Social-driven e-commerce experiences are hardly a new concept. From the boom of social media in the early 2010s, retailers have experimented with driving sales through social media platforms. When COVID accelerated the shift toward online retail, Instagram officially launched Shops in July 2020 (Facebook launched the feature, too) after introducing an in-app checkout beta with 20 major brands back in 2019. But the most exciting ideas are brewing beyond Silicon Valley. China and India have taken the lead, where social e-commerce has grown to become a world of its own.
The most prominent players — social e-commerce giants Pinduoduo (China), Shihuituan/Nice Tuan (China), and Meesho (India) — all raised additional funds in the last 12 months. But the story doesn’t end with these two countries: social e-commerce is a nascent yet promising opportunity in other high-growth economies. Its distributed model — centered on building buyer trust, connectivity, and discovery — is poised to redefine consumers’ e-commerce journeys in emerging tech countries around the world. (And it will surely see a boost as a result of shifting shopping habits and increased support for small local businesses due to COVID-19.)
In this article, we take a deeper look at three types of social e-commerce models that founders have leveraged to build interactive, community-first platforms, and why they usher in a new era of e-commerce.
Group Buying
A big trust gap exists for consumers in smaller, tier 2+ cities when they engage with e-commerce platforms. At the same time, inefficient logistics mean that residents often face suboptimal pricing both online and offline. Group buying can address both challenges.
There are two main types of group buying. Some platforms are structured around community leaders that handle orders, while others allow individual users to share deals with their networks and form groups themselves.
What makes group buying great? By processing grouped orders on multiple SKUs at a time, platforms secure an asset-light inventory and logistics process. Products are only collected from distributors when an order is made, minimizing inventory expenses.
Once items are delivered to a certain radius, many platforms take a hands-off approach. Tricky last-mile logistics in smaller cities and towns are often completed by community leaders who distribute merchandise to customers. Some startups, like Brazil’s Facily, experiment with pick-up spots for item collection. With community leaders and team purchases shaping the shopping experience, cost-efficient customer acquisition is able to drive rapid scaling.
As a result, these platforms are able to offer customers attractive prices and deals from day one. Coupled with the social experience of buying with a trusted community member or friend, it’s easy to see why group buying has been a winner.
Take CityMall for example. The Indian platform sells groceries and lifestyle products through community leaders that aggregate community members’ orders — with WhatsApp P2P referrals and payment links. With just two years of operations under its belt, CityMall already has close to 20,000 community leaders and serves over 200,000 individual customers. An $11M Series A round led by Accel is in the works.
Live and Video Commerce
Short-form video and livestream apps have recently become our collective source of entertainment. It’s true that many of us are stuck at home, but the popularity is also in large part due to the discovery-focused user experience — an endless stream of content awaits every time you log on. Douyin saw a 106 million surge in users in 2020, while in Latin America, unique users on Tiktok had increased from 15.8 million in January of last year to 64.4 million by July. For live commerce platforms, there’s no better growth opportunity than now — to tap into the creator economy and build an interactive online shopping experience.
Again, trust and connectivity are key for emerging economies’ consumers when considering an online purchase. Typical e-commerce platforms are limited to static descriptions, creating a passive browsing process. Live commerce platforms, on the other hand, are driven by video content — often produced by micro-influencers — for deeper insights on products.
It’s all about sticky demand. These platforms offer a user experience centered on the discovery of different products and micro-influencers. Influencers create content in local vernaculars, and share the latest deals with their followers, building communities of shoppers that return to the platform time after time. The customer journey is centralized — to purchase an item, simply add it to your cart and check out in-app.
Gurgaon-based Simsim partners with regional influencers to sell beauty, fashion and home items through short videos. Users discover and purchase products through influencers’ store pages, while Simsim handles inventory and the 3PL process. Launched seven months ago, Simsim now works with more than 1,200 influencers — with content in four languages — and boasts over one million users. It’s planning to roll out another dozen languages by the end of the year.
Reselling
Reselling platforms enable anyone to start their own business by giving them access to inventory and a streamlined payments and logistics process. The customers? The seller’s own extended social network, fuelled by emerging economies’ hyperconnectivity on social media.
Barriers to entry for setting up a digital storefront are drastically reduced, creating a new category of micro-entrepreneurs. Reselling has been especially popular among women, driven by the rising desire to work and the growing prominence of dual-income households. Additional features such as short-form video reselling make reselling platforms accessible to dialect speakers.
Reselling apps are also a win for suppliers. They are an attractive opportunity for suppliers to tap into the growing yet fragmented “WhatsApp-first” business environment, expanding their product reach to an aggregate network of individual sellers.
Like other models in social e-commerce, reselling allows customers to buy from those they trust. Buyers interact with resellers on social media prior to the purchase, addressing any queries and concerns — more often than not, the resellers are relatives or acquaintances.
Elenas has been a category leader in Latin America. Based in Colombia, it’s taking Latin America’s traditional model of reselling, sales catalogs and door to door sales, online. Its base of majority women resellers (95%) can launch their online stores with delivery and payments handled; all they have to do is select their products and set markup prices. It recently secured $6M in Series A funding with participation from India’s Meesho.
Empowering Local Communities
At Alter, we think that social e-commerce will be key to the offline-to-online shift in the shopping habits of many emerging-markets consumers.
But social e-commerce embodies more than rapidly scaling industry disruptors. Its tremendous potential in emerging tech countries also lies in its ability to cultivate strong networks in countless small communities. Whether as a community leader, influencer or reseller, these platforms empower individuals to take part in creating value through e-commerce — for themselves and those around them.
With more aggregate data on consumer demand than ever, social e-commerce will also pioneer the C2M (consumer to manufacturer) economy. Consumers will be able to directly drive manufacturers’ production decisions, bringing in tailored products, better prices, and new growth points.
The social e-commerce landscape is rapidly evolving, with new startups entering the market all across high-growth countries. As we refine our thinking on the space, we can’t wait to hear insights from investors and operators who are equally excited about the trend as we are.
