The Business Times

Why social commerce isn't replacing e-commerce yet

Despite the concept being around for a while, social commerce is still very much in its nascence and still has its limitations.

Published Fri, Apr 9, 2021 · 05:50 AM

DIGITAL has become the new normal in many aspects of our lives today, especially in how we shop. South-east Asia has one of the fastest-growing Internet economies in the world - tipped to grow to an astounding US$300 billion by 2025 - and Singapore is a prominent player in this ecosystem. Besides having top regional e-commerce firms like Lazada, Shopee and Zalora headquartered in the country, Singapore is also home to increasingly tech-savvy citizens and a fast-growing consumer goods e-commerce market that was worth US$2.41 billion in 2020.

Now, a new term has entered the digital consumer's lexicon: social commerce. Simply put, social commerce is the selling of products and services directly through social media. While this concept isn't new, it has really picked up steam in the last couple of years as social media companies began enabling consumers to purchase products within the native social media experience. It's even being touted to eventually succeed "traditional" e-commerce - but will this really be the case?

People are social by nature, and the Internet doesn't change that. It simply changes how we socialise. Eight out of 10 Singaporeans are active social media users - spending an average of two hours and eight minutes on social media each day last year - and shopping is a social experience, even if we don't realise it.

We rely heavily on reviews and comments from other users before deciding on a purchase, demand responsiveness and transparency from sellers when asking questions or giving feedback, and enjoy sharing pictures of our recent purchases with friends and family. Social media facilitates these two-way interactions; they create conversations and even communities around brands. If done well, this potentially harmonious joining of e-commerce and social media opens many opportunities for brands to generate more direct revenue.

WeChat and LINE are some famous examples. Mini programs within the apps themselves allow users to buy things like food and makeup from large brands without leaving the apps. While they serve different markets, Facebook and Instagram have been quick to follow suit by rolling out in-app features such as Marketplace and Checkout. These allow customers to easily browse, order and even list products for sale, reducing the friction of the purchasing experience.

At first glance, it seems obvious that social commerce would be the natural evolution of e-commerce. However, it's not quite that cut and dry. Despite the concept being around for a while, social commerce is still very much in its nascence and, therefore, still has its limitations.

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One hurdle is that social commerce is still mostly limited to larger social media platforms, and even these are only just beginning to embrace it. For instance, Instagram just rolled out Checkout for US businesses in 2020. WhatsApp Business's catalogue feature only became more widely available worldwide that same year. There's still some way for social commerce to be more ubiquitous across social media and ingrain itself as a mainstream purchasing channel among users.

People still think of social media as a place to socialise and discover products and services rather than do their shopping. While social media undeniably helps brands reach and engage with more customers, a study showed that only 19 per cent of "heavy" online shoppers had ever bought anything directly from social media. This may be partly attributed to shoppers having more privacy concerns around social media, especially given precedence such as the Facebook-Cambridge Analytica scandal.

E-commerce platforms showcase thousands of brands in a single place, giving consumers a wide range of choices at a glance. They also streamline and personalise the shopping experience by using cookies to offer recommendations based on browsing history and user interests. Social commerce, on the other hand, centralises the experience around individual brands and their products. Users who aren't looking for specific brands may find it more time-consuming to search for what they want and compare prices.

Additionally, online marketplaces, as their name indicates, are designed with the sole purpose of enabling the best e-commerce experience. They provide important infrastructures to onboard and vet sellers, as well as facilitate customer support, payment processes, order processing workflows, et cetera. In contrast, social media - and thus social commerce - focus on reach and exposure, getting views for your products or services and building purchasing intent. But once you get from "I want" to "I will buy", the purchasing experience for the buyer, as well as the operational experience for the seller, are far from the ones provided on marketplaces.

This disparity in backend support is even more pronounced when comparing the availability of third-party digital solutions. Software companies provide solutions that facilitate end-to-end operations for online sellers thanks to direct integrations with marketplaces, webstores, and sometimes shipping carriers, ERPs (enterprise resource planning), et cetera. These may include products that incorporate everything from centralised management platforms to warehouse management systems. However, they are designed to be used on e-commerce platforms and are not yet ready to integrate with social commerce.

For now, putting all the eggs in the social commerce basket is unlikely to be the most efficient strategy for many brands. While social commerce does have inherent advantages in personalised customer engagement, it still lacks the intelligent and intuitive features of more mature e-commerce platforms that people associate with a smooth shopping experience.

In the current iteration of social commerce, the absence of built-in backend infrastructure means customers are often redirected to third-party websites (marketplaces and webstores) where they enter a whole new funnel, resulting in a high-friction experience. It has also yet to gain widespread consumer trust due to privacy issues. As a result, it is still considered a facilitator for e-commerce, not as a real new sales channel; it still needs time to mature.

Having said that, social commerce does get some things right and e-commerce is taking notes. A big draw is that social commerce facilitates two-way communication between customer and seller, instead of being just one-way. E-commerce platforms are striving to implement similar engagement elements such as Q&A sections and improve customer reviews management. We also foresee that management platforms will expand to include social media channels for a holistic digital marketing strategy.

E-commerce is just beginning to hit its stride and still has a lot of room to grow. But while social commerce is still playing catch-up, it should not be underestimated. Reaping the benefits of both types of digital commerce requires businesses to consider e-commerce and social commerce as complementary formats instead of competitive. They must be ready to embrace new innovations and hybrid strategies to leverage the best of both worlds in customer experience and engagement.

  • The writer is CEO of Anchanto.

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