With the ever-growing usage of social media platforms such as Facebook, WeChat and Instagram, many retailers have embraced the usage of social commerce as an alternative way to expand their businesses.
According to a recent study by payment giant Paypal, which surveyed over 1,400 sellers over five Asian countries, 92% of the sellers believe social commerce is vital to their business growth. Another report from consulting firm Bain has found that approximately 30% of online sales in Southeast Asia can be attributed to social commerce platforms.
So, what makes social commerce so exciting for both sellers and buyers in Asia? Here are four things that are worth keeping in mind.
1. A mobile-first region
Asia boasts half of the world’s mobile phone subscribers and has the largest number of wireless internet connections. The development of the internet also took off at a later stage in developing countries such as Thailand and the Philippines, meaning that many users’ first experience with the web was through a mobile device rather than a desktop computer.
While mobile penetration rates in markets such as South Korea, Hong Kong and Taiwan have surpassed the 90% mark, smartphones are also forecast to overtake feature phones as the primary type of phone used in Asia this year.
Combined with heavy social media engagement – Asia has the world’s largest number of active social media users – it is only natural that social commerce has taken off to such an extent.
2. Shadow marketplaces
Asian consumers have become well accustomed to social commerce due to the existence of ‘shadow marketplaces’.
For example, using Instagram as a platform, an independent seller can simply create an account, upload the images with product information and the business is ready to go. Transactions are then completed via direct messaging, often also using digital wallets such as WeChat and PayPal.
This can be very profitable as sellers don’t need to spend on rent and website maintenance. As such, social commerce has becoming the ideal platform for individuals to become entrepreneurs without the risk associated with traditional retail channels.
While many larger and established retailers will not want to adopt such an informal business model, they will be able to benefit from the fact that shoppers in Asia have become very comfortably transacting through social media.
3. The impact of influencers
Influencer marketing is the most developed in Asia, with research firm WARC stating that social media is the most popular source of information for purchases in the region – above traditional channels such as TV advertising or store visits.
The use of influencers is very cost effective as they have a ready-made audience that can help raise the profile of a retailer. While some influencer campaigns are only used for brand exposure, many posts will contain links to purchase featured items which counts as social commerce.
Due to legal requirements in some markets, Instagram has introduced a paid partnership feature – where users can clearly see which content has been sponsored. While some brands may lament this level of transparency, on the plus side Instagram has also recently launched a number of new tools to boost social commerce, for instance the ability to pay directly through the app.
4. The Chinese consumer
It has to be said: China is by far the most dominant social commerce market in Asia. This is not only due to the sophisticated ecosystem created by WeChat, but also the fact that home-grown social media networks such as Douyin and Pinduoduo have been ahead of the curve in terms of social commerce.
Social commerce has proven so popular in China as consumers can be distrustful of sales channels and are more likely to purchase based on the recommendations of their friends.
Recent data from McKinsey backs this up: it found that two-thirds of Chinese consumers believe that recommendations from friends is the most important factor in their purchase decision. This will be less of a factor in other Asian countries, so it remains be seen if we’ll see such a shift to social elsewhere.