Daily Management Review

Social Commerce To Generate Sales Growth, Say Social Media Companies


Social Commerce To Generate Sales Growth, Say Social Media Companies
Large investments are being made in shopping features by social media platforms, led by Facebook, along with Alphabet's YouTube, Snap Inc and Twitter, among others. The social media companies hope to drive revenue growth through this measure which was an overarching theme that emerged from the second quarter results of the companies as reported over the past week.
This new trend called social commerce industry is based on the ability of social media users to discover and buy products through social media apps. According to the research firm eMarketer, this market will reach $50 billion by 2030 in the United States from the current $36 billion in annual sales.
Product targeting based on user interests is part of the strategy used for successful social commerce as sales generate more data about users and consumers that can later be used for advertising and merchandise placements.
During the last quarter, Facebook, widely believes to be the leader in social commerce, and Google helped retailers to sell their products on social media platforms. According to the e-commerce firm Shopify, the growth rate of products sold through the social me3dia platforms of the two tech companies was "several times that" of websites that were run by the merchants themselves.
Enabling users to purchase from retailers and making it easier for retailers to engage with and communicate with their customers through its Messenger and WhatsApp apps were "the right long-term bet", Facebook CEO Mark Zuckerberg said.
With Covid-19 restrictions still weighing in on physical stores, the trend of social commerce is being increasingly adopted to a greater degree by retailers.
Celebrities and influencers have been signed up a host of brands – from the luxury fashion house Burberry to fast fashion giant H&M, to encourage millions of their followers to buy from their ephemeral stories or posts that ask the users to "swipe up to purchase".
The data generated from users' shopping and browsing habits are being eyed by social media companies for future targeted advertising even though the business is small for now.
However, according to experts, recent privacy changes from Apple Inc have limited the ability of tech companies to track iPhone users and deliver targeted and personalized advertising which has made this race for getting user data more crucial.
During the height of the pandemic, Facebook shops were launched in May 2020 by the social media company which attracted brands with an easy way to sell items directly through Facebook and Instagram and lured in customers with a curated and personalized way for discovering the latest fashion or home goods.
According to a survey conducted by eMarketer in June 2020, the top social commerce platform was Facebook and 18 per cent of the people surveyed said they had purchased a product through Facebook.
The demand for online shopping is unlikely to retreat even with lifting of pandemic restrictions, say analysts.
"People have gotten accustomed to buying online," said Edward Jones analyst Dave Heger. "I don't think that they're going to go completely back to the level they were at before in terms of purchasing at brick and mortar stores."
"The holy grail of advertising is to actually sell merchandise," said Rich Greenfield, a partner at LightShed Partners, in a note on Snap last week. "While these initiatives are still in the early stages, we believe an increasing number of brands want to be associated with where commerce is headed."