Is Social Commerce the Next Step on the eCommerce Journey?
As more social media platforms have exploded onto the scene over the last couple of years, it will not come as a shock that social commerce is predicted to experience rapid growth as consumers spend more time on the sites and enjoy the convenience of direct shopping. The social commerce industry in the United Kingdom was forecast to grow by 26.6% annually to reach US$31.27 billion in 2024 and is predicted to reach US$83.27 billion by 2029.[1]
Gen Z and millennials are spending more of their cash on social media sites, and as a result, we are seeing businesses, particularly SMEs, making the most of social channels to reach their target audiences. TikTok, Facebook, and Instagram are some of the popular networks that offer successful shopping options. Recent news also suggests that X (formerly Twitter) could go one step further to introduce a payments button with the ambition of transforming the platform into an "everything site" where users can "conduct their entire financial lives."[2]
Content is king
At a very basic level, it would be easy to assume that allowing an individual to conduct their financial lives on a social media platform is a simple P2P payments service. However, as those already operating in the payments space know, it’s extremely difficult to generate a profit from P2P services. Take Cash App and its recent exit from the UK market as a prime example.
So, what is the key to making social commerce profitable?
Social media platforms want strong content to drive viewers for advertisement revenue. However, if creators are paying more to develop the content than they would to have it hosted on a certain social platform, they will undoubtedly go elsewhere. This could be why all the signs point to certain social media platforms integrating payment options to make it easier for other users to pay for content. This is the key element going forward that is going to make social commerce a success.
Moving away from P2P
As the social market develops, we will begin to see platforms moving away from traditional P2P options and the ability to simply tip creators, to more of a commerce format. WhatsApp, the global messenger service, has two billion monthly active users worldwide[3] and has recently launched WhatsApp Business aimed at small business owners. The new model gives SMEs the ability to not only message and chat with customers and manage inventory; it also has a payments button integrated to allow full commerce to take place all under one app.
Social media is slowly but surely taking on this model. According to research, more than half (56%) of UK users have made a purchase directly through social media, either by clicking a link on shoppable content or checking out directly within an app. This rose to almost three-quarters (73%) for those under 45, with one in four (24%) of Millennials purchasing on social media at least once a month.[4]
Some social media sites are in the very early stages of live stream purchasing, and viewers are able to buy goods they see in real-time all through one platform. This growth is likely to be further enhanced as community, engagement, and shopping come together on more social platforms, as well as the increased uptake in shoppable formats such as live shopping and interactive ads.
Due diligence
One of the biggest challenges currently standing in the way of these shoppable formats and making social commerce profitable is the due diligence that must be completed at the outset. We’re not talking about the likes of huge influencers with millions of followers but more small businesses that want to reach a certain market. The challenge lies in bringing payment solutions to the micro-SMEs and overcoming the cost of onboarding and serving, which have previously made this option prohibitive.
Social commerce will be a fully profitable operation for businesses and influencers of all sizes only once social media sites integrate a full payment ecosystem into the platform. It’s definitely one to watch.
About Ecommpay
Ecommpay is an entire financial ecosystem, allowing businesses to make and receive online payments globally. Founded in 2012 and headquartered in London, Ecommpay combines direct acquiring capabilities, 100+ Alternative Payment Methods, mass payouts, a proprietary in-house risk management system, and more within a single, unified integration.
Payment solutions, Individually tailored, Reliable, Secure, Intelligent.
