Led by Facebook, social media platforms from Alphabet’s YouTube to Snap and Twitter are investing heavily in shopping features to drive revenue growth. The companies are vying for a piece of the so-called social commerce industry, a business model originated in China which relies on users’ ability to discover and buy products through social media apps.
Research by eMarketer/Insider Intelligence shows that sales made in this business model could reach $351.65 billion in 2021 in China, an increase of 35.5% over the previous year. Data also shows that more than half of digital buyers ages 14 and over in China will make a purchase via social network platforms.
But now, the model is becoming popular in other countries. In 2021, the United States social commerce sales will rise by 35.8% to $36.62 billion. Brazil and Mexico, the two largest Latin American economies, also may achieve a great social buyer penetration this year, with 38.7% and 30.9% penetration rate, respectively.
The success of social commerce stems in part from product targeting based on user interests, with sales generating more data that can be used for future advertising and merchandise placements.
According to a report by eMarketer/Insider Intelligence, Facebook is the top social commerce platform out of China, with 56.1 million buyers in 2021 only in the U.S.. Instagram is in second place, with 32.4 million, followed by Pinterest, with 13.9 million. In China, WeChat lead the market; group-buying apps like Pinduoduo also boosted its growth.
Retailers are increasingly hopping on to the trend as COVID-19 restrictions weigh on brick-and-mortar sales. Brands have signed up celebrities and influencers to get millions of their followers to make purchases off ephemeral stories or posts by asking them to “swipe up to purchase”.
While the business is small for now, the social media giants are eyeing the data generated from users’ shopping and browsing habits for targeted advertising.
Facebook launched Shops in May 2020 during the height of the pandemic, luring brands with an easy way to sell items directly through Facebook and Instagram and consumers with a curated and personalized way to discover trendy clothes or home goods. The social media giant said it has about 1.2 million monthly active shops on the platform.
Last month, Facebook announced that it is expanding its “Shops” feature to messaging app WhatsApp and Facebook Marketplace. However, it’s not clear when the feature will roll out or where, including Latin America.
In the coming months, the company also said it would launch an artificial intelligence tool called ‘Visual Search’ so users shopping on its photo-sharing site Instagram can click on items and find similar products in Shops. It is doing this by expanding GrokNet, the company’s product recognition system, to new applications.
Twitter, a platform most known for following breaking news or current events, announced that it will allow businesses to showcase products for sale at the top of their profile page, as it seeks to grab a piece of the lucrative online shopping world.
Users will be able to scroll through a carousel of products at the top of the brand’s profile, tap on a product, and then pay through the retailer’s website.
The test is a renewed attempt to offer shopping on Twitter. The company previously experimented with a “Buy Now” button and product pages in 2015.
Streaming video site YouTube, known for “unboxing” videos in which YouTubers review toys or tech gadgets, wants to integrate shopping directly into the platform, said Google chief business officer Philipp Schindler on Alphabet’s earnings call on Tuesday.
Last month, YouTube has acquired the Indian social commerce startup simsim, which helps small businesses in India transition to e-commerce by using the power of video and creators. Gautam Anand, YouTube VP & managing director in Asia, said at the time that the acquisition is another step to help viewers discover and buy products from local businesses.
“As more and more shopping happens online, video has an important role in helping viewers discover new products and find expert advice they trust. Every day, people come to YouTube to compare products, watch reviews and find recommendations from their favorite creators,” he wrote in a blog post.
Snap is investing in augmented reality technology designed to help users virtually try on items like watches, jewelry and other apparel to cut down on returns, a major problem faced by online retailers.
Snapchat users can take a photo of a friend’s outfit with the app and find similar looks or product recommendations, Snap chief executive Evan Spiegel said last week during the company’s earnings conference call.
“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.”
The popular short-form video app TikTok is testing live-streamed shopping with select brands in the UK, allowing viewers to purchase clothes as an influencer models the item in real-time during a live video.
Even as restrictions lift, analysts say the demand for shopping online is unlikely to retreat. “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.”