Covid Response Centre

Social Commerce is the new E-Commerce

The future of e-commerce is driven by social media. Social commerce—the use of social networks to send traffic to e-commerce sites or complete the purchase on social media platform and, ultimately, drive e-commerce purchases—is having its moment. A growing number of consumers shop on social media apps, especially while stuck at home during the coronavirus pandemic. To reach those customers, brands have increased their investment in online sales channels to get found, noticed and drive loyalty.

Social commerce isn’t just about making your feed shoppable, it is about providing a thumb stopping content aimed at delighting your customers in an engaging and inspirational shopping journey.

During the height of the COVID-19 pandemic, consumers spent $200.72 billion online (Q2-2020) with U.S. retailers, up 44.4% from $138.96 billion for the same quarter the prior year. That means more than $1 in every $5 spent came from orders placed on the web in Q2. Ecommerce penetration hit 20.8% in Q2, up 41.4% or 6.1 percentage points from 14.7% for the same period in 2019.

Commerce has become a competitive battleground for social media platforms including Facebook, Instagram, Snapchat, TikTok and YouTube as they seek ways to drive revenue beyond traditional advertising.

Let’s see how each of these platforms are embedding e-commerce capabilities within their social media to allow customers to discover brands through social content, and find products they normally wouldn’t search for on an e-commerce platform.

Facebook - Facebook Shops, recently launched by Facebook to help small businesses in the U.S. turn their social media profiles into digital storefronts. Facebook Shops will act like an online catalog for businesses, whose customers will have to leave Facebook and complete a purchase on a separate website. The company is currently testing Facebook Checkout among a limited number of businesses that were invited to participate in the pilot platform, which enables purchasing without leaving the Facebook app.

Instagram - Instagram, last year, added in-app checkout for brands as a part of its e-commerce ambitions. Since then, the image-sharing app has continued to roll out features that make it easier to shop within its ecosystem, including through a @shop account that showcases the top merchants from categories spanning fashion, beauty and more. It will allow “Shopping” to more diverse business owners, including the content creators who make up a significant chunk of its community.

YouTube - YouTube added the direct response (DR) format to help merchants convert viewers into shoppers. The DR ad formats will allow retailers to turn their video ads into shoppable experiences for viewers by adding a "shop now" button.

TikTok - TikTok is running beta tests that let influencers embed social commerce links in videos on the app, Adweek reported. Levi’s recently became one of the first retailers to use an ad product, which turns creator videos into in-feed ads featuring a “Shop Now” call to action. According to Digiday, TikTok is testing a similar feature that will include the same call to action in creator videos, with the ad revenues split between TikTok and the creator. TikTok's collaboration with Ntwrk and artist Joshua Vides on a shoppable livestream is significant in making the social video app more transactional. By letting people buy products directly through its app, TikTok can help to convert passive viewers into active shoppers and further open its platform to retailers and direct-to-consumer (DTC) brands.

Snapchat - Snapchat's global rollout of dynamic product ads is a strong indication that the format is providing returns for marketers looking to drive mobile commerce sales. Snap reaches 90% of 13- to 24-year-olds, making it more appealing to brands that want to cultivate their next generation of loyal consumers and also creators who seek audiences that are less present on traditional media channels like TV. Hoka One One aims to engage Snapchat users in a virtual shopping experience as many consumers avoid shopping malls and stores during the coronavirus pandemic. The experience includes an augmented reality (AR) pop-up store and virtual try-on of running shoes. Adidas boosted its return on advertising spending (ROAS) by 52% in a test of Snapchat's e-commerce ad format.

Amazon - Amazon is testing personalized online storefronts for social media influencers, AdExchanger reported. Amazon is trying to deepen its relationship with online content creators as the influencer marketing space reaches new levels of maturity and continues to command a massive amount of advertising spend.

Pinterest - Pinterest is going all the way from a platform of inspiration to become platform of transaction. Users can tap the camera in the search bar and snap or upload a photo to see the “Shop” tab with similar products. Each product found will link to the checkout page on the retailer’s site, per the company’s announcement. Pinterest said it has improved the search results that appear when users snap a photo within the Lens camera search, to match similar suggestions and products to buy.

Social platforms are pivoting to e-commerce. Forward looking brands have started to understand the importance of discovery driven experiences and are taking shoppers from inspiration to action.

While e-commerce driven by social media is still relatively small in US, it is expected to grow rapidly as consumer behavior has shifted dramatically due to COIVD. EMarketer estimates that 11.6% of total retail e-commerce sales in China are driven by social commerce. Usage of Instagram and TikTok increased the most during last 2-4 months, consumers not only increased their social media consumption but they also tried a new platform.

Social commerce is most relevant to lifestyle-oriented retail categories such as apparel, luxury goods, beauty & fashion, travel & hospitality and home decor. Both traditional brands and direct-to-consumer (D2C) brands are finding success on social channels.

What brands can do to make their social sell?

  • Bring social content, even better if you have user generated content (UGC) to your site, and various social media channels to inspire your customers to transition from inspiration to actually pressing a checkout button as easy as possible when the content resonates with them.
  • Let your social content become pop-up virtual shops and turn your fans into shoppers. Activate influencers to tell your brand story and partner with them to drive sales on social media sites.

Social commerce wars are heating up and every social platform has had to introduce commerce and outside links to strike a balance between content and conversion. You are not searching for products on Instagram – rather you are presented with a stunning visual of a content which is not only inspiring but it also fits in your lifestyle, hence persuading you to buy it on Instagram.

What is next in social commerce?
  • Social platforms become more transactional.
  • The role of influencers in driving discovery and brand awareness will increase.
  • Storytelling by using your content on social media platforms will become very critical. It needs to inspire your customers and create memorable experiences.
  • Websites will start to look more like social.

Brands are going to harness the power of their customers as growth drivers, that is going to be the future of social as it intersects with commerce. Please let me know if you or your brand has embraced social commerce or planning to do it in future.

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