How Social Commerce is Opening Huge Opportunities for Retailers

“The e-commerce sector grew to a $30 billion gross merchandise value (GMV) industry in India in the year 2020”. However, despite this, less than 10 percent of the estimated 700 million Internet users in India transact online today,” says the Bain Report.

Does this make you wonder, why?

First, most of these Internet users based in Tier III and IV cities, prefer assisted buying from someone they trust like a local shop owner.  However, enabled by the lowest ever data tariffs, these customers spend 2-3 hours a day on social platforms like Whatsapp, Facebook, etc.  This is being leveraged by resellers who are offline retailers or first-time entrepreneurs who influence those within their social network making them more receptive to online shopping. 

Social commerce removes the physical world barriers and enables products to be discovered by thousands of potential customers within their social network. Up to 35 percent of the revenue of these resellers is coming through social commerce now and is expected to grow to 65-70 percent in the next 5 years.  

Second, these users while shopping online have low AOVs (less than Rs 250) given their limited household income in the range of Rs 20,000-25,000 per month.  This makes it impossible for e-commerce 1.0 players (like Amazon, Flipkart) to serve them given high CAC and supply chain costs. 

Third, traditional e-commerce is built on electronics, mobile, and other branded categories, which these users typically can’t afford.  However, the e-commerce 2.0 business models are trying to get a plethora of small brands in long-tail categories like food, fashion, beauty, and personal care discovered to customers. 

Fourth, these customers cannot afford high-quality branded products, and hence, they have to settle with low-quality unbranded products. Thousands of small brands that offer good quality products but have limited distribution reach in the traditional retail channels as well as low margins to advertise, can be made available and aware to customers via resellers at great bargains.

All these factors put together, have led to a whole new dimension in e-commerce – the emergence of social e-commerce to leverage this massive untapped business opportunity worth $450 billion.

As per Bain’s report, “India’s social commerce sector will be double the size of the current e-commerce market within ten years. Social commerce is worth $1.5 to $2 billion GMV market today, and will likely hit $60-$70 billion by 2030.”

Currently in India, social commerce is driven by resellers who sell on multiple social networking platforms in an unstructured manner. These resellers have been early beneficiaries of this Social Commerce wave, completely driven by the persistence of the resellers sharing a curated catalog created by them based on their customer understanding.  However, there is still a massive opportunity to create/ empower the next set of millions of micro-entrepreneurs (community leaders) in a more structured manner. 

However, to do that, the platforms must do the following- 

–    Create Interactive and Social Shopping Experiences Online: In the physical world shopping is meant to be ‘interactive and fun’ and purchases are influenced by friends and family.  It is imperative to replicate the offline shopping experience, in the online world through community buying via experts, peers, and friends, on the same platform. Create an enriching experience via fun, gamified features, videos and rewards and offer personalized experience via recommendations. 

–    Smart Curation: Today, the market is flooded with thousands of subscale brands that are rudimentary, non-aspirational, and have poor product formulation. Just to give you a perspective, in the category of beauty and personal care itself, there are approx. 20K+ subscale brands. Tier-II and III customers aspire for good quality products at affordable prices, but branded quality products have always been out of reach for them. Hence, the platform must create an intelligent curation of products by setting up scalable processes and product features that ensure quality checks, to gain the trust of the micro-entrepreneurs (community leaders) and deliver on the unfulfilled aspirations of their customers. 

–     Deep Customer Analytics Engine to enhance the reward to effort ratio for micro-entrepreneurs and create a seamless personalized experience for customers. Data-led insights combine social behavior as well as user behavior to deliver a personalized shopping experience to customers.  With the help of this data, platforms can provide actionable steps for micro-entrepreneurs (community leaders) to generate more business with reduced effort.     

We believe that India is at the cusp of a social commerce revolution and the new age social commerce platforms that are designed with such innovations, will empower the next 40mn community leaders and will be pivotal in establishing an efficient community social e-commerce system for the next 500 million e-commerce customers.  

Wrapping up

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