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In China, social networks and applications have become a popular platform for the development of social commerce, selling goods worth billions of dollars. We understand how it works and whether our country will follow the Chinese path
Over 149 million people per day watched the selling livestreams hosted by the Chinese singer Viya on the Day of the Bachelor in 2020 (celebrated in China on November 11). “If Wii’s audience were a country, it would be the ninth most populous country in the world. Bigger than our country,” says Matthew Quinlan, Managing Director of Accenture.
Such livestreams with product advertisements are the most visible and striking example of the so-called social online commerce (social e-commerce). But far from the only one.
In addition to selling broadcasts and advertising from bloggers, this segment has many formats and tools – user reviews of goods and services, joint purchases, online shopping in instant messengers, various types of promotion in social networks. All of them encourage consumers to buy and help brands increase sales.
The very concept of social e-commerce implies sales that rely on user interaction and take place on social networks or on other platforms that support social mechanics. This is not just advertising goods and services from bloggers. In such a system, the buyers themselves help to talk about products in social networks.
The shopping model here is essentially upside down, notes Colin Huang, founder of group shopping app Pinduoduo. In classic e-commerce, buyers are looking for products: when they enter the marketplace, they at least have an idea of what they are going to buy. In social commerce, the opposite is true. Recommender systems, content and other users tell the consumer what he needs to buy. That is, here people are not looking for goods, but goods find their buyer.
China leads and sets trends
At the end of 2020, the global size of the social commerce market was estimated at $474,8 billion. In the next seven years, it is predicted to grow by more than 28% annually. Analysts explain the high interest in this segment by the convenience of shopping, the increase in the number of smartphones and, most importantly, the increasing penetration of social networks.
The market is driven by China, which Accenture calls “the world’s center of social commerce.” It is expected that by the end of 2021, sales through social e-commerce in China will reach $363 billion. This is 36% more than in 2020, and three times more than in 2018.
Growth is driven primarily by two tech companies, Alibaba and Tencent, which owns the WeChat app and is investing in the recent IPO Pinduoduo app. Together they occupy about 90% of the social commerce market in the country.
Over the past few years, these companies have managed to create a convenient IT infrastructure that stimulates buying activity. For example, on the WeChat platform in the summer of 2013, a built-in WeChat Pay system appeared for transferring funds between users and online payments. It also launched lightweight applications called Mini Programs, with which you can, among other things, make an appointment with a doctor, play games, order a taxi, and pay for purchases. Both solutions helped develop social commerce. At the end of 2019, mini-applications generated transactions worth more than $115 billion. Large online stores and brands are willing to use the product, creating their solutions on the WeChat platform.
In turn, Alibaba is already promoting the Chinese social e-commerce model in other countries by developing the AliExpress cross-border platform. The company plans to create a whole army of influencers numbering more than 1 million people. It is expected that this will help increase the number of consumers served to 2 billion by the beginning of the next decade.
Following China, the social e-commerce boom has come to other countries in Southeast Asia. Vietnam is confidently leading here, where social commerce already accounts for about 65% of online retail, that is, $22 billion. In Thailand, the volumes are half that, but the pace is similar: over the past three years, the segment has grown several times.
At the same time, the situation here is different from its neighbors, Bloomberg notes, citing a Bain & Co report. If in China the majority of consumers make purchases on e-commerce platforms, then in Thailand almost half of all online sales occur through social networks or instant messengers. For example, on Facebook, WhatsApp or Line.
USA repeats and accelerates
The Chinese social commerce model will become a model for American companies, Accenture expects. Amazon is already implementing tools that replicate the Chinese experience. So, in 2019, the company allowed influencers to promote products using live streams. Around the same time, she released an application for creating, recording and managing advertising broadcasts.
American social networks are also actively experimenting with formats. Facebook last year launched the Facebook Shops service, through which small and medium businesses can create online stores. And the social network Instagram, owned by the company, has implemented a whole set of functions that help organize sales – Instagram Shopping. True, the options for placing and paying for an order are not available in all countries. But the social network assures that it will expand the list of states where you can use them.
Experts expect the US social e-commerce market to grow by 2021% in 34,8. However, the share of this segment in the total volume of online retail is still small – only 4,3%.
There are two main types of mechanics in social commerce.
Very popular in the Asian region. Their main goal is to force users to bring new buyers to the platform on their own. As a rule, you need to recruit enough people to get the goods at a better price. For example, as part of group purchases, mini-games or “bring down the price” promotions.
Includes content describing the product and integrated directly into the user’s feed on the side of the social network. Users can make a purchase either within the platform or on a third-party resource. The latest model is used by Instagram.shop in our country. This also includes selling livestreaming with the participation of influencers.
users want discounts and games
The Russian social e-commerce market has its own characteristics, and Chinese models do not always fit here. “In China, the basis of social commerce relies on the patterns of behavior formed in the WeChat social network: it was originally a messenger in which people communicate in private messages or group chats. Therefore, users are used to trusting information from there. In our country, all major social networks initially developed towards the consumption and viewing of content. The difference in behavior explains the difference in the perception of information: in China, it is more taken for granted and more often motivated to act, in our country, special approaches and mechanics are required,” explains Nadezhda Egorova, Vice President of the social commerce direction “AliExpress Our Country”.
Most Russian users are not ready to share commercial content for additional discounts. Their feed is for friends, colleagues or personal brand development. Therefore, calls to buy something are often perceived negatively.
At the same time, brands are actively cooperating with bloggers to acquaint the audience with the product and build familiarity. But bloggers are also primarily lifestyle, not advertising. And here we still have to find a balance between selling and regular content.
At the same time, the audience in our country enjoys watching streams, following discounts, writing reviews, and playing games. This allows you to use various social mechanics to attract potential buyers. In particular, AliExpress launched live streams, blogs and games within its application for Russian users. The company was the first on the Russian market among those who began to make their own streams in the application.
At the same time, the company cooperates with Russian social networks and other platforms. In the fall of 2020, Odnoklassniki, together with Aliexpress Our Country, relaunched their own product marketplace. Users can shop directly from their newsfeed or product card videos.
Installment plans and game mechanics have been launched on VKontakte, allowing users to reduce the price of goods together with friends. In turn, a special form of reviews with the possibility of monetization has been created in the Pulse recommender system from Mail.ru Group. The income of the authors depends on which specific products from AliExpress are included in the review.
In addition, “AliExpress Our Country” organized a partner platform for local users. On it, a blogger can earn a percentage of the transactions of buyers whom he attracted to the site. With an audience of 50 thousand subscribers or more, earnings reach $2,7 thousand per month. Moreover, during the sales period, this figure increases significantly. For example, during the sale in honor of the 11th anniversary of AliExpress, the earnings of one of the bloggers on the first day alone amounted to about $15, they said on the site, the company said during the launch of the platform.
The rest of the market participants are just starting to develop a new direction, offering separate tools for social e-commerce. For example, in February 2021, a streaming service appeared on Ozon. Sellers or influencers collaborating with them show and discuss the product in real time, communicating with buyers in the site’s app.
Yandex.Market also conducts streams on its own platform. Lamoda launched a regular fashion and style show on VK. In addition, there are separate small platforms for social commerce in our country, such as 24TTL live streaming.
Major brands are still looking at social media as a source of traffic and are just starting to test the possibilities of more integrated shopping on these platforms, admits in “AliExpress Our Country”. But the situation is expected to change soon. The younger generation is used to living inside social networks. There they communicate, look for information, make purchases. This means that brands, marketplaces and stores will still have to adapt to the new reality. Otherwise, they risk losing a very large segment of the audience.
Social commerce has an important technical advantage, according to the Center for Competence Development in Marketing of the Higher School of Economics. To launch sales using social e-comm, you do not need to create your own online store or integrate it with social networks: everything works within social media platforms.
“The future of retail sales is where customers live,” emphasizes the HSE. “Enterprises that will combine various channels — web, mobile applications, social networks, marketplaces — will be able to better support transactions with the target consumer segment and conduct transactions more efficiently than companies with less diversified distribution strategy.”
Meanwhile, in China and the US, the market will steadily gain momentum, experts predict. The share of social e-commerce in China in the next four years will increase from 12,7% to 15,5% of the total e-commerce. In the US, social commerce will account for about 5% of digital retail by 2024 versus 3,4% in 2020. And although the relative figures here look modest, in monetary terms, the increase is more than impressive. Taking the experience of China, American social e-commerce will show an increase of almost 2,5 times in four years and will reach $67,3 billion.