Social commerce is any form of e-commerce that is influenced heavily by the social aspects of human relationships such as real-time communication, authenticity, trust, community, and so on. To define its range, any commerce performed online, on any digital platform, or requires a product/selection payment step at the end of the user journey, and operates on a business-to-consumer model, is counted under the umbrella of social commerce.
Through a series of online surveys with 15,000+ total respondents, and interviews with multiple e-commerce players, stakeholders, and sector experts across Southeast Asia conducted by Cube Asia and Sprinklr between June and November 2022, an insightful sector report titled Social Commerce in Southeast Asia 2022 deliberates more on the contribution and relevance of social commerce in e-commerce businesses.
Here are the key highlights of the report.
Social commerce and its umbrella
The report mentions that social commerce makes up 25 percent of the total e-commerce in Southeast Asia, increasing its relevance and pushing its importance in the business landscape. So much so that social commerce itself has various archetypes that aren’t mutually exclusive of one another. The report also found that ‘social platform commerce’ is the largest archetype within social commerce, contributing 34 billion USD of e-commerce GMV in 2022 in Southeast Asia.
This is because social platforms are not only integrating e-commerce features, but also enabling specialised social experiences through the other archetypes – for example ‘live shopping’ can happen on social platforms, ‘conversational commerce’ takes place on platforms, and social platforms are also used for ‘community group buy’ often used for group communication and demand aggregation.
Diving deep into social platform commerce as an archetype
Social platforms not only offer brands an option to diversify their channel portfolio, but create an experience for the user that engages them, develop a familiar environment for them, and deliver a pre-existing trust that underlie the activities that lead to commercial results. As the survey report found, TikTok is the best example of the social commerce archetype in Southeast Asia. Although primarily used as a content-focused social platform, the company has now expanded and offers a full-feature in-app e-commerce store in Singapore, Malaysia, Philippines, Indonesia, Thailand, Vietnam, US and UK. Instead of sending the user to a separate website to complete the transaction, it has gone a few steps further to keep the check out and payment steps within the application.
Southeast Asia has one of the world’s highest rates of social media engagement, with 90 percent of internet users having signed up with platforms such as Facebook, Instagram, TikTok, WhatsApp, LINE, and Zalo. As these social platforms have introduced e-commerce functionality, users have followed with their wallets. For example, an estimated 55 percent of internet users in Indonesia and Thailand are making online purchases on these platforms, spending on average 100 USD and 180 USD per user per year, respectively.
Here are a few ways social platforms assist brands
More engaging user experience: Consumer preferences have evolved with new ways of shopping online; traits like fun, engagement, community and instant gratification are becoming increasingly important – experiences that can currently be delivered more effectively on social platforms.
Lower commission fees: As social platforms seek to capture a greater share of the economic value, instead of just passing high-quality traffic to e-commerce marketplaces through ads, brands may be able to negotiate lower commission fees.
Available tech infrastructure: E-commerce infrastructure such as payments rails, logistics platform integrations, and customer service agent routing software has improved, reducing dependency on e-commerce marketplaces.
Competitive dynamics: In categories like beauty, 63 percent of brands are now selling on TikTok Shop; other brands that are not on these platforms risk losing out on a growing audience size. However, keeping in mind long-term channel economics, emerging platforms like TikTok Shop are currently offering discounts and vouchers to attract sellers but may pull these back as they scale up. Established platforms like Facebook and Instagram have limited e-commerce features and need third party plugins to address these gaps.
How social platforms benefit e-commerce more than marketplaces
Social platforms can be more profitable for e-commerce than marketplace due to their lower platform fees. Although there may be additional costs associated with third-party plugins, commission fees for selling charged by some social platforms are generally lower than major marketplaces. Social platform commerce can even make more money than horizontal marketplaces if brands can better negotiate their overall commissions, given that marketing and sales are on the same platform.
As social platforms adopt e-commerce functionality, they also provide a direct link between sellers and buyers, reducing the number of intermediaries. And an ecosystem with fewer intermediaries makes it easy for sellers to get started, while also offering up better margins to be shared between the seller and the platform.
According to the report findings, social platform commerce in Southeast Asia can reach USD 85 ~ 125 billion in five years. In a base case, with a compound annual growth rate of 20 percent, e-commerce on social platforms will grow faster than incumbent marketplaces. TikTok continues to strengthen its e-commerce offering and attract a growing number of users and online spending from incumbent marketplaces and other platforms. Other regional social and messaging platforms, super-apps, like LINE and Zalo also will continue to improve their e-commerce integration. A higher case of compound annual growth rate of about 30 percent can be achieved if Facebook and Instagram follow TikTok’s lead and build out their e-commerce functionality in the region, leading to a big shift in spending from other channels to them.
Five ways brands can best leverage social platform commerce
- Establish a strong and flexible direct-to-consumer fulfilment engine.
- Invest ahead of the curve on TikTok Shop, the most important new channel.
- Wherever you launch, staff your new channels for one or two years of experimentation.
- Prepare your digital marketing strategy with less distance between traffic and sales.
- Elevate your social shops by integrating other social commerce archetypes such as live shopping, conversational commerce, and content generation to maximise engagement and sales.
Social commerce, therefore, is an increasingly imperative subset of e-commerce, and will be key for businesses and brands to work on and create strategies for, amidst the ever-changing business landscape and consumer expectations.
Originally Appeared Here