Social commerce: Scroll, click, buy

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  Quantumrun Foresight
• August 6, 2024

Insight summary

Social commerce makes it easy for users to discover and buy products directly within social apps, driven by the rise of influencers and live streaming. This trend offers businesses a powerful marketing tool but also presents new challenges, such as the need for stricter data privacy regulations. As social commerce grows, it may create new job opportunities, impact consumer behavior, and require changes in government policies to protect consumers.

Social commerce context

Social commerce (social media + e-commerce) integrates product discovery and purchase directly within social platforms. This approach allows businesses to leverage social media's vast user base to promote and sell products seamlessly, offering a highly interactive and engaging shopping experience. Deloitte forecasts the social commerce market to have surpassed USD $1 trillion globally in 2023, driven by the increasing number of social media users, which is predicted to reach 5 billion worldwide. Platforms like Facebook, Instagram, and TikTok have introduced native shopping tools, allowing users to complete transactions without leaving the app, making the shopping process more convenient and frictionless.

Developments in social commerce are largely fueled by the "creator economy," where influencers use their substantial social media followings to market and sell products. Influencers play a crucial role in this ecosystem, with many consumers making purchasing decisions based on their recommendations. For instance, nearly one-third of US consumers reported that social media influencers affect their buying choices, a trend that is even more pronounced in markets like Brazil and China. 

The rise of social commerce has also seen innovative applications like augmented reality (AR) and live streaming enhancing the shopping experience. Brands are using AR to allow customers to virtually try on products, while live streaming events offer real-time interaction and instant purchasing options. For example, Magnolia Market uses AR to replicate in-store experiences for online shoppers. Meanwhile, the live commerce market in China, which grew from USD $3 billion to USD $171 billion in just three years, demonstrates the potential of live shopping events, according to Shopify. 

Disruptive impact

As social media becomes more integrated with shopping, users may find it easier to make impulse purchases influenced by targeted ads and influencer endorsements. This trend could lead to more personalized shopping experiences, but it may also increase spending and financial pressure on consumers, particularly younger generations who are more active on these platforms. Moreover, blending social interaction with commerce may blur the lines between socializing and consumerism, potentially affecting mental health and social relationships.

Social commerce offers businesses a powerful tool to enhance marketing and sales strategies. Companies may need to adapt by investing in social media engagement and influencer partnerships to stay competitive. Retailers can use social platform data to understand customer preferences better and tailor their offerings accordingly. However, the transparency of social media also means that businesses face the risk of public backlash if they make missteps, such as offensive posts or poor customer service, which can quickly go viral and damage their reputation.

Governments may need to consider new regulations to address consumer protection, data privacy, and online advertising standards. For example, governments could implement stricter guidelines on how influencers disclose paid promotions to ensure consumer transparency. Additionally, international trade policies might need adjustments as social commerce platforms facilitate cross-border transactions, impacting local economies and global market dynamics.

Implications of social commerce

Wider implications of social commerce may include: 

• Increased reliance on influencer marketing leading to higher consumer trust in personal endorsements over traditional advertisements.
• Growth of social commerce platforms enabling small businesses to reach global audiences without substantial marketing budgets.
• Expansion of mobile payment systems leading to greater convenience and higher transaction volumes on social media platforms.
• Shift in consumer behavior towards instant gratification, impacting long-term savings and financial planning.
• Creation of new job opportunities in social media management, content creation, and digital marketing.
• Increased environmental impact due to higher demand for quick delivery and packaging in online shopping.
• Businesses adopting more flexible and remote working arrangements to manage their social media presence effectively.
• Enhanced digital literacy among older demographics as they adapt to using social commerce platforms for everyday purchases.

Questions to consider

• How might your purchasing habits change if you could buy everything directly through your favorite social media apps?
• What steps can you take to protect your personal data when shopping on social media platforms?