Social commerce is creating huge opportunities for business of all sizes to boost sales and allow easy and affordable web stores to be set up. It combines digital marketing capabilities directly with commerce.
What’s more, social media shopping can help with customer engagement to catch the attention of new and existing customers at the most optimal time.
In 2020, 42% of people used social media to conduct product research before making the purchase. Allowing customers to purchase directly from the platforms they research on shortens the buying journey and subsequently drives sales.
Social commerce can create multiple opportunities and new sources of traffic. It’s also beneficial for driving engagement through appealing content. It can help to boost conversion rates, engage new audiences and get products in front of the right audience.
According to the latest data, there are currently around 7.8 billion people in the world. From that, 6.4 billion are smartphone users and a total of 4.4 billion are on social media, equating to around 57% of the global population.
That’s a huge number of people in the world - catching their attention represents endless opportunities to increase sales.
In this article, we’ll explore what social commerce is, when and how it started and why it’s quickly becoming the chosen method of shopping.
What is social commerce?
Social commerce is often defined as the method of selling and buying products on social media platforms without ever leaving the site. For example, Instagram native checkout or Facebook marketplace, where customers can purchase products directly without being redirected to retailers' websites.
In reality, the definition of social commerce is much broader than that.
The term social commerce is closely intertwined with social media marketing. It’s an overall process of using social media platforms to research, buy or sell products. Social commerce combines social media marketing and ecommerce to assist buying, selling and promoting products and services between consumers.
Social commerce includes a range of activities and interactions. It’s also marketing and ads (for example Facebook or Google ads) targeted to specific consumer groups to sell products. It can be about simply posting content to promote online stores, or making content shoppable by linking it directly to online store product pages.
The aim is to make customer journeys easier, increase traffic, conversion rates and revenues. Social commerce shortens the customer journey by allowing them to click on the content and land directly on the product page.
Here are some of its key benefits:
- User-generated content is more trustworthy than ads
- Drive sales through peer-to-peer recommendations
- Allows building a brand
- Strengthen and increase brand loyalty
- Opportunity for small brands to launch their businesses
- Increase by-word-of-mouth marketing
- Source of inspiration for customers to upsell products
- Upsell and cross-sell with inspiration-based rather than intent-based purchases
- Grow sales through evoking emotion in customers
- Increase conversion and engagement rates
Social commerce is often confused with the term shoppable media, so let’s quickly touch upon the main difference between the two.
Social commerce vs. shoppable media
Shoppable media is where any kind of content is directly linked to the shop product page, and where customers can get all the information in one place to make the decision.
Sounds similar, right?
Well, the main difference is that shoppable media isn’t only limited to social media. It includes content posted on other outlets, such as shoppable blog posts, online magazines, product pages, ads and even email marketing through shoppable content, using headless checkout technology. What’s more, shoppable content allows presenting detailed product information, such as price or product reviews, directly on the content without clicking a third-party link.
When did social commerce start?
Even though it may seem like the term social commerce is relatively new, its first concept came already back in 2005, when Yahoo! introduced a set of new online shopping tools like Pick Lists, content tagging and user ratings.
An excerpt from an article in Techcrunch published 16 years ago, a quote by Sabrina Crider, then Yahoo’s PR Manager:
The idea behind Pick Lists was that customers can list any items from Yahoo shopping catalogue, and a combination of social media tagging, recommendations, likes and comments enable them to share and communicate information about their experiences, opinions and reviews and where and when to buy.
It started as a way to monetize social media with consumers sharing information and feedback amongst each other. Naturally, consumers trust other consumers, and can therefore make well-informed decisions about their purchases.
Since 2005, the term social commerce has become about understanding how consumers interact with content on social media. From buy-buttons, tagging to live-stream shopping, social commerce has become a community to empower consumers as well as businesses.
How has social commerce evolved?
Social media shopping is about sharing and networking to recommend products to each other. Let’s have a look at the evolution of social commerce and how social media is changing the way we shop.
1. Yahoo! launches “Shoposphere” in 2005 with Pick List feature
In 2005, the term social commerce first appeared with the launch of Pick List feature, where customers could list any items, add ratings and comments in Yahoo! shopping catalogue.
At the time, there were several assumptions about what social commerce would become. The idea of consumers believing in peer-generated content over marketer-generated ads became more prominent, making social media the perfect platform for sharing user-generated content.
The general consensus was that instead of hard-selling, giving advice and educating consumers was the best way to attract new customers. Social commerce was ideal. By letting consumers share their opinions and let other consumers discover their chosen selection, user-generated content (UGC) became the driving force.
2. eCommerce start-ups with social shopping elements emerge
In 2006, as the concept of social commerce was starting to develop, several new social shopping start-ups emerged. eCommerce platforms tapped into social media. Platforms like Wists, StyleFeeder or ClipClip allowed customers to create shopping wish lists and share them to friends or other customers, like bookmarking.
Marketers realized that shoppers may not always be goal oriented, but need some inspiration to know what they want. Giving ideas and recommendations from fellow-shoppers was the perfect solution to upsell.
Shopping went from goal-oriented to recommendation-oriented, businesses were advised to enhance the overall shopping experience. Large social media platforms like Facebook and MySpace did see the potential, but struggled to make the connection to e-commerce stores.
3. Social media sites tap into ecommerce functions
In 2007, it became clear that consumers trust peer recommendations. Social networking sites were the obvious choice when it came to product research through credible reviews.
What’s more, irrational purchasing is another aspect that drove social media sites to tap into commerce. People make impulse purchases based on recommendations, social media was perfect for that.
In 2007, social media sites started to launch commerce features. For example, Facebook launched its Facebook Marketplace, allowing users to advertise their housing and job listings. This was however shut down in 2009, to be relaunched as a “Buy & Sell” marketplace in 2016.
4. Networking combined with shopping - Facebook’s “like” button
In 2009, more attention was paid on consumer behavior, and digital social media channels allowed tracking customer engagement.
As shopping goes from offline to online, it gives more opportunities to understand consumer behavior and how they interact with different content. For example, tracking what consumers like and dislike on Facebook, or which content they interact with gives indications how to adjust a company’s marketing and branding strategy.
In 2009, Facebook introduced the “like” button, which was the beginning of the virality trend. And most importantly, the concept that people can get paid to recommend products for a living took off, a huge catalyst for the rise of social commerce.
5. Social media beyond entertainment
In 2010, things started to pick up and social commerce became a global phenomenon. Social media mixed with commerce was more than just entertainment now.
For example, Japan's shopping concept “Mainichi Tokubai” or “Everyday deal” emerged. The internet was now widely available, but less had access to regional newspapers. People started sharing grocery store coupons in newspapers with their online community, often receiving a small fee in return.
In China, similar trends appeared around 2010, when group buying and crowdsourcing or now user generated content (UGC) became popular.
Community group buying “Tuán Gòu” or “Team buying” is where a group has to purchase together in order to get a discount. Offers come in the form of “deal of the day”. People can use their vouchers and even negotiate their own deals to get better prices.
6. Social media platforms take shopping features to the next level
- In 2013, Instagram positioned itself as the new marketing platform and with their sponsored posts, becoming the initiator of the entire influencer marketing phenomenon.
- In 2015, Facebook launched newsfeed and product ads that allow businesses to better promote their entire range across devices.
- In 2016, Facebook launched Marketplace, a place where people could buy and sell items with each other within their community.
7. Social commerce takes off after the Covid-19 pandemic
- In 2020, Facebook announced Facebook Shops, which allows retailers to create their own customizable store fronts for free. Shops can be connected to platforms such as WhatsApp, Messenger and Instagram and ecommerce platforms like Shopify or BigCommerce to offer a seamless shopping experience.
- In 2020, Instagram launched its Shops feature, enabling businesses to build their own ecommerce storefronts, link to product pages and allow users to check out on the app.
- In 2020, TikTok partnered up with an ecommerce platform Shopify to launch shoppable video content, allowing retailers to advertise their products in short videos.
- In 2020, Google introduced shoppable video ads on YouTube, where retailers can make their video ads shoppable by linking the “shop now” button to their product pages.
- In 2021, Pinterest taps into the influencer market by launching Product Pins, shoppable content leading users directly to the retailer's product pages.
- In 2021, Instagram announced Drops, a solution that follows scarcity and exclusive collections trend, allowing businesses to create hype for their upcoming product collections on the app.
- In 2020, due to the popularity ofbusiness features, WhatsApp announced more focus on features like Shopping, Payments and Customer Service. The shopping features include the possibility to make purchases directly from the chat and integrations with ecommerce.
Why is social commerce becoming the destination for shopping?
Social commerce is a one-stop-shop for socializing and shopping. It combines messaging, marketing, product research and inspiration, shopping, customer experience and customer service tools all in one place. Retailers are coming up with innovative solutions to mix social media with ecommerce. For example, Walmart recently announced a partnership with TikTok to sell products through a live stream shopping event.
Therefore, it’s no surprise that social commerce is fast becoming the preferred selling and buying method for both consumers, as well as retailers. Social media user numbers have tripled since 2010, rising from 970 million to a whopping 4.4 billion.
At the height of the COVID-19 pandemic in 2020, social commerce grew by 38% year-over-year.
These extreme growth rates are predicted to continue - one forecast found that US social commerce sales will grow by 35% by the end of 2021, reaching $36 billion in revenue and representing a 4.3% share of all ecommerce sales.
By 2025, revenues from social commerce are expected to reach a total of $79 billion, with growth rates still rapid at 18% year-over-year.
In comparison, in China, social commerce is projected to reach $363 billion in revenue by the end of 2021, representing a large chunk (13%) of total ecommerce sales.
The extreme growth rates and the popularity of social commerce have been highly driven by the pandemic-induced rise in online shopping and social media usage.
As a result of the COVID-19 pandemic, consumers are spending more time on their phones and are increasingly doing their shopping online, contributing to further growth and expansion of social commerce.
Social commerce will keep expanding
With technological advances, like the availability of cloud-based ecommerce tools and the growth in mobile usage, social media is becoming more than a social platform.
Social media has gone from peer-generated content, to community-generated content platform, and evolving to marketer-created, to user-generated content platform.
Even though social commerce growth rates are expected to slow down a bit, it will take a large chunk of the total ecommerce sales. After a slower start prior to the pandemic, since 2020, we can really see several social media platforms developing and adding more shopping features.
It seems like social commerce is truly here to stay and looks set to evolve even further.