Social Commerce or as most of us understand, the “Buy Button” on social media websites is the buzzword these days with marketers swearing by it.
While the transition from retail commerce to e-commerce has been gradual, that from e-commerce to social commerce is happening at a rapid pace with more and more users getting comfortable to shop with their mobile phones and while catching up with friends. Nonetheless, the share of social commerce is still relatively small (less than 1% of total e-commerce sales) according to Morgan Stanley, indicating huge scope for growth.
Not only buyers, but also marketers are focusing on this mode to reach a much wider audience (the perks of marketing in connected networks, the ease of interacting and sharing stuff are many).
The trend is undoubtedly proving to be beneficial to both buyers and sellers but the ones that are poised to gain the most are social media platforms.
According to an Oct 2015 report titled “Who Is Best Positioned to Capitalize on Social Commerce?” from Morgan Stanley, 'Social media platforms and retailers are learning how to convert “likes" and “followers” into “add to my cart” and buyers, with substantial implications for eCommerce.'
Until recently, social media sites were only platforms for businesses to showcase their products and create awareness. Now these platforms are stepping up their game by getting users to remain on their site for the entire purchase cycle, right from finding the product to making the payment, that is, they are redefining themselves as a place to explore, like, shop and share.
Pioneers like Facebook FB, Alphabet’s GOOGL Google, Pinterest and Twitter TWTR have already made headway in the race to maximize their return on investments. All of them have already included the ‘Buy Button’ in some form or other on their platforms.
Apart from social media companies, credit card providers like Visa V and MasterCard MA are expected to gain from the increasing adoption of the ‘Buy button.’
So What’s Driving the Change?
A number of factors have led to the evolution of the online retail space, starting from convenience, time-saving, more offerings to compare and choose from and a fun way to include friends in your shopping.
Social commerce is being driven by the tendency of buyers to follow their preferred companies and brands, share their recommendations and most importantly to get information about deals and discounts. The Buy button is handy because when users see a promo ad, they can grab the offer by the simple click of the button and then continue with their social activity smoothly. They don’t need to toggle between the social network and retailer sites in order to complete the purchase cycle.
Most importantly, technological advancements have allowed social media companies to build immense data reservoirs that are complete with demographic information and purchase histories, allowing marketers to offer more targeted marketing strategies. And naturally, users are more prone to make purchases when they are getting products per their preferences.
Larger-screened smartphones have also played an important role in facilitating the change, eliminating the need to switch between devices.
Also, technology-friendly shopping is more engaging for the next-gen, especially millennials. According to a 2014 research report from Dartmouth “35% of Millennials are likely to use a Buy button on Facebook and 24% are likely to use one on Twitter, should those be provided by the platforms.” As much as “48% of Millennials use smartphones to purchase online and 21% use tablets.”
Implications for Social Media Companies
It’s not too difficult to determine the impact of the change on social media platforms, which are primarily dependent on advertisements for a major chunk of their revenues. The Buy button allows marketers to get concrete statistics (effectively getting information from advertisement to transaction itself) about the performance of their marketing campaigns.
The Morgan Stanley report projects that the prime beneficiaries of this social commerce trend are companies like Google and Facebook, while it will have “mixed implications” for PayPal PYPL.
The statistics also indicate the same. As per an eMarketer report, Facebook occupies the top spot among social networks (22%) with regard to the adoption of the Buy button. Google has an adoption rate of 6.8%, followed by Pinterest and Twitter with 5.9% each.
Is This Holiday Season a Litmus Test?
Most of these companies had started experimenting with the idea back in 2014. However, this is the first year when the full impact will become evident. Therefore, it’s no surprise that all these companies are pulling out all stops to attract users.
For instance, Google took the philanthropic approach pledging to donate $1 in the buyer’s name for all purchases made through Android Pay between Nov 24 and Dec 31.
Facebook, which has been strategically building its position over the past few months by partnering with Shopify SHOP and opening digital stores to help small and midsize businesses, expanded its offerings further. To make the most of the holiday season’s shopping binge, Facebook has launched a new product – Canvas. The company says that “people on desktop or mobile can click the “Buy” button in ads in News Feed to purchase a product directly from a business, without leaving Facebook.”
Even Twitter, under the leadership of Jack Dorsey, has partnered with notable e-commerce payment companies like Stripe, Shopify, Bigcommerce and Demandware. In addition, the micro-blogging company has got brands like Best Buy, Adidas and PacSun on board while expecting ‘much more’ shopping-enabled tweets this season.
Bottom Line
With a booming online retail space and e-commerce industry, it seems that social commerce is here to stay. The nascent market is expected to get an additional push as millennials increasingly use these platforms.
As Morgan Stanley states with regard to social commerce “It’s small because, in our view, shopping is still an emerging online social network use case. But as eCommerce penetration grows from ~10% to an estimated ~15% by 2020 (and the annual pool of US eCommerce grows from $332bn to $535bn per year), we see “social shopping” being a materially larger distribution channel.”
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