOL.

Marketing Strategies

• Target Audience: Chums primarily targeted digitally active individuals, particularly those aged 18-35, who frequently engage in online shopping and value peer recommendations. This demographic is comfortable using mobile apps for social interaction and commerce.
• Customer Acquisition Channels: While specific strategies are not explicitly outlined, potential channels likely include App Store Optimization (ASO), social media marketing (Instagram, TikTok, Facebook), influencer collaborations, referral programs, and targeted paid advertising.
• Supplier Acquisition: Chums aimed to enhance the online shopping experience through collaborative features, potentially relying on integrations with existing e-commerce platforms rather than acquiring physical suppliers. This approach aligns with the broader trend of social commerce, where platforms facilitate shopping from various retailers within a social, interactive context.

Product & Innovation

Key Product & Innovation Points

• Mobile-First Approach: Chums recognized the importance of mobile devices in consumers’ lives and designed their platform specifically for a seamless mobile experience.
• Integration with Existing E-commerce Platforms: Rather than creating a separate marketplace, Chums aimed to enhance the shopping experience on existing platforms by providing a layer of social interaction and trusted recommendations.
• Algorithmic Personalization (Potentially): While not explicitly stated, the mention of turning recommendations into a “working funnel” suggests the potential use of algorithms to personalize recommendations and enhance user experience.

Financials & Metrics

Revenue Sources

Chums’ revenue model included:

• Transaction Fees: Chums charged commissions on purchases made through its platform, acting as an intermediary between users and online retailers, and shared this revenue with users. ​
• Affiliate Marketing: The company partnered with retailers to earn commissions on sales generated through affiliate links shared within the app.

Metrics

• Funding and Investments: Chums raised a total of $3.5 million across two pre-seed investments. The initial $1 million was secured in December 2020, followed by an additional $2.5 million ahead of Y Combinator’s Demo Day in March 2021. Investors included Ludlow Ventures, Shrug Capital, Contrary Capital, Fuel Capital, and BoxGroup.
• Employee Count: At the time of its funding announcement in March 2021, Chums had a team of four employees and was seeking to expand to six.

Structure & Culture

Organizational Structure:

The company was founded by Noah Gilman, who was joined by Dick Fickling as co-founder. This partnership was facilitated by Contrary, an early backer of Chums.

At the time of its funding announcement in March 2021, Chums operated with a small, agile team. The company had four employees and was seeking to expand to six, focusing on key areas such as product development, marketing, and operations to support its growth objectives.

Company Culture:

Chums fostered a culture centered around innovation, collaboration, and user-centric design. The team emphasized creating a platform that not only facilitated online shopping but also replicated the social aspects of in-person retail experiences.

This approach aimed to build a community where users could share recommendations and engage with friends during the shopping process, reflecting the company’s commitment to enhancing user engagement through social interaction. ​

Values:

• Community Engagement: Chums prioritized creating a platform that encouraged users to interact, share, and recommend products within their social circles, fostering a sense of community.​
• Innovation: The company aimed to redefine the online shopping experience by integrating social elements, striving to stay ahead in the evolving e-commerce landscape.​
• User-Centric Design: Chums focused on understanding and addressing the needs of its target demographic, ensuring that the platform was intuitive, engaging, and responsive to user feedback.

Impact

The platform’s concept of integrating social interactions into online shopping was well-received in the industry.

Chums’ ability to secure $3.5 million in pre-seed funding from notable investors such as Ludlow Ventures, Shrug Capital, Contrary Capital, Fuel Capital, and BoxGroup underscores the confidence in its vision and potential impact on the e-commerce industry.

The partnership between founders Noah Gilman and Dick Fickling, facilitated by Contrary, exemplifies a strategic collaboration aimed at leveraging their combined expertise to drive Chums’ mission forward.

Closure Rationale

While Chums introduced an innovative approach to social commerce, the following compounded challenges ultimately led to its closure.

Exit Factors

​Chums ceased operations due to several challenges:​

1. Market Competition and Differentiation: Chums entered a crowded market dominated by established e-commerce and social media platforms. Differentiating itself and capturing a significant user base proved challenging.​
2. User Acquisition and Retention: Building and maintaining a substantial user base is critical for social platforms. Chums may have struggled to achieve the necessary growth and engagement levels to sustain its operations.​
3. Monetization Challenges: Chums’ revenue model relied on earning commissions from recommended products and sharing this revenue with users. Implementing and scaling such a model can be complex, potentially impacting financial sustainability.​
4. Technological and Operational Hurdles: Developing a seamless and engaging platform that integrates social interactions with e-commerce requires significant technological investment. Operational challenges in maintaining and scaling the platform may have contributed to its difficulties.​

Key Takeaways for Entrepreneurs

• Capitalize on Shifting Consumer Trust: Chums identified a crucial shift in consumer behavior — declining trust in traditional advertising and a growing reliance on peer recommendations. Entrepreneurs should be vigilant in identifying such shifts and building solutions that address emerging needs.
• Turn Problems into Scalable Solutions: Chums didn’t just solve a personal pain point; they tackled a problem experienced by millions. Identify problems with a large potential market for scalability.
• Validate Your Idea Early (Even Without a Product): Chums secured significant funding before even launching a full product. This demonstrates the power of a compelling idea and strong validation. Don’t wait for a perfect product to start seeking investment if you have a strong vision.
• Leverage Existing Platforms: Instead of building a new e-commerce platform from scratch, Chums integrated with existing ones, focusing on enhancing the experience. Consider how you can leverage existing infrastructure to accelerate your path to market.
• The Power of ‘Why’: Chums’ success hinges on understanding why recommendations matter more than ever. Dig deep into the ‘why’ behind your solution. This deep understanding will be your most powerful communication tool to investors and customers alike.
• Don’t Underestimate the Power of FOMO: Chums’ oversubscribed funding round suggests that creating a sense of excitement and momentum (even before a full launch) can be incredibly effective in attracting investors.