Social Commerce Is Replacing the Shopping Mall
We used to shop at the mall with friends. These days, we do it on the ’gram.
Earlier this summer, Instagram rolled out a dedicated Shop page under its Explore tab, making it easier for users to purchase items they see in their feeds from inside the app.
Our social feeds are no longer just sources of information or inspiration — they are marketplaces that facilitate transactions. And retailers want in.
When you couple this trend with the endangerment of brick-and-mortar retail — which the spread of coronavirus may accelerate — you’ll have an idea why experts are calling social commerce the future of shopping.
What Is Social Commerce?
Social commerce is a somewhat nebulous term. Depending on whom you talk to — or what geographic market you’re in — definitions and examples may vary.
In North America, for instance, social commerce is often associated with brands using platform-specific marketing strategies to sell products through social media channels; in Asia, however, where social commerce is more advanced and diversified, it includes practices such as online group shopping and shoppable user-generated livestreams.
Ana Andjelic, a strategy executive who specializes in brand strategy and retail innovation, told Built In she prefers this widely embraced definition: Social commerce is “anything that combines content, community and commerce.”
Social Commerce Leverages Inspiration for Transactions
The average person clocks two and a half hours on social media every day, and more than a third of U.S. internet users say that social media networks are important sources for making a decision about what products to buy.
People scroll through their feeds to get inspired — about what outfits to wear, or what decor to adorn their homes with.
Social media companies don’t want it to end there.
“It’s a natural extension,” Andjelic said. “It’s merging inspiration and transaction.”
What’s in it for them? Increased engagement on their platforms, for starters — plus a cut of all sales that occur on their apps.
“We’re seeing platforms like Instagram and Facebook jumping on social commerce, because that’s another revenue stream for them,” Andjelic told Built In. “When they find themselves squeezed by ad regulation, and publishers and brands boycotting, commerce is a way for them to still have the audience and still have another revenue stream.”
It also provides a chance for social platforms to run even more ads.
“Instagram and Facebook are jumping on social commerce. It’s another revenue stream for them.”
Retail brands, too, are enticed by the idea of selling their products directly through social media channels. Their thinking is that letting users stay on platform will reduce friction, leading to higher conversion rates and fewer abandoned shopping carts.
In Andjelic’s estimation, the consumer is the biggest winner of the rise of social commerce.
“They have a convenience and seamlessness of shopping where they are,” she said. “They don’t have to have different touchpoints for content, community and commerce. Everything is one seamless flow. That is where the opportunity is — to explore and discover new things, and connect with others through those things.”
Here are some of North America’s biggest players in social commerce:
For years, merchants have advertised their products on Instagram; it’s where their (young) target markets dwell. Maybe they buy ads, or leverage influencers, or showcase products through their own accounts. But in the past, if someone wanted to buy from them, the user would have to click over to their e-commerce site and complete the transaction there.
Instagram eventually allowed business profiles to tag posts that had products available for purchase. Last year, the company took it a step further, releasing a checkout feature on its mobile app. That way, users didn’t have to click off-platform to shop. (Even Target got into it.)
This summer, Instagram introduced Instagram Shop, an in-app destination for product discovery, where users browse personalized recommendations and featured brands. They can even use Facebook Pay to make a speedy purchase.
In the spring of 2020, Facebook rolled out Facebook Shop. The product allows businesses to create digital storefronts on the Facebook platform, and sell their inventories directly to Facebook users.
In a Facebook Live stream accompanying the launch, CEO Mark Zuckerberg said that Facebook Shop was a way for small businesses to weather the pandemic, which had shuttered physical retail stores just about everywhere.
“I do think we’re going to continue living more of our lives online and doing more business online,” he said.
It’s not the social media giant’s first foray into commerce: It launched Facebook Marketplace, a Craigslist and eBay competitor, in 2016.
People use Pinterest to find inspiration for what to buy. They “pin” images, usually of clothes or home furnishings, to return to later, often as a way to curate a list of potential future purchases. The company’s internal research showed that “93 percent of people say they use Pinterest to plan for purchases.”
To leverage this, Pinterest launched Buyable Pins in 2015. The feature allows users to click directly on pinned items and add them to their shopping bags, so they can complete the purchase on Pinterest rather than having to click through to the merchant’s website.
Pinterest’s Buyable Pins makes it easier for users to buy stuff they pin, which, theoretically, makes it easier for merchants to sell stuff. Pinterest’s case studies show that various businesses have seen sales increases as a result of using Buyable Pins.
Snapchat is investing in social commerce too. For example, the visual chat app allows users to virtually “try on” clothes and make-up through augmented reality; this helps shoppers clear the hurdle of not knowing how the item will look on them. The company is also soon rolling out original programming that “features commerce as part of the narrative” and will include additional content with a “swipe up to buy” call to action, Variety reported.
TikTok is experimenting with social commerce as well. In December of 2019, the social app began allowing users to feature links to e-commerce sites in their profiles. And in May of 2020, TikTok partnered with Levi’s to test its Shop Now button (clicking it took users directly to Levi’s website).
There are also social commerce pioneers in North America that aren’t social media companies — like Glossier, a skincare and beauty brand, Food52, a recipe and cookware brand, and Supergreat, a recent, fast-rising entrant in the skincare and beauty space. Each of these businesses seamlessly blend together the shopping experience, community interaction and (often user-generated) content. These elements work in tandem to keep users engaged on the platform, giving them an easy way to purchase when inspiration moves them.
Social Commerce in Asia is Light Years Ahead of the U.S.
If social commerce is an emerging practice in North America, it’s a fully developed industry in Asia, and specifically in China.
There, consumers tend to be more digitally connected and are used to seeing media content integrated with mobile shopping.
E-commerce platforms in the United States are typically treated as utilities, according to Jessica Li, an investor at Soma Capital. They are tools people use to find an item they intend to purchase. In other words, you go on Amazon to buy a replacement for a broken garden hose, not to hang out with friends.
In China, though, “people visit social and commerce platforms to be entertained and to learn, rather than to purchase a specific item,” Li wrote.
Pinduoduo serves as a helpful illustration of this phenomenon.
The Rise of Pinduoduo
Pinduoduo is a Chinese e-commerce platform that was founded in 2015 and is now valued at over $100 billion. It revolves around a group shopping experience.
For example, a merchant on Pinduoduo can set the price of a single item at $20. But the merchant can also decide that, if a group of five people join together and each purchase one, the item’s price drops to $15.
This group discount encourages app users to message family and friends (usually through WeChat, which Pinduoduo integrates with) and convince them to join in for the deal. That way, each one can enjoy a discount that wouldn’t be available to them individually. It’s an inherently viral experience, with built-in network effects.
“All of this brings a real social dimension to the act of buying,” Marie Dollé, a digital marketing strategist, wrote. “There is less intervention of the computer and the emphasis is on people, friends, and community.”
Groupon is probably the closest North American comparison to Pinduoduo. The company got its start offering discounted group purchases for one-off luxury products, like a trip to a spa or an arcade. However, Pinduoduo is more known for team purchases of everyday consumer goods, like paper towels and vegetables.
Pinduoduo is highly interactive, spontaneous and social. It successfully imitates the feeling of rounding up a group of friends to go shopping at the mall. (It even includes an in-app game — in which the player tends a virtual mango tree — to keep users engaged.)
There’s little doubt that other companies will try to replicate its business model.
Fans of QVC shopping broadcasts can take heart that livestream commerce is the next big wave. At least in China.
According to Calanthia Mei, a fintech operator and investor, livestream commerce is the “fastest-growing segment of China’s broader social commerce boom,” with a gross merchandise value projected to reach $90 billion this year, she wrote.
Remi Blanchard, who works for a market research firm in China, told Vogue Business that video livestream lets “Chinese shoppers feel reassured by the in-depth product introduction and testing that [key opinion leaders] provide them in a live and ‘no filter’ environment.”
What makes livestream commerce so sticky in China, Mei wrote, is that “the entire shopping experience is natively embedded in the livestream content.” There’s no platform hopping, no need to turn from your television to your web browser to make the purchase. And shoppers can send in questions and see them get answered in real time, much like Instagram Live, Facebook Live and Periscope.
In a post-pandemic reality, livestream commerce might be a sign of things to come — a future where, Mei wrote, we “stream, shop and socialize all in real time, in a compulsively watchable livestream, on mobile phones.”
Beyond Asia, some startups are innovating new e-commerce features, such as peer-to-peer chat.
Anyone who’s shopped online is probably familiar with the chat window residing on the corner of the website, with either a robot or a customer service representative typing on the other end. The bot or rep may be able to answer a frequently asked question — but you probably wouldn’t trust their opinion on the items you’re thinking about purchasing. They wouldn’t be as candid as a friend would be.
TokyWoky, a French startup, helps brands cultivate online communities with their superfans and turn them into brand advocates. One way they do this is by encouraging the advocates to answer questions that shoppers ask on the brand’s e-commerce site. (They also let these customers test new products, share feedback and meet other fans.) That way, the shopper and someone who’s passionate about the brand, rather than someone trying to close a sale, can have a conversation about the product. Howtank, also in France, does something similar, leveraging volunteer brand ambassadors who are happy to jump into real-time chats with shoppers.
If talking to a brand advocate doesn’t feel authentic enough for shoppers, they can take solace in the recent launch of eNvite. This startup, based in Israel, builds e-commerce chat widgets that allow for shoppers to share a link that will pull the recipient directly into the chat. There, the shopper can show a friend the products they are looking at buying, and ask for their real-time feedback.
How Your Business Can Leverage Social Commerce
With its vast inventory, two-day shipping, and one-click purchase feature, Amazon has disrupted commerce forever and solidified itself as the reigning industry giant.
Some say that if anyone’s ever going to rival Amazon, it’s going to be a social commerce platform.
“The next Amazon competitor is likely going to look like a social or video app, not a shopping app,” Connie Chan, a general partner at Andreesen Horowitz, a venture capital firm, said on Twitter.
Where should companies start? Here are two ideas.
1. Make Your Commerce Mimic Offline Shopping
That means cultivating spontaneous and social experiences — and keeping people engaged and on-platform, even when they have no concrete plans of making a purchase.
Li Jin, a former investor who now publishes a newsletter on the passion economy, writes that e-commerce needs to evolve beyond two-dimensional experiences filled with product filters and search bars. “There are opportunities to create new experiences that promote the sense of serendipity and fun of shopping in the real world.”
2. Empower Key Customers
China has a more advanced influencer economy than the U.S., and many influencers there weren’t celebrities first, so customers find them more authentic, relatable and easier to trust. This influencer infrastructure is integral to China’s booming social commerce industry.
Companies looking for similar success may want to leverage brand advocates who are fans first, celebrities second.
Quentin Lebeau, chief executive officer at TokyWoky, offers a similar suggestion. He told Built In that many brands and retailers “still live with the illusion that they actually do have control over their image, when reality is, your customers control your image.”
“Your customers control your image.”
His solution is to employ a customer-centered logic, which entails being generous with and investing in your key customers. Work with them in community chats, let them create content (like “outfit of the day” photos) to publish on your product pages.
The brands who are afraid to do this, Lebeau said, are too focused on marketing tactics for which they can track ROI. In his view, they should shift more control over to their brand ambassadors, and let them be a part of what drives conversations about the brand, even if it’s too difficult to track.
“At some point,” he said, “you have to take that leap of faith, [believing] that, if I’m super generous, and take care of my key customers, I will win long term.”