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With today’s digitally-savvy and connected consumers, social commerce is becoming the next breakout trend in e-commerce. Bolstered by the super app phenomenon, which has exposed consumers to new products and facilitated their online life in an integrated platform, the potential for social commerce presents new opportunities for both big brands and micro retailers to tap into.

Social commerce gains ground globally with Asia at the forefront

The biggest differentiator between social e-commerce and the traditional e-commerce that we are familiar with is the shopping functionality that lets users browse for products and make purchases within a social media platform without leaving it. Within Asia, social commerce has developed rapidly in China for two or three years now, according to Samuel Yi, Category Director, Retail, Technology, and Media, Mintel Reports China. Driven by the ‘sharing’ culture in popular social media platforms such as WeChat, this has prompted traditional e-commerce players and emerging brands to quickly enter the social commerce space.

In the US, a similar trend is also happening. “Social commerce brings the product to consumers right where they ‘socialize’ with their friends versus them actively searching for the product. It’s a lot more passive way to shop and it’s more convenient for consumers,” said Lierin Ehmke, Insights Manager, Mintel Comperemedia Omni.

While social commerce is becoming more common in other regions, Nick Carroll, Associate Director, European Retail Research shared that social commerce is still in its nascent stage in Europe. Local brands and retailers have leveraged major social media platforms to interact with consumers but there’s not necessarily the utility of having one application like a super app that integrates both digital and physical experiences. Facebook, for instance, is already looking at what’s happening in Asia and trying to mimic that in Europe by rolling out more tools to pivot towards retail, and Carroll believes that the building blocks are coming for social commerce to develop and thrive.

The lure of e-commerce on social media platforms

The popularity of social commerce is also due in part to the idealistic lifestyles that we see on social media. Today, we find inspiration for different aspects of our lives whether it be fashion, travel, food, or fitness across Instagram, TikTok, or Pinterest. Consider when a consumer sees a trendy outfit from an influencer and wants to know where exactly it comes from.

As e-commerce sites strive to become more social in the same way that social media platforms integrate more e-commerce into the ecosystem, would one appeal more to the other? To answer this question, Caroll traces it back to the early- to mid-2010s where brands started adding social functionalities on their websites such as ‘share’ buttons. For example, London-based furniture retailer MADE.com previously launched a site called “Unboxed” where customers who have already bought its products could showcase them online to see what they look like in a real-life setting. Today, the page features an Instagram feed of posts from different users with information about the featured product and a link to directly purchase it. 

In the US, curated content is also appealing to younger consumers, particularly Gen Z. Because social commerce enables that seamless purchase journey, it is the convenience that these consumers are going to expect more from brands that they are engaging with. 

Winning in the market

In traditional brick-and-mortar shopping, the influence of one’s social circle on purchase decisions is massive. This has now transcended into the digital space where consumers get recommendations from their ‘online connections’. Even a simple comment or ‘Like’ in a post serves as informal feedback in favor of a purchase. Chinese e-commerce giant Pinduoduo has successfully leveraged this ‘social’ element in its social commerce strategy. It has combined the ‘sharing functionality’ with attractive discounts and incentives not only to attract more customers but also to address initial concerns on product authenticity. This has helped Pinduoduo to keep users within its ecosystem.

Another brand that attempted a foray into social commerce is PayPal through a possible acquisition of Pinterest. However, after the news came out, the company’s shares fell, indicating that investors are not ready for such integration especially for a brand that has not been historically associated with a social media platform.

This sends an important message to brands that are considering social e-commerce to grow their business. First, they must know their audience, where they consume content, and then make social commerce easy for them on relative platforms. The goal is to streamline the marketing funnel experience and take them right to the product. Second, engage with the right kind of influencers in the marketing strategy with ‘authenticity’ in mind. Micro-influencers, for instance, might make more sense for brands that are looking to target a niche market or audience. Finally, assess the social commerce strategy and ensure that it is communicating the value of your brand authentically.

What we think

The rapid development of social commerce over the last five years has paved the way for micro retailers and micro brands to establish their presence, with some eventually growing into household brands (or ‘unicorns’). Social media platforms have democratized access to consumers and provided tools for businesses to make strides in social commerce.

It is worth noting that social commerce would not have evolved as quickly as it did in markets like China without the important advancements in mobile technology and connectivity, which serve as the digital backbone for its growth. 

Beyond technology, brands must think about the user experience. Experimenting with new formats such as live streaming and tactics such as gamification, and riding on the metaverse trend could be the next big opportunities that social commerce players can take advantage of. Of course, there’s the product itself that is key to customer loyalty and driving repurchase decisions. As social communities continue to expand, brands must be willing to adapt and explore innovative ways to keep customers in the loop. Being strategic on which platforms to focus will certainly give them a competitive advantage in the longer term.

To learn more about the analysts’ insights and recommendations on social commerce, listen to the Mintel Little Conversation podcast episode here.