The past few years saw explosive growth in e-commerce. While the sector was already roaring before Covid-19, the inability to visit physical retailers during the pandemic has led to a significant shift in online shopping, causing merchants to innovate the best strategies to boost their sales and brand recognition further.
One such strategy is social commerce, which integrates the shopping experience with social media. This comprises non-traditional avenues of e-commerce such as live-buying, group-buying, classifieds and business messaging, explains Dhruv Vohra, managing director of Meta business group (mid-market) Southeast Asia.
Meta — which runs social media platforms such as Facebook and Instagram — partnered with Bain & Co to release the SYNC Southeast Asia report on Sept 6, 2022, which found that 17% of Singaporeans’ online purchases are made on platforms such as the aforementioned social commerce avenues.
Almost one in four Singaporean consumers say video is one of their top three channels to discover and evaluate products, while 31% say they purchased more streaming and content creator-related products than last year.
In its earlier iterations, social commerce primarily took the form of promotional posts or ads across various platforms, a spokesperson from social media platform TikTok tells DigitalEdge. This changed with the evolution of online shopping habits shaped by the accelerated use of technology, with consumers today expecting more from brands before making their purchases.
This has prompted platforms like TikTok Shop to evolve into a complete end-to-end experience, whereby shoppers can browse, interact with merchants and make purchases all without leaving the app, says TikTok.
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Launched in Singapore on Aug 4, 2022, TikTok Shop helps merchants to recommend their products to users via in-feed videos, live streams and a product showcase tab prominently featured on sellers’ TikTok profile page. Sellers have complete control of the process within TikTok, from uploading the products to curating the point of purchase and managing shipping and order fulfilment.
Meta also provides similar avenues for merchants on its platforms, launching features such as Facebook and Instagram Shops in mid-2020. These features offer a mobile-first shopping experience, where businesses can create an online store on Facebook and Instagram for free. The feature also allows users to connect with their customers through WhatsApp, Messenger or Instagram Direct to answer questions and offer support, among others.
Before the launch of Shops, the Facebook platform itself had been used by sellers to market their products, leveraging on the live-streaming function launched in 2015. Malaysia’s DD Fishery Live, for example, have used the Facebook live-streaming feature to auction freshly caught fish even before the pandemic’s start, of up to 300kg of fish daily.
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Entering Southeast Asia
With developed markets like China, South Korea and Japan, Asia produces over 50% of all global e-commerce sales, according to consumer intelligence firm NielsenIQ. As a pioneer of the e-market, China accounted for almost a quarter of the total retail sales of consumer goods in 2021, with total online spending of a whopping RMB10 trillion ($1.9 trillion) recorded last year.
Unsurprisingly, China has the most developed social commerce market globally. The country recorded a social commerce market size of RMB2.5 trillion in 2021 on the back of 800 million participants, according to data compiled by Chinese consultancy firm ITC. To top it off, the average Chinese Internet user spends around 5 hours and 15 minutes daily online, nearly half of which is for browsing social media platforms.
The growth in social commerce is partly supported by the launch of Alibaba Group Holding’s Taobao Live in May 2016. The launch has led to exponential growth in live-stream broadcasts with e-commerce stores.
In 2020, for instance, the first 30 minutes of Alibaba’s Singles Day pre-sales campaign on Taobao Live generated US$7.5 billion in total transaction value. Singles Day is a major shopping event in China and other Asian countries that takes place annually on Nov 11.
During last year’s Singles Day pre-sales campaign, China’s top live streamer Li Jiaqi pre-sold US$1.9 billion ($2.6 billion) of products in a marathon 12-hour live stream that attracted 250 million views, smashing records for any show live-streamed on Taobao.
Can this be replicated across Southeast Asia? Although China is the birthplace of social commerce with platforms such as Taobao, Weitao and Pinduoduo, Southeast Asia may be the next big market for this phenomenon, says Joshua Qiao, regional general manager at Hong Kong-based omnichannel commerce solution provider Shopline.
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“The region has an estimated 64.2 million social shoppers. Social commerce has taken a different form, with live sales on Facebook, Instagram and TikTok being the most popular way of social buying. Additionally, conversational commerce on messaging apps like WhatsApp and Telegram have taken off, particularly in markets like Indonesia,” he adds.
A critical driving force for the growth in social selling in Southeast Asia would be the “mobile-first” nature of the market, says Qiao. “For many consumers in the region, their mobile phone would be the first computer they own, and many download apps like Facebook, Instagram, WhatsApp and Line almost immediately. This meant that social commerce penetration had fewer barriers to overcome as it was relatively easy for customers to go from using these platforms to shopping on them.”
Another growth driver would be the importance of communities in Southeast Asia. Southeast Asians have been looking towards online communities for the closeness and belonging that online interactions provide, especially since the isolation of Covid-19 lockdowns, says Qiao.
“A reason for the meteoric rise of social selling is that people are looking towards influencers in these communities for social proof — they trust the people they engage with online and are more likely to buy when they are encouraged to by influencers. Live selling takes this to the next level with sellers directly interacting with their community by explaining and demonstrating the products in real-time,” Qiao adds.
Agreeing, Meta’s Vohra adds that Southeast Asian consumers have become more savvy, switching brands more often and increasing the number of online platforms they use. Citing the SYNC study, 22% of online purchases in the region are made on social commerce avenues (also known as alternative e-commerce platforms). They are also more willing to venture beyond the mainstream to search for better value, Vohra points out.
“As consumers become more experimental and look for value, we also see video driving decision-making. There is greater video content consumption, with almost one in three respondents ranking video as the most used channel for discovery and evaluation. In addition, there’s a rise of the creator economy in the region as consumers now seek more engagement, which drives the shift to video,” says Vohra.
Content creators are also becoming increasingly influential in motivating people to consider or purchase products, Vohra highlights. According to the study, more than one in four respondents across Southeast Asia have purchased entertainment, streaming services or streaming-related products from content creators.
“In Southeast Asia, the average number of purchases for streaming and content creator-related products grew 11 times in the past three months before our survey — the highest of all categories polled. Additionally, one in three respondents across the region say they purchased more streaming and content creator-related products this year compared to last year,” he adds.
Seamless blend
Before the prominence of social commerce, e-commerce used to be simple marketplaces where products were listed with a snippet of customer review information. Today, however, even marketplaces such as Amazon and Sea’s e-commerce arm Shopee have instilled some social elements.
Amazon has introduced the Amazon Associates and Influencer programmes, which allows critical opinion leaders to customise and curate their “storefront” with products they recommend on their respective platforms, earning commissions when customers shop through their links. For example, a social media influencer on TikTok can recommend products on the videos they upload together with a link to their Amazon storefront.
Meanwhile, Shopee has introduced Shopee Live, a function that lets users host live-stream sessions on the Shopee app to promote their shop and products. Customers are incentivised to watch as they can claim in-app rewards, such as Shopee Coins and discount vouchers, during the session.
Unlike traditional marketplaces, social commerce provides a new dimension to online shopping, says TikTok. The company spokesperson explains that a big part of the appeal of social commerce is how it seamlessly blends convenience and entertainment. With platforms like TikTok Shop, shoppers can get a first look at their product of choice via live demonstrations and opportunities to interact directly with sellers, who often become well-loved figures themselves, from the comfort of their homes.
“Above all, social commerce has elevated the ecosystem in which merchants, shoppers, and creators interact with one another, creating new opportunities for each of these groups. For instance, merchants on TikTok Shop can now easily collaborate with influencers to create content that engages with their target audience and fuels a larger creator economy that ultimately empowers others to monetise their creativity.
“Simultaneously, shoppers can easily discover new products on the platform through creative short videos and live streams that emerge as they surf the app. These are often accompanied by lively interactions between merchants and creators that bring that human quality and personal touch that shoppers today enjoy.”
In other words, TikTok Shop allows its community to complete a purchase entirely on the platform in a closed-loop system — users can recognise a trending item through the content they find on the platform and purchase it immediately in a seamless end-to-end transaction.
Still, Shopline’s Qiao believes that both social commerce and traditional marketplaces have a place in an omnichannel retail strategy.
While traditional marketplaces remain dominant forces in the Southeast Asian e-commerce landscape, merchants looking to stand out in the crowded retail space can look at social commerce as a strategy to sell in the spaces where their customers reside.
“Social commerce has evolved into a powerful sales channel where brands can cultivate meaningful relationships with their customers. At the same time, it drives conversions with instant purchases alongside the media that they consume. With the rise of the ‘edutainment’ trend and skyrocketing social media adoption, we expect social commerce to become a go-to channel for many businesses in the next few years,” says Qiao.
Shopline has recently introduced a TikTok for Business plug-in, which adds a range of advertising features to the platform for its merchants. This is part of Shopline’s broader push to equip merchants with tools to sell and engage with their customers on social media, completing its suite of social commerce solutions.
Qiao says: “Managing a retail business across online and offline channels can also be a roadblock for businesses. We’ve found that many merchants want to dive into omnichannel retail but are concerned about the work that goes into maintaining a large number of channels from their ‘brand.com’ page to marketplaces like Lazada and Shopee and their social commerce platforms like Facebook and Instagram.
“With the TikTok for Business plug-in, brands can manage their TikTok for Business efforts on the same dashboard as their e-commerce store and other sales channels. This means merchants can buy ads more easily while managing their TikTok advertising campaigns and TikTok Pixel (conversions tracking tool) data in a unified manner on a single platform.”
Shopline’s partnership with TikTok is the latest in a slew of collaborations it has established internationally to strengthen its platform capabilities. It has previously partnered with Meta and Google as well as payments and fulfilment partners such as PayPal, Atome, Stripe, Ninja Van, Klarna and OneShip.
Continuing momentum
The overall outlook for digital shopping remains positive, with gross merchandise value expected to grow by a CAGR of 17% from 2022 to 2027, says Meta’s Vohra. The digital consumer population in the region is also growing steadily, forecasted to reach 402 million by 2027 from 370 million by the end of 2022.
Chart: Sync Southeast Asia by Meta Platforms and Bain & Co
In the next three to five years, Vohra also expects mobile screens to become the new storefront, as social platforms dominate consumers’ attention while physical cash becomes a thing of the past.
Qiao believes that social commerce will continue to gain momentum in the coming years. It will likely rise rapidly, with 37% y-o-y growth and more than 100 million social shoppers forecasted by 2025.
“Social media adoption will only increase in the next few years, and customers worldwide will get familiar with buying while they browse their favourite social platforms. With Generation Z and Alpha consumers being so digital-forward, brands need to double down on using these social communities to make the customer experience social.
“Social commerce is, thus, likely to expand beyond its roots in Asia to markets like Europe, the Americas and Africa,” Qiao adds.
