Social commerce comes of age

The pandemic with its lockdowns has not only resulted in a huge growth spurt for digital retail. Another sector that previously received little attention from the media and retailers has also benefited. The topic of “social commerce” is gaining in importance.

As with many other things in the digital world, there was already a name for the phenomenon before it caught on. The term “social commerce” is actually already over 15 years old. The idea behind this is to transform the rather isolated human activity of shopping online via your computer or smartphone into a social interaction. However, this required the breakthrough of social networks becoming a mass phenomenon and the triumph of the smartphone with its huge range of apps.

Looking for inspiration, experiencing and purchasing products as part of a community

It’s no wonder that Etsy, the “trading platform for handicrafts”, has only received greater attention from the business press in recent years, even though it was founded in 2005. The marketplace for vintage goods and handicrafts can be seen as a template and forerunner for the social commerce phenomenon.

The community (or rather the communities) is united by interest in a specific product category. “Sellers” exchange ideas with the community before the sale, but the process then continues to the user review stage. The focus is on the user experience rather than the sale. This is similar to how the influencer model works on large social platforms: individuals who are considered credible in a specific category present products and services.

Social networks are becoming transaction platforms

The trend came first, followed by the question of how it could be exploited. This form of indirect selling has not gone unnoticed by the operators of social networks. It is a game in which they did not initially participate. These companies did not benefit from the fees that influencers were collecting, nor from the members who were purchasing goods in another shop. That is changing right now – drastically. Some examples of current developments:

• Instagram (owned by Facebook) has put a lot of effort into enabling purchases directly on the platform over the past few years. A shop area can be linked directly to the profile page, posts are “shoppable”, specially highlighted entries appear in the “Explore tab” for customers with a high purchasing intention. And as part of a collaboration with Shopify, it is even easier for retailers using this e-commerce platform to list their products on Instagram. There are additional options for retailers who link Instagram to Facebook.
• In the middle of the first phase of the pandemic, Facebook launched its new “Shops” function. This offers many options, including networking with WhatsApp. Its own payment method “Facebook Pay”, links the various elements.
• Pinterest is not lagging behind in this area: a shopping button is included in the search, and elements on the pin board can be made “shoppable”. And “style guides” are becoming digital catalogues.
• TikTok is the latest high-flyer to jump onto the social commerce bandwagon. It now also includes shopping links on the profile page, which is a useful feature when working with influencers.

Whether this is worthwhile for retailers is less a technical question and more about how they interact with users and how their products are presented. Social commerce is not web shop 2.0. Members of the networks want to be enticed and impressed.

The prospects for social commerce are good

A survey conducted by Greven Media among users in Germany at the end of last year returned some surprising results. One in ten users became social shoppers during the coronavirus crisis. It also showed that Facebook is the top channel. The prospects are good that the proportion of social shoppers will increase.

We are observing two different trends here: on the one hand, there is a growing number of posts with live moving images, which then immediately lead to a shopping opportunity. On the other hand, it is noticeable that influencers are increasingly bringing their own products onto the market. This can result in interesting opportunities for brand manufacturers and large retail companies.

Retailers should definitely keep an eye on this dynamic situation and gather initial experience with social commerce as early as possible. After all, the entry barriers are low.