Thursday, August 4 2022

Social commerce or live shopping should turn social media into one big shopping channel. The entire shopping experience, from initial product discovery to checkout, will take place on social media, with the consumer never leaving the app.

Many serious players agree that it will happen. TikTok launched its UK mall, saying, “E-commerce is a big opportunity for TikTok, and it’s something we’re investing in significantly. We think this is a really big time.” It also said its internal data shows that one in four TikTokers research a product or make a purchase after watching a video mentioning a product.

More and more consumers are shopping on social media platforms like Facebook, which benefits smaller brands. Accenture predicts that social commerce will be worth $1.2 trillion by 2025, growing three times faster than traditional e-commerce. He also claims that by 2025, Gen Z will be the second largest social commerce user group (29% of all spend), followed by Gen X, which will account for 28%. As a result, social will account for no less than 17% of all e-commerce sales by then as well.

(Photo: Alexander Shatov /Unsplash)
According to e-commerce entrepreneur Alexander Graf, predictions that social media will drive the next big change in retail are proving far from accurate.

The social and commercial gap

Yet these predictions may not reflect the development of social shopping that will actually occur. In the mid-2000s, it was perfectly conceivable that Facebook friends Maria and Anna would interact after Anna posted “I think these products are cool” on her profile. Maria is then influenced to buy a product on Anna’s recommendation.

Even back then, it all sounded very promising, but it just wasn’t happening. A few years later, social media users were potentially at the center of an online shopping channel, either helping to generate buying impulse with a Facebook status update or supporting the brand by writing product reviews useful for SEO.

Social commerce is still about selling, but now it’s not the product that is the start, but the human being [and] the user is much more in the foreground as a producer or at the beginning of the process. Providers are not hand in hand or transaction competition but competition for user’s attention. So for Amazon, someone is a buyer, while for Etsy and Polyvore, a producer.

At that time, potential consumers had to be lured into the retailer’s online/offline environment and then they purchased the product. But the purchase only happened after an opt-in process that involved researching the consumer on the website, asking friends, sharing ratings, and more. We were all going to share, “like” things, then leave social signals around the web, and people would participate in the online transaction both before the purchase, during the purchase, and after. There were many moving parts and a lot of free consumer labor to help the brand.

None of these services, sites or ideas made it work. None survived the Amazon wave or the ASOS wave. Although people were there to buy, the payment facilities were there if they wanted it. Yet people were going to Amazon or even – then, less now – to the Sears or Walmart online store.

Pockets of potential

Have things changed enough to make this latest wave of social commerce viable? There is potential for change with Instagram. Within Instagram, there are influencers and brands that have been uniquely built within the social ecosystem. So it’s not a brand builder using a network as an advertising channel, but a brand built within the channel. If there is some product exclusivity and an easy way to verify, the two worlds can merge in this specific case.

Social commerce may well be huge in China or India. WeChat is already a leading force in social commerce. For various historical and social reasons, Chinese consumers have not experienced “Retail 1.0” (bricks) as much as Western consumers. So social commerce doesn’t have as many gaps to fill. Another key difference with Chinese social is that it often supports a networking system where 10 other friends can agree to buy a product and then get a discount together, which is behavior we don’t. haven’t really seen it evolve in western markets yet.

A new generation is emerging that may not be so committed to shopping on Amazon rather than social media. But as it stands, advertising on Facebook and other social media environments attracts consumers to businesses but does not facilitate sales. Where I see social commerce, however, is on Amazon, in a skilled way – using dark schemes in marketing. So a consumer can see on Amazon that 100 other people are looking at the same product and 20 people have bought it in the last hour. There are only 40 available, so buy now to get your 5% discount.

This is used a lot on travel sites. The sites claim that thousands of people are considering vacations, implying that the person searching should book now or risk losing their vacation. That’s probably not true, but it’s a neat conversion trick and something we’ll probably see more of in other e-commerce environments.

People expect to connect to share ideas, share photos from their prom night or anything else entirely on social media. On Amazon, they buy stuff. The gap between these two orientations has always been so wide that it has simply never been possible for even the largest social networks to become relevant players in the e-commerce space. There may be some opportunity for e-commerce embedded in people’s social media experience, but it’s much more likely that social commerce applied to trusted selling platforms will be the future of retail.

Alexander Graf

(Picture: Alexander Graf/Spryker)
Co-founder and co-CEO of B2B e-commerce software leader Spryker and co-author of The E-Commerce Book

The author is Alexander GrafCo-Founder & Co-CEO of the leader in B2B commerce software Spryker and co-author of The E-Commerce Book.

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