Why retailers can no longer afford to ignore social commerce

Retailers and online shoppers had seen the vast potential of social commerce before 2020, but the Covid-19 outbreak and government-imposed lockdowns have further whetted the appetite for more and better social shopping opportunities.

Social commerce provides a whole new shopping experience for consumers as it takes place in a social media channel. And while social media companies have been building toward this over the years, the pandemic provided an additional push to create more shopping features to their platforms to make purchases effortless and seamless for buyers.

“It is essential for brands, retailers, and even individual sellers, to start looking at social commerce as a long-term sales solution instead of a one-shot marketing campaign and to be willing to try different tools and technology such as AI to enhance buyer engagement,” said Sega Cheng, CEO & co-founder of AI solutions firm iKala. “Customer analytics also has a role to play in helping retailers better understand their consumers and create powerful solutions to hold their attention and drive sales.”

According to the study The Rise of Social Commerce in Southeast Asia, conducted by iKala, the emerging middle class, increasing digital connectivity and a host of new technologies have bridged the gap between social media and commerce across the region. 

Southeast Asia is home to some of the most avid social media users, with people in the Philippines, Indonesia and Thailand spending a significant amount of their time on social media platforms.

How attractive is social commerce?

Purchasing on social media cuts the length of consumers’ buying journey significantly by allowing them to take action immediately after seeing an advertised product, eliminating the process of signing in to the retailer’s site or downloading apps, which most find to be a hassle. It also reduces common issues for brands like abandoned carts.

An Econsultancy report in 2019 found 85 per cent of the region’s social media shoppers now find it ‘quick and easy’ to buy products via social media with 84 per cent of respondents saying they would buy more on social media over the next few years. 

Jewellery retailer Heng Seng Heng Gold Shop, which has over 150,000 likes on their Facebook business page and 100,000 followers on Instagram, said social commerce has immense potential to help retailers reach an unlimited audience in a real-time, engaging manner and that is why it has pursued this as a key sales channel. 

“Results have been fantastic so far,” a company spokesperson said. “Currently, our revenue from one hour of live-selling through Facebook is higher than that from our four physical branches, making social commerce our main source of income amidst the pandemic. The feedback from customers has been really positive too, and we think that this is definitely something that we will continue to work with even in the future.”

The Wine Collective CEO Lloyd Heinrich said they see social commerce as an important channel for the industry moving forwards.

“We have seen a huge shift of customers to shopping digitally, particularly over the past 12 months, and social commerce is one of the sub-channels of digital sales,” Heinrich said. “More than just e-commerce we are now seeing significant diversification in sales channels digitally. It has become increasingly important to not only have a simple website, but to have an integrated digital presence. Social platforms are an important part of that mix.”

Rising social media trends

The Rise of Social Commerce in Southeast Asia report, which surveyed 12,000 consumers and over 1,000 social sellers across Thailand, Vietnam, Philippines and Singapore in the first half of this year, revealed that total social commerce orders in the first of 2020 more than doubled, while gross merchandise value grew three-fold across the region, when compared to the same period last year. 

The study also shed light on the emerging trends on social media, like live selling or the broadcasting of live videos featuring products, which saw a nearly 13 per cent increase to 67 per cent in the number of live sales in the region.

“Every live selling session is a way to not only sell but also communicate the brand’s identity and authenticity to it’s current and potential audiences, which makes it important for brands to look at the numbers in order to understand their consumers’ preferences and behaviour,” Cheng said. “Another way in which brands can create social commerce campaigns that have an impact is by leveraging KOLs and engaged follower base.” 

Shopping via live sales is happening often, too, the report revealed, stating that an analysis of repeat purchases found that consumers in Vietnam and the Philippines typically make purchases via live sale twice a week, compared to their peers in Singapore who shop once a week on social media. 

“Social commerce is growing rapidly, and every day social media companies are adding new capabilities to support this growth. For retailers, the opportunities are apparent, but to truly succeed they must find ways to make the shopping experience live, interactive and seamless,” said Cheng.

According to the Heng Seng Heng Gold spokesperson, they spend over 95 per cent of their marketing budget on Facebook ads with live streams on the platform driving the highest sales numbers for them. They also use social messaging platform Line Openchat to communicate with their customers.

Already, the adoption of social technologies is up, but it varies from country to country. In Singapore, more retailers are using AI chatbots to automate order creations, while Thai retailers prefer AI-powered order management systems. In Vietnam and the Philippines, there’s a greater dependency on leveraging tools for payment reminders. 

“Social commerce will continue to evolve, and retailers who adapt quickly and experiment with a growing array of social technologies will emerge strongest,” Cheng said.

The challenges of social commerce

Shopping on social platforms is not without its challenges. The study found that trust, fraud and a lack of familiarity are proving to be big barriers for retailers in the region. 

“Users’ search for convenient ways to navigate their everyday lives has caused social media platforms to become one-stop shops, but trust, fraud and a lack of familiarity are proving to be big barriers for social commerce,” iKala’s report showed.

It is for this reason that despite an increasing influx of e-wallets in Southeast Asia, cash-on-delivery remains the most popular payment method in the region, and consumers in the Philippines and Vietnam are particularly reliant on it. Unsurprisingly, Singapore is taking the lead in terms of embracing multiple payment methods including bank transfers, e-wallets and credit card payments. 

“Moving forward, we expect the growth in e-wallets to continue, a trend that will in turn further enable social commerce,” the report stated. “However, for that to happen, retailers must ensure their payment strategy reflects the differing needs and expectations of consumers.”

Heinrich, from The Wine Collective, said social commerce is still in its infancy, much like e-commerce was 20 years ago. The biggest challenge is forming a real and meaningful connection using social media rather than paying influencers to pose on a beach with a glass of wine.

“It’s not rocket science but people connect with human things on social media more so than other media channels,” he said. “We know that if we stay focused on the beauty and the joy that our products bring to people’s lives and how we can help accentuate that beauty, we are in a good spot.”

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