The trial of TikTok in-app shopping with a select group of Shopify merchants in the US, UK and Canada looks set to grow the number of users worldwide buying products and services through social commerce channels.
The video-sharing company and eCommerce specialist first announced their global partnership in October last year when TikTok allowed the latter’s 1m merchants to sell products on its platform via in-feed shoppable video ads. The two companies have further evolved their joint proposition to enable new shopping tab and product links within the TikTok interface. These will allow merchants to sell products through their TikTok for Business accounts by synchronising their product catalogues to create a mini storefront that links directly to their online store for checkout.
Social commerce sales and ecosystem poised for rapid growth
Social commerce – the integration of online advertising, selling tools and payments within social media platforms in a way no redirection is necessary – is now one of the fastest-growing eCommerce market segments.
Statista estimates that global social commerce sales will generate US$585bn of turnover in 2021, up 23% year on year from US$475bn in 2020. That figure is forecast to expand further at a compound annual growth rate (CAGR) of 28% to reach almost US$3.4tn by 2028.
Insider Intelligence calculates that US social commerce sales will grow 35% year on year to surpass US$36bn in 2021 after surging 39% in 2020. Even so, it will still only be worth about one-tenth the size of the social commerce market in China, expected to bring in US$352bn in 2021.
In its report Social commerce in emerging markets: understanding the landscape and opportunities for mobile money, GSMA Intelligence 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.
Some of the world’s biggest retailers are also starting to recognise the potential of social commerce. Walmart-owned Flipkart launched a platform in India – Shopsy – that enables consumers and small businesses to resell their goods through WhatsApp and other social media platforms earlier this year.[i]
Dedicated social commerce start-ups are also attracting significant investment, the latest recipient being Flip which closed US$28m of Series A funding earlier this month.[ii] Elsewhere DealShare closed US$144m of Series D funding led by New York-based venture capitalist Tiger Global[iii]. Indeed Venture Intelligence has calculated that social commerce companies had attracted US$554m of investment in the first six months of 2021, over seven times more than in 2020 and the highest total since 2015.
Low transaction values attract younger demographic
Social commerce transaction values tend to be low, often involving products like cosmetics and clothing. As such, they offer a relatively low barrier to market entry for retailers who can build revenue and reputation through subscriber sharing and recommendations targeted at younger buyers.
Social commerce is also very smartphone focussed – statistics from Influencer Marketing Hub suggest TikTok users spend more than 850 minutes per month using the mobile app. The convenience of “scroll to buy” removes a lot of friction from the sales process. At the same time, sophisticated algorithms are deliberately designed to help and encouraged social media users to easily find suitable products tailored to their interests and peer recommendations.
TikTok overtook Facebook Messenger to become the most downloaded by volume in 2020, according to digital analytics company App Annie.[iv] Reports suggest that TikTok owner ByteDance saw its revenue more than double to US$34.3bn in FY20[v]. The Chinese company had 1.9bn monthly active users (MAUs) across all of its platforms by January 2021. However, these include news aggregation app Toutiao and the Chinese version of TikTok (Douyin) and TikTok itself.
TikTok and Douyin combined generated around US$128m from in-app purchases in January 2021, calculates Sensor Tower, four times as much as they did in January 2020. The fact that China contributed 82% indicates it was Douyin rather than TikTok, which accounted for the vast majority of those sales.
ByteDance does not break down its figures, but it launched new in-app payment services for Douyin at the beginning of this year. The platform already has existing integrations which enable its users to fund in-app purchases quickly and easily via leading Chinese payment apps Alipay and WeChat Pay rather than opening up third-party payment websites that introduce an additional step into the sales process which may lead to an abandoned sale.
If TikTok’s platform can facilitate similarly convenient in-app payment options for Shopify merchants on a global basis, the value of its in-app purchases could accelerate too. And this could pave the way for other social media companies to emulate similar partnerships with payment service providers and ewallets.
[i] Flipkart has big plans for social commerce platform Shopsy, The Drum, 3rd August 2021
[ii] Flip Raises $28M in Series A Funding, FinSMEs, 30th August 2021
[iii] Indian social commerce DealShare raises US$144m, eyes international expansion, TechCrunch, 8th July 2021
[iv] TikTok named as the most downloaded app of 2020, BBC, 10th August 2021
[v] TikTok Owner ByteDance’s Annual Revenue Jumps to $34.3 Billion, Wall Street Journal, 17th June 2021