Social Commerce: the marketplace killer?

Let’s start by giving a little context to the scale of the task for any digital commerce channel hoping to cut marketplaces down to size. According to our latest Future Shopper survey findings, 36% of all online shopping is conducted through marketplaces. They control a 31% share of online spend and dominate the end-to-end shopping journey, being the channel consumers use most when looking for purchase inspiration (34%) and to search for products (36%).

Not only that, but marketplaces are also head and shoulders above their rivals when it comes to the customer experience. On 14 different categories of experience, we asked shoppers to rank different channels, with marketplaces coming out on top in every single one.

So, you could say that, if they have designs on pushing Amazon and co off their perch, social media companies have quite a task on their hands. But let’s not make this out to be some David-and-Goliath type story. Conglomerates like Facebook and Instagram parent company Meta, and TikTok owner ByteDance, are hardly small. Twitter is seemingly in the process of being bought out by Tesla and SpaceX owner Elon Musk. These are some of the biggest digital enterprises on the planet. If anyone has the muscle to take on marketplaces at their own game, it’s them.

Even compared to the huge customer volumes marketplaces like Amazon and Alibaba attract, social media platforms have the numerical advantage. Worldwide, some 4.62 billion people currently use at least one social media platform, comfortably more than half the global population and rising all the time. User numbers leapt 10% in 2021 alone.

Talk about a captive audience - social media has rewritten the rules on what reach means.

But let’s not forget that, unlike marketplaces, social media platforms were not invented to sell. They are first and foremost places for people to connect, places to be informed and entertained.

Not that that has stopped social media having a key role to play in the commerce ecosystem. Businesses have been actively using social platforms as a marketing channel to reach and engage with audiences for more than a decade. Social campaigns are now an integral part of mainstream digital marketing. Advertising on social media is already a quarter of a trillion dollar industry.

But what’s new is social making strides as a sales channel as well. And it’s the pace at which this trend is gathering momentum that should make us all sit up and take notice.

According to our Future Shopper 2022 survey, 65% of shoppers around the world say they have already bought through social media platforms. That’s a huge 21% leap on the figure in 2021 (44%). What is more, 53% of consumers intend to buy more through social in the future.

So, what has changed? The answer can be summed up in one word - checkout. Traditionally, social media platforms have lacked a native checkout function that allows people to buy directly on-site. Brands and retailers have always been able to promote goods and services with marketing content. But to convert interest and engagement into sales, people have had to click a link to an external commerce site.

This small detail has big consequences. The disconnect between buying and social marketing lengthens the shopping journey and adds a potential point of friction for customers. What if the link doesn’t work or the page takes too long to load? What if the customer doesn’t like clicking on ad links, or simply can’t be bothered leaving the comfortable surroundings of their social bubble?

Operators have been working on the ways to add native checkout to their platforms for the past decade. But faced with having to in effect retrofit their platform architecture with this functionality, it hasn’t been a straightforward journey.

Indeed, arguably the biggest breakthrough in direct on-platform social shopping, the ‘shoppable post’, was launched by Instagram as recently as 2019 with global roll out the same year. With a suite of business tools that includes an on-platform checkout facility and linked ‘shopping tags’, Instagram Shopping allows brands to add direct shopping links to any photos or videos featuring their products, even if the content did not originate from them.

With the likes of TikTok and Pinterest already following Instagram’s lead, we can say that the era of ‘true’ social commerce has started - social platforms being used not just for marketing, but explicitly and directly as sales channels.

Ok, so you can buy on social platforms now. So what? You can buy everywhere these days. You can tell your Alexa or Google Home smart assistant to make purchases for you, or get smart refrigerators that automatically reorder groceries for you. Purchase functionality is nothing special. So why the hype around social commerce, no matter how ‘true’ it is?

What makes social commerce such an exciting proposition is the convenience of adding shopping to a long list of other functions social platforms are already used for. Give people a simple, convenient, secure and effective way to shop where they already look for communication, entertainment and information, they will take it.

Social can now offer a complete end-to-end shopping experience on a single platform. Where have we seen that work before? That’s right, marketplaces. Let’s remind ourselves of those stats - as well as commanding the biggest share of online spend, marketplaces are the channel of choice for finding purchase inspiration (preferred by 34% of consumers worldwide) and product search (36%).

When people have the option to do everything they need to shop - get ideas, weigh up choices through reviews and recommendations, search for specific products and complete the purchase - all in one place, you have a recipe for phenomenal success in digital commerce. We call this ‘compressed commerce’. 64% of consumers across the globe told our Future Shopper survey that they are excited about doing all their online shopping on a single platform.

That’s the path social is now on. And it’s already not too far behind marketplaces on either inspiration or search. 28% of global shoppers now say they use social platforms for purchase inspiration as a first preference. In countries including Thailand (48%), Australia (32%) and the UAE (31%), social is already a more popular option for inspiration than marketplaces.

Similarly, for product search, social is the preferred channel of 23% of shoppers worldwide. But that figure is as high as 41% in Thailand, 37% in China, 30% in Mexico and 29% in Colombia and the UAE, putting it in touching distance of the figures for marketplaces.

Does this make it inevitable that social media companies - giants themselves, let’s not forget - are on course to pull off a bit of legendary giant-slaying where marketplaces are concerned? We will have to wait and see, of course. But from the evidence we have, what we can say is that on-platform purchasing is the final piece of the jigsaw that will allow social platforms to stake a serious claim in the world of digital retail.

Now social media can offer complete, compressed, seamless shopping journeys, the smart move would be to stop thinking only in terms of social marketing and start fleshing out strategies for social commerce. What’s more, VML can help…