Ever bought a product directly on a social media platform? No? No problem, according to a research of Capgemini only 24% already have. But not only this consultancy calls out social commerce as a top tier trend to watch and to invest in the near future. I personally stumbled upon this use case 6 years ago on a trip through Thailand, where I observed people using normal facebook messenger features to sell/buy items. Also in combination already with live streams, which is a huge trend in Asian markets nowadays bringing the concept of Teleshopping on steroids back.
What is social commerce all about?
Simple framed: social commerce are e-commerce transactions directly on social media platform, such as facebook, instagram, pinterest and many more. So the point of inspiration, brought to us via an influencer presenting lifestyle or fashion products, and the point of transaction has been tided together on one single platform. It seem to be the next logical step as so many inspirational content is found especially on instagram, pinterest and also uprising on tiktok and those folks want an easier cash-out for their audiences.
Basically all big social media platform providers are tapping since years into that field and offering for their creators easy to use shop solutions with similar functionality from a stand alone eshop solution.
Coming back to the perspective of the audiences and to the study I quoted at the very beginning. Besides the insights that only 24% of the total surveyed people use a social commerce feature yet, the age further breakdown shows no surprise that this number is remarkable higher for a younger audience segment. 46% of GenZ under 25 years old, already have used this purchase channel.
Why the young people do this? Because they are heavily impacted by their role models on the social media platforms:
Live Commerce
A mentions worth sub category or even a own category is live commerce where the transaction is happening in real-time to product offering happening in a livestream situation – again on a popular social media platform. This phenomena is really huge in Asian markets where top content creators make millions of revenue in just a few minutes.
But also outside Asian markets it’s already a thing: sales revenue in the U.S. has been estimated to reach $50 billion in 2023 and are expected to account for more than
5% of total e-commerce sales in the U.S.
Who are the payers here?
Social commerce is of course dominated by the big social media networks but also amazon is tapping into the area with for eg. live stream events. Instagram looks like the leader, especially in the younger target groups but also youtube is surprisingly popular.
Here in the chart not shown, but also major players are pinterest and tiktok. Pinterest is especially popular among female users and is the platform for all kind of lifestyle related inspiration. Of course here the next step is to also tap into commerce. Big social media rising star tiktok is very early adopter here with huge open growth potential.
The interesting question here is, why all the big social media player area active in this field and also are pushing it aggressively forward. And the answer is quite simple: it’s another worthwhile revenue stream they want to secure besides their ad business.
What is the future perspective?
When I try to recall the mass of trend reports for 2024, the topic of social commerce was very often present there and also the big 5 consultancies, as well as the big communication networks have identified it as a valid trend. The growth in this area seem to be quite lucrative:
The global social commerce market was valued at $561 billion in 2021 and is projected to rise to $6,341 billion by 2030, showing a CAGR of 31.1% in 2022–30
What matters to today’s consumers 2024: consumer behavior tracker for the consumer products and retail industries from Capgemini Research Institute 2024
So, more then 10x growth think the guys from Capgemini this field will deliver within the next 6 years to come. I honestly doubt that numbers, as almost all hockey stick like growth patterns that are estimated by consultancies. There will be for sure growth in the upcoming years, just as simple as the entire topic starts from a low base, but not in that dimensions, as also e-commerce growth in general is slowing down:
The interesting question is which area of other sales will be substituted by social commerce? Is it the traditional brick & mortar sales or will e-commerce tank? We will find out in the next years.
Social commerce at it’s core is a platform business model, which means it’s value depends directly upon the numbers of merchants and customers it serves. We are now at a relatively early stage with quite some competitors in the field which makes it a really interesting field to observe over the next years. Will be Meta be able to pursue it’s platform dominance also in this area or will the new hero tiktok win this race? My predication is that it will significantly depend on the region.
My take on this trend…
Basically social commerce is not new, not even quite. I can remember that it was already years ago a big ambition for social media platform to make their content more “shop-able”. I am at some point really surprised that this year it is in a lot of trend papers of big institutions and also a advisory focus at some of the consultancies. But there must be something in there – at least for them. The platforms will definitely benefit from this additional push but as always it is significant how the consumer will at the end respond to it and make a habit out of this new channel of transaction.
For me the trend is overvalued and there is also a lot of FoMo in current discussions about it which brings me to the advice to carefully evaluate if it could be a fit for your brand or company. The hope to find some more GenZ buyer there shouldn’t be a motivator alone.
Legit or overvalued
Fomo Factor
Source: https://www.capgemini.com/insights/research-library/what-matters-to-todays-consumer-2024/
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