Social Commerce: All you need to know
Prabhjot Kaur
Senior Product Manager | AI/ML and CRM Product Management | Sportstech, Fintech and Insuretech | ex- Gartner
Online buying and selling of goods and services has gone global with increasing penetration of smartphones and improved internet connectivity. The convenience of online shopping has led to massive growth of e-commerce, especially in the post covid era. Within the umbrella of e-commerce, is one such branch, Social Commerce which has recently created a buzz and become increasingly relevant for all kind of businesses across the globe. There are startups bustling in every nook and corner of the world, focusing on this concept and thus creating opportunities for big brands and small businesses alike.
Social Commerce: Social media has found a special place in our life since the Orkut days and has evolved beyond just sending friend requests or ranting about a topic. The working models have evolved and paved path for a new way of doing business i.e. encouraging users to perform transactions on these platforms without even leaving the app, hence forming an ecosystem of PaaS (Platform-as-a-service). The entire journey from product discovery to research to checkout process takes place on the social media platform while scrolling and catching up on the latest from friends or influencers. This has also driven the platform revamp process by major players such as Facebook, Pinterest, Instagram, Tiktok (most significantly in 2020) to streamline the experience and boost features which promote social buying or selling either organically or through paid advertisements (1). The advent that started in China with Wechat driving the growth has created waves across multiple geographies.
A look at various players of India’s social commerce market. Image Credits: Jefferies
?Market Potential: Amidst the COVID crisis, the global market for Social Commerce is projected to reach a size of USD604.5 Billion by FY27, growing at a CAGR of 31% over the period FY20-FY27.
‘As per latest reports by e-marketer, US social commerce sales will reach USD36.62 billion in revenues this year an increase of 36% YoY’(2). The Indian market is expected to potentially grow to touch upwards of USD50 billion in terms of GMV (3).
Difference between Social Commerce, E-commerce and Social Media Marketing:
Social commerce is all about transactions i.e. buying and selling goods over the social media platforms. This could either be by clicking a paid advertisement or the “View Shop” button on the brand’s social media page.
E-commerce, an acronym that stands for Electronic Commerce, is buying and selling of goods over the internet. It typically follows the search and purchase behavior where the user looks for the product on a specific platform and buys through it. In simple, it’s like getting into a shop, searching for a product, comparing the product and completing the transaction.?
?Social media marketing is to drive traffic to the brand’s websites through the help of social media platforms. This can be achieved either by posting ads showcasing the products and/or services, and includes a CTA (call to action), for consumers to click-through and land on the website.
?How is traditional Social Media enabling Social Commerce:
1.?Instagram: Instagram has acted as a frontrunner in this race, primarily owing to its aesthetics and the audience it serves. With 8 in 10 users following businesses on Instagram, consumers use the platform for product inspiration or even follow influencers for product discovery and trials. ‘Brands and retailers rely on digital marketing to reach credit card-ready shoppers with stories ads, collections ads, dynamic ads and more. As a result, ad spend on Instagram is growing at a tremendous rate of 177% year-over-year’. (4)
Instagram utilizes ‘Shoppable Posts’ feature on posts, reels and videos. When somebody clicks on the Shoppable Posts, they are routed to a link in-app checkout feature, so the customer never has to leave Instagram to make their purchase. In addition to making the purchase, Instagram also gives shoppers the opportunity to check order status, initiate returns and request support. Payment credentials are secured for fast, easy future purchases.
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?Additionally, Instagram has also introduced a shopping feature called ‘Drops’. As the name suggests, it is a tab within the Instagram shop that drops/showcases new releases from designers and retailers. Few big names such as Adidas, Fenty have already debuted. ?Posts for the upcoming drops show the day and time of the launch and offer users the option of setting a reminder, which enables the app to send notifications to the user leading up to the release. Users can also share drops with their friends through direct messaging.
2.?Facebook: As per Emarketer’s initial forecast,?Facebook is the No. 1 social commerce platform in the US (5). The social media giant introduced following features to enable commerce:
a.?Dynamic and Carousel Ads:?These ad formats are used to personalize the experience and reduce the number of steps taken to get from social feeds to product pages:
(1)???Dynamic Ads promotes products that people have previously expressed interest in elsewhere on the internet, and can be used to tie promotions to local inventory and nearby availability.
(2)???Carousel Ads showcase up to 10 images or videos, each with its own link, within a single ad unit. They can be used to tell a story around a single product, or to introduce social shoppers to multiple products in a visually compelling manner.
b.?Facebook Marketplace: Also known as the place for consumers to buy and sell amongst themselves, Facebook Marketplace has become a destination for discovering brands and retailers. It provides a personalized shopping experience where products are discovered based on the interests and locations of each individual. Seller uses a product feed to manage and maintain listings.
3.??Pinterest : Pinterest is one of the most popular platforms for users to plan future purchases or research about ideas and pin them. Millions of people pin product rich pins, allowing retailers and brands to display real-time pricing, availability and “where to buy” product information. The search ad functionality allows information to be pulled directly from product feeds to dynamically update what’s displayed based on inventory levels — and not just for items that have already been “pinned” by consumers, but for all products in their feeds.
Recently, Pinterest introduced ‘Shopping List’ feature which displays the saved pins, shipping costs and reviews and a user is notified when the prices are dropped.?
Source : https://digiday.com/media/pinterest-edges-closer-to-social-commerce-with-new-shopping-list-feature/
4.?Snapchat: As per the latest earnings report, Snapchat is aggressive on the social commerce wagon. It acquired Screenshop and a new feature is anticipated in the Snapchat app which?will enable users to upload a screenshot of outfits they like and get in-app recommendations for similar purchases. Additionally, Snapchat allows any business to set up shoppable product catalogs and AR filters (called Lenses)?and lets customers place orders with each business without leaving the Snapchat app.
Additionally, Snapchat is also building voice functionality to its Augmented reality filters through an integration that displays products based on a user’s command.
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Farfetch has the first-mover advantage through the use of these tools. Snapchat highlighted at its Partner summit, a user who was browsing through Lenses from the Farfetch catalog could use commands like “Can you show me a windbreaker jacket?” and “Maybe something with a pattern,” and the outfit in Snapchat changed accordingly. (6)
?Apart from the above traditional social media platforms, there have been success stories of startups across the globe who have pioneered the commerce concept. Below are a few examples:
1. WeChat: The app, also known as Weixin in China started off the social commerce journey riding on its 1.1 billion monthly users. WeChat Pay was introduced in 2014 followed by the highly successful?mini programs that link to business accounts and enable features such as additional content, loyalty programs and transactions.
WeChat enabled Social commerce in the following ways on its platform (7):
a. Mini Programs: This helps users to discover and buy products without downloading another app or being redirected to another website on their phones. The users can make purchases through various options on the app:
a.1. Scan and Go: Shoppers utilise a retailer’s mini program to scan products and checkout without waiting in line also allowing for home delivery. ?
a.2.?Buy Online, pick up in-store: Retailers mini program allows shoppers to buy online and ship to the store within an hour for pick up. If a product is out of stock at any location, shoppers can still scan a QR code of products for home delivery.
a.3. Social selling: Users can sell and recommend products to their own WeChat followers.?
a.4. Key Opinion Leader sales (KOL): Primarily Influencers program where they can put product tags in their content and lead shoppers to a product detail page and the ability to buy within the application.
b. Good Product Circle: This program taps into the power of friends and acquaintances which enhances credibility as well as sales on the app. This is an interactive feature that allows users to recommend products, access friends’ recommendation lists, and socialize on the interface.
According to the Kantar Group, Good Product Circle lets users share different e-commerce Mini Program stores with friends, making the process of “grass planting [creating a demand] + shopping” — which is the core of the social commerce trend in China — much easier and more seamless. Users can share products from different platforms and interact with friends within Good Product Circle. They can also directly access merchants to purchase products recommended by friends. (8)
?2.?Meesho: Meesho pioneered social commerce in India around 6 years back and has been a constant source of income for millions of homemakers across the country. Meesho stands for “my shop” or ‘apni dukan’. The platform empowers small business owners (SMB’s) and individuals to start their online stores via social channels such as WhatsApp, Facebook, Instagram etc.
We have all grown up with buying or selling through small businesses and reaching a wider audience has been an untapped territory until recently. Meesho bridged this gap by providing?sellers with products (which it sources from suppliers) and inventory management and other basic seller tools. In turn, sellers send their catalog to friends and family as they please. Meesho handles payment and logistics, providing a cut of the transaction to sellers. Interestingly, sellers can vary the prices and even bargain with their customers.?
3. Pinduoduo: This social commerce giant of China is an amalgamation of two organsations, Pinhaohao and Pinduoduo merging the logistics experience of PHH and end consumer’s understanding of PDD.?
Pinduoduo operates on a simple model: buy everyday items and receive discounts by completing in-app actions or inviting friends to buy them as well. Prices are set by suppliers, and a user's very first purchase are almost always subsidized at a discount by PDD. Subsequent purchases could be made at the full-price, or discounted with a team or through in-app rewards.
Here is the deal: Social Commerce is just one piece of the overall digital maze but post the Covid era, it is definitely leading the e-commerce game. Brands across are already exploiting the power of social media and commerce features as it gave them an opportunity to integrate the three pivots i.e. selling, customer engagement and brand awareness and hence avenues to enhance sales.
Please stay tuned for the next part of this article. Keep sharing and feedbacks are welcome ?
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Senior Director, Research & Advisory at Gartner
3 年Went through the article, its amazing to see the depth and scope of research with solid examples/use cases. Way to go Prabhjot!
Full Stack Engineer | Kronos | .Net Core | Microservices | Angular 7 | React | GCP | Jenkins | Docker | Exago | Elastic Search
3 年Very detailed and informative article covering almost everything for Social Commerce and plethora of other things it relates to. Waiting for the next one in the series.
Associate Director - Product | UPI | Net Banking | Payments | MBA | NMIMS Mumbai
3 年Great insights provided in the Article. In this Pandemic era, only few industries have got a boom, with e-commerce being one of the major one. And social media has played a vital role in promoting the sale of these products. A lot of companies are relying on the social media influencers and paying them handsomely to promote their product as reach of these influencers in today's world is larger than any TV or radio advertisements on which there companies used to rely earlier. Good job Prabhjot kaur Looking forward for more articles.
Strategy & Planning | Public Healthcare | Ivey MBA
3 年Very insightful and informative article, lays down the various business models and use cases of online commerce in a very structured manner. Looking forward for the next article in the series :) Would love to hear some insights into the profitability of the above business models and how sustainable they are. Is there a scope for consolidation in the industry or can new and small entrants still expect to survive by pursuing the differentiation strategy? Would be interesting to see how Buy Now Pay Later (BNPL) can further disrupt the industry.