On the shoulders of giants: the rise of social commerce

The demands, expectations and shopping habits of consumers continues to evolve in response to innovative applications of technology in the retail sector. Modern consumers expect… Read more

The demands, expectations and shopping habits of consumers continues to evolve in response to innovative applications of technology in the retail sector. Modern consumers expect a multi-channel experience, with the ability to fulfil their shopping needs online and instore. For younger generations the world of retail is becoming increasingly synonymous with mobile devices and online platforms as consumers look online for inspiration, greater choice and a convenient shopping experience.

According to the UK Office for National Statistics, internet sales accounted for 18% of total retail sales in 2018[1]. What’s more even though the bulk of purchases remain instore, market commentators are finding that the majority of retail growth is occurring in the online space[2].  Enter into this arena Instagram, which is leveraging its 1.1 billion monthly active users, thriving influencer culture and targeted advertising capabilities to launch its new and improved retail functionality.

Social commerce

The combination of social media platforms and e-commerce is leading to the creation of new social marketplaces, which are enabling retailers to engage with consumers where they are increasingly spending more time online, by listing products and placing ads directly on social media platforms.

Current offerings in this space include:

• Facebook’s integrated e-commerce platform;
• Facebook Messenger’s chatbots and conversational commerce;
• Instagram’s shopping update;
• Pinterest buyable pins;
• Snapchat’s collection ads and swipe up purchases; and
• Twitter ad posting with links re-directing to e-commerce sites.

The platforms listed above have adopted various approaches, from the development of Facebook’s e-commerce page and sales chatbot, to Instagram’s targeted/personalised shopping channel and call-to-action “buy now” style purchase options on newsfeed posts and stories. Platforms like Pinterest and Instagram are particularly well placed in this area. Pinterest’s use of buyable pins makes perfect sense when users are looking for inspiration for designs and products; whereas Instagram’s ability to build on the social influencer and celebrity phenomenon, adding functionalities such as paid partnerships and taggable products within posts and stories seems to offer retailers a great deal of potential.

Without the trappings of lengthy website user journeys, these new social offerings, make it easier for consumers to discover and interact with brands and to make quick seamless purchases compared to visiting physical stores or navigating multiple pages on more traditional web pages. Social commerce also enables retailers to deliver targeted advertising to captive audiences, not only are retailers finding it easier to access new customers, but some savvy product owners have been able to reach a global market by leveraging the following of local influencers to expand their reach globally.

Used correctly social commerce can be a powerful sales tool in a retailer’s arsenal. The key to success is not only making products purchasable on these platforms, but also building a social media presence, which can be leveraged by publishing social content to reach and drive customer engagement.

Companies performing well in this area

The success of market players like Ikea and Condé Nast in this space provide useful examples.

Condé Nast has implemented a particularly successful Instagram campaign for its fashion and luxury lifestyle magazine Vogue. Through successful use of social media, the publication has increased magazine sales and advertising revenues, which have resulted in more than 22 million followers. Vogue have also found that their Instagram channel is getting many more impressions than its website Vogue.com, and has achieved a 40% higher conversion rate with ads on Instagram stories compared to the regular campaign figures[3]. It also saw particular success using an Instagram stories campaign for their September 2018 issue featuring Beyoncé on the cover. By all accounts, the campaign helped the publisher to sell out its new stands and was directly responsible for 20% of new subscribers at the time.

Ikea saw similar success through the use of targeted Facebook adverts, intended to drive real-world footfall to its Cardiff store and to acquire new customers whilst re-connecting with old ones the campaign led to an increase in sales both online and instore. By monitoring mobile phone activity, Ikea was able to establish that users who had been geographically targeted by ads, contributed to a 31% uplift in store visits by 22 to 25 year olds and an 11% increase in visits from 26 to 35 year olds[4].

Fostering trust, and the rise of a super app

Much like initial consumer concerns surrounding the input of payment information on e-commerce platforms, there remains a hesitancy amongst a large number of consumers about entering payment information into social media platforms. Whilst consumers may be intrigued or influenced to purchase a product elsewhere due to a listing on social media, a significant number still choose not to purchase directly on the platforms due to concerns relating to the security of their payment information and privacy of their purchase data.

Such concerns are not ill founded, Facebook, Instagram and Twitter have all fallen foul to breaches of confidential user information and Facebook in particular has suffered well publicised incidents relating to the unlawful sharing of user personal data.

Additionally, Facebook has recently announced the planned merger of the Facebook, Instagram and WhatsApp platforms, leading to a new ‘super-app’ or multi-purpose platform. The development has raised concerns amongst some commentators who worry about the combination of previously separate sets of user personal data profiles, the security of the new platform and the isolation of payment data between the sites.

Facebook has stated it is aware of these concerns, particularly those relating to the encryption of data and has pushed the implementation of these proposals to a time in 2020. A successful combination will represent a move towards a new super-app similar to the Chinese giant WeChat. Such a marketplace with a rich understanding of its freshly enlarged active user base presents an even more exciting opportunity for retailers willing to take advantage of the new marketplace.

Getting ahead of the crowd

Notwithstanding the above, there is a stark difference between having a social media presence and utilising social media to its full potential. Recent studies have shown that most high street retailers are not using social commerce effectively[5], and whilst social commerce remains in its infancy, there is a real opportunity for those using these platforms effectively to get ahead of their competitors.

Retailers who combine featured products with social content, utilise tools available to better understand and re-connect with existing and reach new customers, will be able to take full advantage of their social presence as social commerce becomes increasingly the norm. They will then be best placed when social media goes the way of e-commerce, with increasing numbers of consumers having become comfortable with making payments on social platforms.

 

[1] Office for National Statistics, Retail Sales Index time series

[2] Deloitte, Retail Trends 2019

[3] Condé Nast, Instagram Business

[4] Ikea Footfall Study, Facebook Business, 2 June 2014

[5] Majority of retailers failing on social commerce, Retail Systems, December 2018

• Share this blog

• Twitter
• Facebook
• Linkedin