Social Commerce is Booming. How Can Global Brands Capitalise on the Trend to Stay Ahead?

When the pandemic first hit back in 2020, offline retail environments were strongly impacted and brands were forced to take a closer look at the digital ecosystems they had in place. This meant investing heavily in digital transformation, and particularly, in e-commerce.

Through this process, the overall digital environment began to thrive, with platforms starting to roll out more functions and capabilities and brands becoming more open to embracing them. Over time, the roles of digital platforms along the customer journey began to shift and overlap, and the lines between content and commerce started to blur, giving rise to a new phenomenon – social commerce.

In 2021, the global social commerce industry was valued at $492 billion. It is expected that this number will grow three times as fast as traditional e-commerce in the next few years, hitting a value of $1.2 trillion by 2025.

“This is something that has been observed globally, and perhaps even more strongly in China. The industry has definitely been disrupted. Take for instance, video platform Douyin – previously known for its short videos, it now also does livestreams and has e-commerce capabilities. Its estimated GMV for 2021 is about 700 to 800 billion RMB, making it a significant e-commerce player in the market now,” says Pablo Mauron, Partner & Managing Director China at DLG (Digital Luxury Group).

“China's digital ecosystem has evolved to the next level, with local platforms offering a wider range of functions and attempting to cover more touch points along the consumer journey. This has provided the perfect backdrop for the concept of social commerce to thrive, and brands are already taking note and stepping up to improve their consumer offerings on this front.”

The digital ecosystem in China differs from that of Western markets. How should international brands plan their investments and choose the right channel to if they want to capitalise on the social commerce wave in China?

“China's online platforms are now highly developed, with the vast majority of them establishing e-commerce capabilities that allow brands to convert customers. However, the abundance of opportunities can sometimes cause brands to lose focus, so it is critical to identify the nature of each platform and select the target that is aligned with the brand's image and resources.

WeChat, for instance, is a popular channel for running social commerce initiatives not only because of the wide range of consumer touchpoints it covers, but also its ability to afford brands more ownership over consumer data, control over marketing cadence and even target audiences. Its users are largely millennials, and the platform is often seen as a brand content and membership hub. Brands can also leverage their offline sales force to drive sales online through social selling (powered by WeChat’s enterprise solution, WeCom), making it a very powerful tool.

Then there is also Douyin, which brands may view as a promising channel. But given the platform's tone and younger Gen Z consumer demographic, it is important to evaluate if the significant financial investment required to create relevant content to drive commerce on this platform is worth the returns. In this market, there is no one-size-fits-all strategy for social commerce; brands have to pick battles based on their scale and goals to ensure efficient returns.”

With the online environment becoming increasingly crowded, how can brands create content that stands out and drives commerce?

“It goes without saying that the first step is localisation, and creating content that is adapted not only to the tone and style of the platform, but also in line with local festivals and celebrations as well as shopping events instead of being tied to global ones.

But beyond that, brands also need to start taking into consideration the role of the platform at the stage of the consumer journey and develop not only content, but also services and other digital initiatives, that tie in with all of that to drive conversions. For instance, at the Awareness stage, a consumer might not know that much about the brand or its products so content collaborations with celebrities or KOLs on awareness building platforms like Weibo or RED will help. But once consumers are at an Interest stage and actively trying to learn more about a brand and its products, that’s when content and digital initiatives like AR/VR try-ons or customisation engines on platforms like WeChat or Tmall can help to push them closer to the act of purchase. Content alone will not convert a consumer. It is the sum of all these elements that will help to move consumers further along the journey and towards conversions on these social platforms.”

Last November, China's Personal Information Protection Law went into effect, restricting access to consumer data and the global transfer of local data. What effect will this have on a brand’s business in China?

“It has become a global practice for brands to collect consumer data on platforms and capitalise it for personalised marketing activities. With the introduction of the PIPL, some challenges will arise for brands – one being that local consumers now have to give explicit consent to have their data collected and used for marketing purposes. This means that brands have to offer stronger value propositions in order to gain this consent from consumers and drive data capture rates.

At the same time, the focus on local data storage will also force more brands to look into their current practices and re-evaluate if the current handling process is compliant. As part of this exercise, brands may start to look more seriously at their CRM infrastructure in China, which could potentially be beneficial in the long run.”

What is in store for social commerce in 2022 and beyond?

“As a broader range of social platforms in China begin to offer brands conversion opportunities, the consumer journey will start to evolve even further. This will increase the fragmentation of audiences, and those looking to expand their social commerce offering will face challenges both in terms of marketing and data collection. At the same time, the costs related to consumer acquisition will rise together with it.

As a result, we expect that brands will start paying more attention to the private domain – also known as brand-owned channels – in order to better consolidate and manage their consumer profiles. By focusing on owned channels, brands will have more control over the consumer data collected, as well as direct engagement with and a guaranteed channel of outreach to consumers. This will eventually afford them improved returns of investment in terms of marketing and communications, and help them better target consumers at different stages of the consumer journey to drive them closer to the act of purchase.”

What are you expecting in terms of takeaways from eTail Asia and why this an event not to be missed?

“Given that the international retail environment is rebounding, many brands have experienced unexpected growth across global markets, owing in large part to their investment in digital channels during the pandemic. These efforts will also have an impact on their future growth. I'm excited to speak with other industry leaders about the future of retail and how brands and platforms are leveraging digital channels to meet changing consumer demands.”

Social commerce is booming, and how can brands leverage this trend to stay ahead and relevant in a rapidly-evolving digital arena? Find out more at eTail Asia 2022, where Pablo Mauron will be giving further insights into the opportunities related to social commerce during a panel discussion on 9 June, together with Trần Nguyễn Phi Long, Head of Retail Marketing at PNJ Group; Hung Nguyen, Industry Director, Regional eCommerce at TikTok, and Mike Ghasemi, Founder, Retail, Hospitality & Travel Chief Analyst of Mike Ghasemi Research.