In 2020, shopping changed forever! eCommerce grew at a significant rate, and traditional eCommerce companies realized that the secret to their growth goes through Social Commerce. We believe 2021 will be the start of a social movement in commerce; Therefore, we would love to share our analysis of 2020 followed by our Social Commerce predictions for the year ahead.?
All opinions expressed are solely our own and do not express the views of any entity.
1. eCommerce Growth and Direction in 2020
US eCommerce has grown 32% since last year (almost 2X the 18% expected YoY growth) [1], and it is expected that it will reach 35% of total retail sales by 2030 [2]. As a result of the pandemic, customers are now very accustomed to shopping online, and their behavior will not fully change back once it is over.?
Although revenue numbers indicate a significantly large adoption rate of eCommerce platforms, these businesses have not been able to address a full range of customer needs, at least in the US. Traditional eCommerce companies, such as Amazon and Walmart, continue with an isolated and transactional experience for their consumers through their search-based platforms. These experiences do not translate the physical shopping experiences into online formats. More importantly, the lack of social aspects of shopping makes them less engaging, especially during this pandemic that consumers would need online ways of social interactions more than ever.
In parallel to shopping, other business verticals such as trading, gaming, or fitness have made social moves leading to more/unique engagement from their consumers. Examples include
- Public whose social platform has made investing more informative and fun,
- Discord which brings like-minded gamers together, and
- Strava whose social fitness app has created a unique community of engaged runners and cyclists.
Similar to a social shopping experience where you can shop a look based on your friends’ opinion, the social aspects of above-mentioned vertical platforms allow for closer-to-reality experiences; consumers can discuss their investment strategies with their expert friends or discuss a game or fitness activity with people with the same interest. We believe these closer-to-reality social experiences will be the future of vertical businesses.
Based on above, we strongly expect that Social Commerce would become the next generation of eCommerce in the US in the coming years. The validation for this move is the strong impact of Social Commerce in China; In only 5 years, PDD’s social platform has created both high virality and engagement of over 800M MAU [3], which in-turn has moved its market cap close to $200B. Similarly in the US, the Social Commerce movement has already started with the existing giant social media platforms, such as Facebook, Instagram, Snap and TikTok. However, as more and more users are looking for more curated and meaningful connections and more relevant content, vertical social commerce platforms will lead the way in 2021 and beyond [4, 5].??
2. State of Social Commerce in 2020
Now, what is Social Commerce in our words??
Social Commerce is the socially-empowered product discovery and evaluation leading to transactions.
In most cases, connections and content are two key elements of Social Commerce. In 2020, the tech world moved towards social commerce slowly:
- Facebook has made significant moves towards social commerce in 2020, through marrying social and commerce for their users to transact together and for their creators to make money [6]. Through these enhancements, creators can include ads to their videos, add subscriptions to their Pages, and even create promotional content for their FB Groups.
- Instagram shopping also aggressively expanded their Checkout product to more partners, and redesigned the app to include shopping in its main navigation bar [7].?
- As well, Whatsapp has introduced Add-to-Cart capabilities in 2020, and has announced their intentions for B2B growth as the next steps.?
- After WeChat’s success in their mini-programs, Snap launched its Minis in June 2020.?Minis are lightweight third-party programs that live inside the app’s Chat section, which users can quickly pull up alongside friends without having to deal with switching apps [8]. This is a unique way of collaborating on a specific task with friends, online.?
- Snap won’t be opening the floodgates to potential partners; they’re taking a slow, curated approach at launch with just a handful of Minis available.
- An example of a Mini is the Movie Tickets by Atom, solving a real pain point for friends going to a movie together. Users can choose a show time at a local theater, select the best seats together, and individually pay for tickets to see the show.?
- Additionally, It introduced Spotlight, a video feature on its app that seeks to avoid some of the controversial video content that appears on TikTok but still maintains the shoppable element [9].
- Walmart has great potential to adopt social commerce, however, is not the best company to build it itself. Walmart has made great partnership moves in 2020. The TikTok deal and their acquisition of JoyRun were both indicators of Walmart’s potential for Social Commerce.?
- Through TikTok, users can view a host—usually a promoter or individual associated with the brand—and then click on a product in the stream to purchase in real time. Walmart’s TikTok livestream shopping event took place in-app in two ways: Viewers could either click an item in real time and then be taken to a mobile checkout, or they could wait until the end of the broadcast and see all of the items featured in the livestream.
- Walmart’s acquisition of JoyRun was unique; JoyRun enables community purchases which saves time for consumers and solves last-mile logistics for retail. Walmart could not only create higher community engagement through JoyRun, but could potentially reduce their delivery costs significantly as last-mile accounts for the largest portion of its delivery cost. Their dense store distributions (being available on average within 10-miles of any consumer) will also allow for great adoption of this community service.
- The eCommerce giant Amazon expanded its first social move through an influencer program in 2020 [10]. While there are similarities between Amazon affiliates and Amazon influencers, there is one big difference. The members of the Amazon Affiliate Program can only share on their website. On the other hand, Amazon Influencer Program allows influencers to share the storefront link anywhere they like, making it an interesting move towards its social presence.
- The Social Commerce pioneer PDD expanded to travel vertical in 2020 [11]. This was an amazing business strategy to move from a high-frequency/low-margin shopping business to low-frequency/high-margin travel business, to create greater value for their highly-engaged consumers and generate more revenue for the company. This is not the first time such moves are happening in China; previously, Meituan -- the top food delivery company -- also expanded its high-frequency/low-margin food delivery business to travel industry.
3. Social Commerce Predictions: 2021 and Beyond
Now, here are our bold predictions for 2021! We believe 2021 is the year of Social Commerce innovation and adoption in the west.?
1. Winners of Social Commerce:?
- Snap: We believe Snap’s mini programs could lead to future group shopping experiences in the West for Gen-Z. Mini programs’ success have already been validated by WeChat in China, and this replica will take a good share of the market from Facebook Messenger and WhatsApp on Gen-Z.
- Facebook: We believe Facebook family of apps will take a good share of the market from traditional eCommerce businesses such as Amazon; and here is why! In 2021, high adoption of eCommerce in the US will lead to supply chain and fulfillment issues for eCommerce giants and hence a decreased quality of services for their consumers. To combat these issues, we believe that these corporates will start investing heavily in optimizing the fulfillment processes leading to faster and lower-cost services in the near future. These enhancements will grow all eCommerce businesses, empowering social platforms to move to the frontline of this competition. This is why Facebook family of apps will have a great chance of competing against the eCommerce giants through its content and valuable loyal and engaged user-base, if those traditional eCommerce companies do not make a move towards Social Commerce.
- Wish: Founded in 2010, Wish connects buyers and sellers in the home goods market, and serves more than 100 million worldwide users. It shifts around 2 million products each day, and its revenue for the nine months ending in September were pegged at $1.7 billion (32% increase from last year).?Wish IPO’d just recently and its market cap is now ~$14B. We believe Wish will double down on their social experiences. This will be a result of novel community experiences and China’s manufacturing comeback. The company was even spotted to hire for a Social Commerce product manager in 2020 (find the JD here before removed!), which confirms our speculation. This description specifically states that the new candidate will be expected to identify and prioritize opportunities to make the Wish shopping experience more social.
- PayPal: According to PayPal’s Social Shopping report, 35% of businesses currently accept social commerce where 45% of their transactions go through social media platforms [12]. They expect the adoption will double by this year. This significant growth will be indicative of PayPal’s unique position to offer social payment features such as groups payments. PayPal will be a winner of Payment category if they move quickly.
2. Big eCommerce Players Need to Rethink their Strategies:
Traditional eCommerce businesses such as Amazon and Walmart will have failed attempts in building social features in-house. Building a social platform on top of a traditional eCommerce technology is much harder than building eCommerce on top of social platforms. Amazon and Walmart’s only way to succeed is through acquisition of a vertical social platform.?
3. Live
Social commerce will significantly move to live social shopping experiences in the US, where shoppers can interact in real-time with sellers and other buyers, make decisions based on real-world discussions and shop at once.?This will require interesting machine learning investments, both in vision and NLP.
4. Category Expansion
Startup Investments in social commerce will expand from fashion and beauty to other non-seemingly social categories such as everyday-living products.
5. Social Subscriptions
Digital subscription bundles (or rundles [13]) will become social in 2021. The largest of them is Apple One with its inherently social content such as TV, Fitness, and news!
References
Scrappy-to-Scale Product Management Leader | Driving Innovation & Strategic Alignment Across Startups and Fortune 100 Companies | Expertise in Governance, Cloud Transformation, and Advanced Analytics
4 年Insightful article.. thanks for the predictions
Building - Calmado Labs | Digital Nomad | Community Builder - Super Connector.
4 年This is amazing. Thank you for sharing. ??
Founder & CEO
4 年it seem for United States to be far slow movement in Social Commerce than CN
Co-Founder @Pinosell & @Podro | Ex Senior Director of Product at SSENSE | Ex CPO in Rocket Internet SE ventures | E-commerce | SaaS | Logistic | Social Commerce
4 年This indeed a very concise summary on social commerce. I also have been following up on this topic for a while. One thing that is interesting for me is the customer point of view in this journey. We see tremendous growth in social commerce in platforms such as Instagram and Facebook which indicates the level of engagement of the customers. However, the actual funnel of shopping in these platforms are not as mature as other traditional ones. What do you think is the reason that still it is the preferred method of shopping for certain customers.?
Veteran product manager (Meta, Fiserv, Cox) and competitive intelligence analyst
4 年Proud to see Facebook represented here :)