Winning the ecommerce game means going social. Social commerce goes beyond facilitating P2P transactions; it scales these transactions using features of social networking platforms, involving entire communities and networks in the purchase journey of a customer. It is this ability to scale online transactions through social connections that makes social commerce powerful.
Digital convergence behind social commerce
Enabling this scalability is the digital convergence of social media, entertainment, and ecommerce. Social media platforms are leading the way by formalizing and monetizing ecommerce use cases on their platform, integrating digital payment portals, setting up customer service chatbots, and adjusting algorithms to push product-related content beyond ads. As the lines blur between these use cases, the paradigm shift from transactional to experiential in the ecommerce landscape is more apparent than ever. Platforms need to go beyond the silos of social media and ecommerce and become agile for users.
Big players testing the waters of social commerce
Leading this shift is China, where social commerce platforms like Mogu, Meilishuo and Pinduoduo are chipping away at ecommerce giants Alibaba and JD.com’s local market share while breaking into Wall Street. Having live video sales, purchase sharing and group buying built into their business model and application from the get-go has sped up adoption of their platforms in a market where going social is a non-negotiable for the individual.
Even with the remarkable growth of native social commerce platforms in China, big players and migrants (ie social media platforms that expanded into ecommerce and vice versa) still have an upper hand not having to start from square one. A development characterizing their shift into social commerce is make use of app features and incentives to generate revenue beyond the usual ad models, like how Tencent Music incentivizes users to pay for exclusive access to their favorite artists’ latest hits by allowing artists to block off streaming of new releases.
In the West, social commerce is gaining ground, albeit at a slower pace than in China. In the US, social media and ecommerce are treated as distinct activities. While this may be a challenge for social commerce, the big social media platforms are seeing increased adoption of ecommerce features like Marketplace and Shoppable. On the ecommerce side, Amazon has been experimenting in the space, rolling out content and community-based platform Spark in India, and partnering with Snap to create purchase journeys on the platform.
Playing to the strengths of social commerce in SEA
Powering the shift to social commerce in Southeast Asia are the growth of ecommerce platforms like Lazada and Tokopedia lowering barriers for user acquisition, the widespread usage and cost-effectivity of mobile and social media raising economies of scale, and the entry of big players like Amazon and Alibaba into the region presenting opportunities for investment. These forces present a strong case for entrepreneurs in the region to build platforms and services geared towards social commerce. With the worldwide market expected to reach $5.23M by 2022, Southeast Asia can maximize the benefits social commerce has to offer by playing to its strengths: diverse communities and digital convergence.
Influencers as a channel
It’s not about being the next Kylie Jenner — it’s about building the next Kylie Cosmetics without her (Photo from Forbes)
Shared interests, needs, and fulfillments of online communities create the drive for consumers to make purchases and engage with a platform. While there are many grassroots markets in social media groups and online messaging boards, it is a different affair when the platform caters to a specific need like reselling or has stakeholders like brands involved.
The obvious answer may be to dive into influencer marketing. The problem with this is that influencer marketing poses limits over time, tending to become a captive market with big brands capturing most of the activity. This brings in agencies, and while intervention has scalability in mind, this creates distances influencers from brands and consumers. Finally, not everyone will be a Kylie Jenner. Nor is everyone a Kardashian fan.
These limits are what social commerce goes beyond. With social commerce, every user can be an influencer, seller, and buyer without having to be a Kardashian or Cardi B. For the platform, influencers are not users per se, but a channel through which any product or service can be purchased. This way, it is the communities that drive purchases rather than all the burden sitting on the shoulders of the influencer.
Shifting focus from the influencer individual to the influenced communities
In the case of Meesho in India, they enable sellers to capitalize on the effectivity of families and friends as influencers. This lowers the barriers to purchases and increases repeat purchases, with more trusted recommendations and reviews. This also cuts down customer acquisition cost and discount dole-outs. Products that thrive with this strategy either build identity within a group (eg cosmetics) or connections within a group (eg furniture). With the community as the focus of the platform rather the individual consumer, influencers are no longer limited by their individuality or potential separation from the group they influence.
This does not that mean celebrity or top influencers will be rendered ineffective next to influencers operating within smaller circles. Getting top bills like Kylie will still work in urban settings but it is important to recognize the limitations in scalability dependence on this strategy will present. A more long-term strategy is enabling users to influence each other on the platform.
Capturing the value chain through digital convergence
If enabling influence within and among groups gets users through their first few purchases, digital convergence keeps users on for the long haul. This means looking at integrations across the value chain — digital payments, logistics, content, etc. — for a more localized and even personalized consumer experience. Big players are moving in this direction already. Line recently poured in $182M into mobile payments, allowing merchants to drive purchases faster using the chat app’s already existing social commerce features like multimedia broadcasts, consumer polls and coupons.
While it seems like a play only for tech giants and mature companies, digital convergence, if integrated creatively into the product-market fit (PMF) and go-to-market strategy of the platform early-on, can provide control of the purchase journey, reduce barriers to user conversion, and keep users on the platform with rewards and fulfillment beyond the purchase. This is the play of successful Chinese social commerce platforms. The challenge with a region as diverse as Southeast Asia is localization.
Localization bringing in focus and bringing out creativity
Transforming the consumer experience turns localization into an opportunity, as is the case with halal cosmetics, which despite being a niche market is growing in popularity. Bringing the market for halal cosmetics into the online social space made it easier for halal certified brands like Indonesia-based Wardah Cosmetics to widen their market and distribution network.
The localization approach to integrating digital convergence requires market and product focus, especially for early-stage platforms in a highly competitive market. For Hong Kong-based Goxip, they focused on the fashion vertical for high-end consumers, coming up with image recognition features for virtual fitting and a rewards program for micro-influencers to meet the needs of their chosen market. Focus allowed them to come up with creative features for the seamless experience their users want. Creativity is where the possibilities of digital convergence come in.
Making social commerce work in Southeast Asia
Building on the seamless consumer experience allows platforms to leverage on diverse communities rather than individuals and on digital convergence rather than any single use case. These shifts in focus turn transactions into experiences and userbases into communities. In a region where the social dimension undercuts all aspects of living, more platforms in the region will evolve in this direction, making cross-platform partnerships and going into O2O with retailers and FMCG companies.
Here’s a recap on how entrepreneurs can the make the most of social commerce:
- Enable users to influence each other through positive engagements and incentives. Incorporate features onto your platform that will encourage authentic influencer behavior.
- Take advantage of digital convergence to create a more seamless consumer experience. Focus on a specific market, and be creative in addressing that market’s needs.
- Localize through partnerships with key players of the consumer experience. This lowers barriers to adoption and purchase. It is also an opportunity to gain more insights on the consumer in a context that is familiar to them.
Disclosure: This article was co-authored by Joolin Chuah and Paulo Joquiňo.