In the D2C business it is clearly noticeable that the type of online shopping is changing. This applies, for example, to the end devices used as well as the use of the platform. Sales transactions via smartphones are increasing. Almost everyone of the 20 to 29 year olds (96 percent) has already made a mobile purchase at least once, is the result of the study G + J Mobile 360 ° from 2019. And according to a survey by Bazaarvoice on social commerce, one in three consumers in Germany will have purchased a product or service on social media portals in 2020.
Social media platforms are getting into social commerce
The major social media platforms have been trying to expand their portfolios in the direction of e-commerce for a number of years – but failed earlier. In the corona pandemic, things are different. Facebook, Instagram, TikTok and Co are making a name for themselves in social commerce. At the end of this year, YouTube also wants to get into business with YouTube shopping. The idea: Even during a live stream, viewers can buy the products presented (often by influencers) directly without having to click on external links.
The importance of social commerce in the marketplace business
At first glance, social media and the classic marketplace business have little in common. Marketplaces such as Zalando and Amazon primarily serve to meet demand, while users on social media are more interested in entertainment and interaction. What they have in common, however, is the intelligent infrastructure that knows its users and satisfies their needs – by connecting consumers and brands with one another.
The enormous reach of social media providers is particularly interesting for brands. This is scalable and is already monetized in various ways. Of course, eBay and Co. also reach millions of people every day. Social media, however, have a crucial special feature: They can split their reach, which creates very topic- or target-group-specific micro-networks around influencers. In this environment, goods and offers can be precisely positioned – an advantage compared to the hard-fought competition on Amazon and other marketplaces, where visibility can often only be achieved through retail media.
What connects social commerce and e-commerce
Despite all the differences, however, social commerce and e-commerce have one thing in common: the fulfillment process. No matter where you shop, capacities are required for the provision of goods and delivery to customers. The extent to which this happens depends on the platform. The marketplace business is classically a long-tail business in which many items are offered and sold in small numbers. Social commerce, on the other hand, is more likely to be located in the short-tail business, where only a few, curated products are offered but a very large amount is sold, for example with temporary special promotions, similar to teleshopping in the past. In inventory management, too, the two variants vary between a one-time provision of an inventory and permanent update cycles.
Brands are successful in other ways in social commerce
Success has to be defined differently in social commerce. While in classic e-commerce it depends on the ranking of the goods or their prime availability, for example, so that they are often played out to users, products are rated differently in social commerce. Here, users not only buy goods from a brand, but also the image of having acquired something from their role model or favorite influencer. The experience and the moment are decisive for a purchase. If a multiplier recommends something, it can trigger a sales pike. Brands thus benefit from the credibility and community of influencers.
New sales strategies are needed
Due to the different mechanisms and success factors on the platforms, brands should develop new strategies for social commerce and adapt their existing marketplace strategy. This is especially true for content creation. Content on social media is snackable and cool, while on marketplaces it is precise and detailed. For social commerce success, both must be combined and tailored to the respective target group. The same applies to inventory management: In social commerce, there will often be one-off inventory sales, while permanent update cycles are run through on the large e-commerce platforms.
Social Commerce – Top or Flop for Brands?
A fundamentally critical point of view is that social commerce is also not a solution to the structural problem of brands: Although social media increases the reach of brands enormously, it leaves them alone with content, management and the entire fulfillment process. In addition, the networks are unlikely to be able to check and optimize the quality of transactions. However, the social media top dogs have excellent analysis tools. It can therefore be assumed that the offers can be optimized well after a test phase. The action character also simplifies the management logic for the brands.
Overall, the development of social media shopping can nevertheless be viewed as positive. This is because brands get the chance to open up new sales channels and to bind customers to themselves in other ways, and if the approach is right, even more long-term ones. After all, they are free to address, design, advertise and implement on Facebook, Instagram and YouTube and do not require the approval of the marketplaces, which are always strictly regulated (albeit for good reasons). Social commerce can therefore establish itself as a good way to combine branding and conversion.
Not a full replacement for platform business
Social commerce is not (yet) a fully-fledged substitute for the classic marketplace business. If brands sell exclusively on social networks, this can very well trigger short- or medium-term hype, but it cannot replace sustainable brand building. Social media shopping works more selectively and emotionally. It is therefore particularly suitable for low-threshold D2C products, for example from the FMCG and fashion sectors. For high sales, brands should continue to rely on the large marketplaces – but adding via social media makes perfect sense in many cases.
About the author: Marcel Brindöpke is a marketplace expert and founder of the platform provider heyconnect. He has been in the marketplace business for 20 years and has helped, among other things, to set up the curated platform Otto.de for the Otto Group. In 2012 he founded heyconnect together with Florian Curdt. The service provider that enables brands to connect to large marketplaces.
Also read: Social Commerce: 5 Tips on How Retailers Strengthen Customer Loyalty Using Social Media