The Inevitable Rise of Social Commerce in America

American ecommerce currently has two avenues: the marketplace model driven by Amazon and Walmart and the self-branded approach led by Shopify, BigCommerce, and WooCommerce. 

One side revolves around search intent, where users on Amazon or Walmart are searching for what they want to purchase. Brands that run on self hosted platforms like Shopify, primarily grow through discovery. These companies run ads across Facebook, Instagram, and Youtube to attract customers. Their primary avenue for growth stems from social media.

Some would say that makes this social commerce but when you look closer at what social commerce really is, we find that these avenues are solely marketing channels. There is no social interaction amongst customers on platforms like Shopify. 

For commerce to be social, it has to have viral loops that connect people together to fuel conversations and conversions. 

Shopping on Facebook and Instagram

Facebook recently partnered with Shopify to roll out Facebook Shops and people now have the ability to purchase products through Instagram. Though these are great sales channels for brands, these platforms are missing the key of social commerce.

They don’t connect would be buyers together and commerce on Facebook or Instagram is still individualistic. Though social levers of likes and comments help boost conversion rates, when you make a purchase, you aren’t buying with someone else or inherently sharing the product you’re purchasing. 

Facebook and Instagram will continue to be social sales channels that help brands grow.

Growth of Social Commerce in Asia

In 2015, an app called PinDuoDuo became the fastest growing tech company in the world. In two years their number of active buyers surpassed 200 million and in four years they reached 500 million. 

Most people in America have never heard of PinDuoDuo. How did an ecommerce marketplace grow so quickly in Asia?

Few would bet against ecommerce giants like Alibaba or JD in China like they wouldn’t bet against Amazon or Walmart in America. 

The founders of PinDuoDuo saw what was overlooked: the gamification of shopping. Unlike search driven marketplaces, PinDuoDuo stems from social experiences. 

It targeted price-conscious buyers in third tier cities to obtain deep discounts by getting their friends to participate in group buys of items ranging from tissues to pans. Would-be buyers have 24 hours to complete a buying group, and each additional buyer added increases the discount. 

This fosters inherit user growth, as would be buyers join people to get a discount on the same product. 

This combined with a price chop feature that enables users to get products for free by sharing a custom link with their friends fueled PinDuoDuo’s rapid growth. Their team realized the cost of a free product compared to the additional user growth driven by this price chop feature was well worth the acquisition costs. (Imagine a $5 item gets 10 new users signed up.)

Why Group Buying in America Won’t Work

Any founder would think let’s take this group buying function and apply it to the American market. 

Americans act differently though. We don’t want our friends to buy what we purchase.

Think back to your teenage years, going to the mall with friends. You shopped with friends to provide them feedback but would never buy the same shirt or dress. 

Social commerce in America revolves around recreating that experience we felt when shopping with friends at a mall. We gave feedback, wandered the mall looking for cool items, and always wanted the best deal. 

Think about a recent purchase you made where you asked a friend for feedback before you bought the item. If you had the option to group buy that item for a discount with that friend, would you? 

For most items, the answer is no. That’s because products we want feedback on aren’t ones that we’d want our friends to buy too. 

In fact, the most popular items on Pinduoduo are homegoods like tissue paper and fruits like apples. You don’t care if your friend buys the same tissue paper or fruits as you. 

But in America, you probably wouldn’t join a stranger’s group buy in order to get a discount. From a young age, we’re taught to stay away from strangers. 

Social Commerce in America

While I believe marketplaces like Amazon and platforms like Shopify will continue to flourish, I am convinced that there will be a social commerce marketplace in America. 

If you’re working on this and want to share notes, let me know because we’re also building in this direction :)