The inevitable rise of social commerce

Exploring the main reasons why social commerce is leading the future of e-commerce

E-commerce. The word was added to the Cambridge Dictionary in 2005 to define “the buying and selling of goods and services over the internet”. When we think about e-commerce today, a few things immediately come to mind: an easy-to-use checkout, advanced payment options, user-generated reviews, wish lists, discounts, related items and detailed shipping information. These are just a few examples of features that have been democratized by the category leaders such as Amazon, Etsy or Shopify, and that are now part of our everyday lives.

Interestingly, the same is far from true for ‘social commerce’. Although social media platforms have become mainstream, nobody would be able to accurately define what ‘social commerce’ is and what the primary features of social commerce are. The reason is simple: the category does not exist and hasn’t been defined yet.

We believe all the conditions are met for a drastic shift to happen over the next decade and for social commerce to become the fastest-growing sales channel for businesses, small and large. In this article, we review the three main reasons why.

Social media: a fertile soil for commerce

Social media is everywhere. It’s unavoidable and it’s here to stay. Since 2005, social media has been growing exponentially and there are about 3.5 billion users today, which equates to about 45% of the global population.

What’s impressive is that with only half of the global population on social media today, it hasn’t reached the peak of its popularity yet. As economies develop and mobile penetration increases, this number will keep growing even further.

Naturally, with an audience moving towards social media, brands quickly jumped on the train. The leading social media platforms (Facebook, Instagram, Pinterest, YouTube, etc.) have become the world’s largest ever media agencies, generating billions of dollars from advertising spend every year. As an example, Facebook’s revenue amounted to roughly $86B in 2020.

With social media advertising being so efficient to tap into the current 3.5 billion social media users, commerce seems to be the logical extension. Experts estimate that social commerce today represents a $80B market and expect it to reach $600B in the next five to seven years.

Generation Z is leading the change

Gen Z - the generation born after 1996 - is the first truly digitally native generation. Gen Z grew up with social media, mobile devices and constant access to the Internet, which has shaped its shopping habits differently from previous generations.

First of all, Gen Z shoppers consider a purchase as more than just a transactional event. This generation wants to be emotionally involved with the brand, and therefore gravitates towards collaboration. More and more brands are using a direct-to-consumer model to get closer to their customers and involve them in the creation of new products and services. Collaboration is key and will increasingly become an important feature as social commerce develops.

Additionally, Gen Z shoppers are mobile first. The previous generation of e-commerce companies designed experiences optimized for keyboards, but short-term video content is rapidly becoming the most popular form of content on social media platforms, in particular on Instagram and TikTok. The leading social commerce players of the coming decade will therefore design mobile-first and more interactive shopping experiences.

By 2030, the vast majority of shoppers will be from Generation Z. Inevitably, the social shopping journey will significantly transform and adapt to account for these new perspectives.

Social media is the new search engine for commerce

As discussed previously, social media platforms have become leading media agencies, driving billions of advertising spend every year.

If advertising is moving away from Google to Facebook, Instagram and the likes, this is because the audience is also moving from Google to social media. Customers tend to increasingly research products directly on social media platforms.

Recent studies have found that more than 40% of social media users turn to social networks when researching about a product. YouTube and Instagram have become two leading destinations for people looking to purchase products.

In essence, the behaviour is already there: people do turn to social media platforms to research and buy products and services. However, social commerce is still in its infancy and no one has nailed the social shopping experience yet.

With half of the population on social media already and a growing Gen Z population, it’s just a question of time before social media finds its definition and its ground into our daily lives. What’s sure is that the future of social commerce won’t be about simply embedding buying functionality into the existing social media platforms. It’ll be about re-thinking the whole buying journey to make it more immersive, direct and playful.