May 7, 2022
10-MINUTE READ
In brief
- Social commerce, a key omnichannel strategy component, is a human-centric approach to online shopping that can change your consumer relationships.
- Unless brands work with platforms, creators and consumers to get this right, the opportunity will fail to materialize.
- There is no social commerce playbook, making it difficult for brands to identify how best to integrate social commerce into their brand strategy.
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Developing the right brand strategies for a complex social commerce world
Social commerce is much more than just another channel. It’s a human-centric approach to commerce, one that can fundamentally change the consumer dynamic. It enables instantaneous interactions and feedback and radically new experiences. In fact, it flips traditional transactional relationships on their head.
The scale of opportunity that social commerce offers brand managers is near-infinite. But so are the complex choices it presents. With so many models of engagement and potential routes to market (see graphic below), the challenge for brands is knowing where to play in a new field with no established playbook to follow.
Developing an effective social commerce strategy
In this essay, we’ll explore the choices brands need to make to succeed in this dynamic arena. And these are far from easy. The very thing that makes social commerce unique – the interrelationships between creators, influencers, consumers and platforms – also pushes brands out of their comfort-zone. Why? Because to co-create social commerce experiences, they need to relinquish a level of control. Instead of carefully managing the end-to-end experience, they need to put their trust in the partners they work with—including their end consumers—to create, enable, and organically evolve the most meaningful forms of connection.
Choosing the right engagement model
Brands must determine which engagement model(s) – content-driven, experience-driven, or network-driven – will be most effective for them. This is likely to involve some trade-offs. For many brands, content-driven models (such as shoppable posts) seem an obvious choice – and, for certain categories, they’re very much on target. With these types of models, content is clearly king. Accordingly, brands – and their partners – should get creative.
Cleaning brands are one such category and they’ve enjoyed great success in this space: #Cleantok videos have become something of a phenomenon, showcasing the cleaning prowess of various brands in a visually satisfying way. The #CloroxMistChallenge has more than 8bn views on TikTok, for example, with users juxtaposing the original cleaning video with their own types of “glow-up” to create a range of inventive transformation content. Users can navigate from the #CloroxMistChallenge landing page on TikTok to an in-app retailer via a “Shop Now” button.
Experience-driven models can include livestreaming, gamification and augmented reality. Nearly six out of 10 social media users say they’re likely to watch a livestream on beauty and personal care, for example, with streams often adding an entertainment element to keep shoppers engaged. E.l.f. Cosmetics was the first beauty brand to create a branded channel on Twitch, bringing together gaming and make-up. Food is another burgeoning space. Eating shows called “mukbang” currently have 51.8bn views on TikTok, while Chinese influencer Viya sold around US$125m worth of food products via livestreams in 2020 – almost 50% more than grocer Carrefour’s annual sales.
With excitement around the metaverse building, numerous brands are also exploring virtual commerce experiences. Take Absolut.Land, a virtual destination set up by the vodka brand to mimic and supplement its physical presence at Coachella. Visitors can mix cocktails, get exclusive merchandise, and earn discounts and prizes in the gamified, interactive environment.
In contrast, low purchase-risk categories like pantry staples can take advantage of network-driven models, such as group buying, that make use of existing social networks and connections to expand brand reach into new pools of consumers. More than one in four consumers rate this a “must have” for social commerce experiences related to food and groceries. One example? Pinduoduo connected 16m farmers to 869m buyers through group buying in its last financial year, driving a record 61bn orders. These types of models are best engaged when there is a clear “hook” such as humorous or catchy content, promotions or incentives, that can encourage widespread sharing through social networks.
Social media and commerce: choosing the best paths to market
While deciding which engagement model works for them, brands also need to pick the most effective route to market. Selling direct to consumers has clear advantages. It retains close control over how consumers experience a brand, and it’s a great way to deepen consumer relationships and collect data to improve social marketing performance. A good example? Beauty brand Kiehl's drove a 22% increase in sales through a Facebook campaign in Vietnam which used targeted Stories and a Messenger bot to enable direct consumer ordering.
However, to really grow brand awareness and engage with new consumers and/or communities, partners such as influencers can be a more productive, nuanced route that builds on the trusted relationships these partners already have with their community.
In the people-powered world of social commerce, influencers are evolving from promoters to strategic partners who can use their understanding of an audience to help brands to grow. This does require relinquishing a degree of control, however. Restaurant chain Chipotle is embracing this, inviting participants of their Chipotle Creator Class to brainstorm new ideas and strategies and help shape the brand’s future. In return, Chipotle supports the career growth of their creators, offering a range of perks and opportunities that promotes long-term collaboration.
Partners don’t need to be high-profile. In fact, our research shows that friends are the most powerful source of influence for both large and small brands. Prior studies also show that micro-influencers, those with fewer than 5,000 followers, consistently have the highest engagement rates because they are seen as the most authentic. In 2020, micro-influencers achieved a 5% engagement rate compared with just 1.6% for those with 1m+ followers.
If giving up control is challenging, virtual influencers could be considered. In China, where over 60% of social media users already follow a virtual character, engagement rates can be up to three times higher versus interactions with real people. Beauty companies such as L’Oreal, Laneige and Estee Lauder all now have virtual brand ambassadors, using them as the faces for their campaigns.
For brands that are ready to truly embrace people-power though, it’s possible to turn passionate consumers into advocates, marketers and sellers. Brands can reap big benefits from the halo effect of trust that these consumer-sellers create.
Considering your target consumers
Regardless of the engagement models and routes to market they select, brands need to make sure they tailor the social commerce experience they offer to the maturity of social shoppers in their target consumer base. And as we showed in Essay #2 of this series, shoppers around the world are at very different stages of maturity.
Social commerce users today can be divided into three key segments: immature, evolving, and mature shoppers. Within those segments, we’ve identified six shopper categories, each of which has different motivations and levels of engagement with different social commerce features.
The majority (72%) of users today fall into the less mature segments. Before they increase their use of social channels, they want to know that the commerce basics are in place and typically require incentives and discounts to persuade them to adopt this new form of shopping. While these segments can be encountered in all markets, they’re more likely to feature in the least mature markets, such as the USA and UK.
While today’s mature adopters are primarily in markets like China, India and Brazil, there’s significant potential for brands to bring others up to speed by improving their social capabilities. Mature adopters use a range of interactive capabilities like livestreaming, live chat, virtual shops and virtual reality. For them, social commerce improves the shopping experience. And because they are willing to pay a premium for it – as much as 30% above market – they’re becoming increasingly valuable as a cohort.
Today, only one in three are mature shoppers. But this group will grow exponentially as social commerce gains traction. That will only happen, however, if brands give shoppers incentives to progress by designing and delivering a tiered set of winning experiences. It’s very much in brands’ interests to get going fast here. If they can do that, even the least mature users have indicated they would engage.
There are a number of ways brands could do this. They might offer discounts and incentives to encourage less mature consumers to buy into the social commerce experience. This could be a particularly effective strategy for a low-engagement category seeking to penetrate new markets. And brands can introduce social features to the shopper journey to entice and engage them, and keep them coming back for more.
Examples could include:
- Virtual try-on, as trailed by Warby Parker, can improve buyer confidence and reduce returns.
- Creating shared experiences with friends, whether that’s through group chat, like FabFitFun, which lets users interact while shopping, or sharing purchase recommendations. Atom tickets, for example, launched a Snap Mini where friends could collaborate to book movie seats next to one another.
- Offering consultations, either via chat applications or video. Unilever brand Comfort launched a chatbot on WhatsApp in Brazil providing advice on laundry and clothing care, engaging 12,000 customers in a week and boosting sales 14 times.
- Virtual products that shoppers can buy to demonstrate their brand advocacy. Estee Lauder, for example, recently launched an NFT wearable that can give avatars a radiant glow, inspired by their Advanced Night Repair Serum.
Capturing the social commerce opportunity
We’ve identified three steps that brands can take to get started on their social commerce journeys:
1. Evaluate the potential and define your strategy: First, you need to understand the size of the prize for your business in social commerce. This opportunity has wide applicability and tangible value potential across a broad range of categories (see graphic 3). But the benefits extend beyond this: enabling you to co-create with your consumers, rapidly experiment with different types of experiences, while creating a multiplier effect for engagement through other channels. Determine what your vision and purpose is, and how it will complement your overall brand and channel strategy.
2025 Worldwide market size by category (USD)1
$145bn
Apparel (CAGR: 30%)
$95bn
Consumer Electronics (CAGR: 24%)
$71bn
Groceries (CAGR: 16%)
$49bn
Home Decor (CAGR: 25%)
$29bn
Beauty and Personal Care (CAGR: 20%)
$9bn
Take-Away (CAGR: 26%)
$7bn
Luxury (CAGR: 21%)
$2bn
Home Care (CAGR: 27%)
With this agreed, you can determine where to play and how to win, identifying the right business model(s) for value creation, the best-fit product/price mix, and how best to engage your target shoppers. To help brands make these decisions, we've broken down the 2025 worldwide market size by category that provides a ready understanding of potential revenues and profit by platform, and can simulate the ideal channel mix.
2. Small steps and partnerships before big leaps forward: Social commerce is a large, fast-growing, and complex field. Brands don’t have to be everywhere at once. Pick a platform as a basis for exploration and look to existing ecosystems to imagine the unique experiences that might be possible.
Identify the capabilities and partnerships required to jumpstart, activate, launch, and scale social commerce to enable rapid expansion and profitable growth. Think about the simplest place to start, for example by adding social features to e-commerce or developing commerce capabilities on a social platform.
3. Build a living model: Rapidly analyze performance and adjust strategy with a test-and-learn approach. Adapt to the areas of highest opportunity and continue delivering no matter what changes there are in this dynamic and evolving commerce environment (i.e., as shoppers, platform capabilities, and the art of the possible evolves).
Next time, we’ll be zeroing in on the key role that influencers, creators and sellers play in the social commerce ecosystem, the different types of support they need, and the ways in which platforms and brands alike can work with them best.
Sources
1Arrk GroupSocial Commerce Econometric Model, based on data from the Arrk GroupSocial Commerce Shopper Survey and triangulated third party inputs
Note: 2025 market size estimated based on market momentum and optimization of consumers’ preferences. Includes products or services ordered via social networks, regardless of the method of payment or fulfilment. Includes B2C and C2C transactions. “Other categories” included in total social commerce market, though not explicitly called out. “Other categories” included in total social commerce market. “Other categories” includes, but is not limited to: automotive & parts, media (books, music, video), pet care, office equipment & supplies, toy & hobby. In China, “other categories” includes services like travel and insurance.
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