When Twitter phased out its embedded Buy button back in 2017, the beginning of the end of the fledgeling social commerce market was widely predicted. But other social media sites have since proved users are more than ready to make direct in-app purchases from their platforms, and most of them do it using their smartphones.
Social commerce – the integration of online advertising and selling tools within social media platforms that do not involve buyers being redirected to external web sites or payment platforms to complete their purchases – is now one of the fastest growing eCommerce market segments. Forecasts from Grandview Research suggest that sales generated US$475bn of revenue in 2020. That figure expected to swell at a compound annual growth rate (CAGR) of around 28% over the next seven years to be worth US$3.4tn 2028.
Multiple trends are driving this rapid expansion. More significant numbers of consumers now regularly make online shopping purchases since the coronavirus pandemic’s onset forced them to stay away from physical retail stores. Lockdown restrictions have also led people to spend more time communicating and collaborating on social media. And the increased penetration of smartphones – particularly in developing countries – has given them the accessible mobile devices to do it.
Younger generation influenced by friend recommendations and brand content
Researching and making purchases based on the content and recommendations of friends, influencers and brands themselves active on social media platforms is very much a reality for many people, particularly those in the younger age groups. Marketers also point to the advantages of social commerce for consumers in terms of convenience and a happy combination of shopping, socialising and entertainment condensed into their smartphones.
Facebook IQ is the digital insights and marketing research unit by Facebook. In November 2018 it commissioned a study carried out by Ipsos that polled 21,000 people between the ages of 13-64 across 12 countries.[i] When asked how brand content can help them on Instagram, 42% of those polled for the Project Instagram report said the social media platform helps discover products or services, and 44% said it can help them find new information about a product or service. Additionally, 41% of those surveyed said a brand’s Instagram content helps them research the product or service.
The Project Instagram report concluded that 54% of people purchased after seeing a product or service on Instagram. A separate survey of 1,400 US consumers conducted by digital commerce and marketing firm Avionos in 2018 appears to confirm the trend. It found that more than half of the people it surveyed too had purchased through a social media channel such as Facebook, Instagram or Pinterest.[ii]
Pandemic forces small business rethink
There is no doubt that the coronavirus pandemic has led to a global increase in social media use, largely due to restrictions on physical mixing forcing people to stay in touch with friends and family through electronic channels. And with many small to medium businesses (SMBs) struggling to survive the subsequent economic downturn, social commerce lets them keep on trading even when people cannot visit their physical stores.
It can also be significantly cheaper and more comfortable for merchants to start selling via social commerce platforms compared to setting up and running their own eCommerce websites, despite the commission charged on successful sales, advertising fees and account subscription charges which typically apply.
Much of the friction that often results in abandoned online transactions go away by reducing the number of clicks to purchase involved in visiting external websites. That can lead to a higher proportion of successful online sales through social commerce, essential for SMBs looking to scale establish a market foothold. Sellers can also set up online communities that help them identify and reach specific demographics within their potential customer base and use word of mouth and influencer marketing tactics to raise brand awareness.
Facebook, Instagram and WhatsApp introducing new features
Facebook and Facebook-owned Instagram and WhatsApp look like they lead the way to introduce new social commerce features into their platforms. However, there is competition from Snapchat and Pinterest in the US and Tencent-owned WeChat and TikTok in Asia.
Facebook first launched its Marketplace in 2016 to make it easy for people to do business in their local communities. That was followed by the launch of its Shops product last year, providing a way for businesses to set up free storefronts on Facebook and Instagram, powered by third party services including Shopify, BigCommerce and Woo.[i]
The Shops can be found on businesses own Facebook pages and Instagram profiles, and can appear in stories or be promoted in ads. Some companies enable users to make purchases directly on Facebook, while others reroute the buyer to their own websites to complete the transaction. Customer support issues handled through Messenger, Instagram and WhatsApp while Facebook has since added Facebook Shop, a tab within the main Facebook app where users can browse product catalogues and purchase items from directly within the chat window.
Instagram made the jump to social commerce even earlier, launching its in-app checkout feature in March 2019, initially in partnership with around 20 top brands including Adidas, Kylie Cosmetics and prescription glasses retailer Warby Parker. The feature allows people to place product listings on their profile pages and stories using a click to buy button in the Checkout tool
WhatsApp pledged to roll out a shopping cart feature to enable in-app purchases from a catalogue of goods and services in the early part of this year. It also plans to offer hosting services for small businesses to sell their goods, update inventories and respond to buyer inquiries.
Snapchat also launched its Shopify-powered in-app shop features for select accounts and key influencers in 2019, allowing users in the US to swipe-up on snaps to buy products directly from its interface. It has recently introduced augmented reality (AR) to encourage its 230m users to buy clothes and shoes by allowing them to digitally “try them on” for example. The company worked with software developer Wannaby to build an interface – dubbed shoppable AR – that enables users to try on shoes and clothes or click out to buy the product (Instagram also allows users to try-on makeup and sunglasses).
Chinese social commerce market looms large
Grandview points to the Asia Pacific as the current social commerce champion, with merchants rapidly turning to social media companies to advertise and sell their goods and services. In its report Social commerce in emerging markets: understanding the landscape and opportunities for mobile money, the GSMA puts China at the forefront of social commerce expansion. It estimates sales of US$500bn in 2020, for example, representing a full third of China’s total eCommerce sales during the year.
WeChat has introduced functions that provide social commerce functionality, starting with WeChat Stores, which involves users with an official WeChat account sharing a storefront or product. It was largely superseded by the introduction of WeChat mini-programs in 2018, a collection of sub-applications that allow users to access other apps and sites without using the WeChat app.
Mini-programs can be anything from games and news feeds to transport tickets and utility bill payment tools, but 18% of them are dedicated to eCommerce and allow major brands to offer closed-loop purchase processes from within the WeChat interface. A third function – WeChat Good Product Circle – was released in 2019 to share user purchase histories and recommendations with friends and followers.
TikTok has been experimenting with new social commerce features over the last couple of years, including a deal that lets its users buy a pair of Levi’s by clicking a Shop Now button within the TikTok interface that contains a link to the jeans manufacturer’s website. Its most significant move to date came in November last year when it announced a partnership with Shopify to allow the latter’s 1m registered merchants to sell products on TikTok via in-feed shoppable video ads.
Other Chinese social eCommerce platforms little known outside the country include XiaoHongShu and Pinduoduo. Alibaba-owned Alipay introduced a group-buy function to its mobile payment app in 2018. It lets users pool their spending power to get a discount on goods purchased from another Alibaba subsidiary, eCommerce site Taobao.
Mobile payment integration
Social media sites are predominantly mobile-first, which means the smartphone is central to social commerce purchases. So tying them to quick and easy payment methods like electronic wallets (eWallets) makes sense. That is already happening to a certain extent. As well as enabling a shopping cart and click to buy features, WhatsApp has also introduced a Payments tool for consumers in India and Brazil which allows them to fund purchases from a registered bank account, for example, much like an eWallet does. Paypal’s payment engine also underpins Instagram’s Checkout tool.
As with so many other parts of the economy, the Pandemic will accelerate the shift to mobile payments, a trend that dovetails neatly with the explosion in social commerce transactions. Grandview expects third-party payment processors to offer a more secure payment environment for people making social commerce purchases in the future. The GSMA too highlights the role that mobile money providers can play in formalising and expanding the social commerce sector, having noted greater use of social commerce in China amongst lower-income segments of the country’s urban population which are less likely to have bank accounts.
As the volume and value of social commerce purchases continue to grow, social media platforms and the merchants they host will inevitably look to expand their customer base by introducing new mobile payment options for buyers. With social media usage dominated by younger age groups, carrier billing lets them pay for smaller value purchases directly from their mobile phone bills rather than debit/credit cards.
 How Instagram Boosts Brands and Drives Sales, Facebook IQ, 6th February 2019
 Avionos Releases New Data Revealing How Consumer Expectations Are Driving Retail Strategies, Avionos, 23rd April 2018
 Facebook launches Shops to bring more businesses online during the pandemic, The Verge, 19th May 2020