India’s social commerce sector, which is a $1.5 to $2 billion Gross Merchandise Value (GMV) market today, has the potential to grow to $16 to $20 billion in just five years
By Sonakshi Nathani
The inclusion of e-commerce in our daily lives has become enormous. If you have a smartphone and internet connection, you have experienced e-commerce either as a buyer or a seller. This industry has seen some tremendous growth in the past few years. Since its initiation, retail e-commerce has been growing at an exponential rate and is estimated to reach $5 trillion in 2021 (Statista). Furthermore, a Bain-Flipkart report points out that the Indian e-retail market is primed to reach nearly 300 to 350 million shoppers over the next five years—propelling the online gross merchandise value (GMV) to $100 billion-$120 billion by 2025. Most global businesses have made their way into the e-commerce realm. From big to small, from Moguls to locals, everyone wants their piece of e-commerce.
Last year when Covid broke out, many new business models emerged, some failed, some succeeded proving to be crucial to a consumer’s everyday life. The pandemic accelerated timelines and solutions we believed would make their way into our lives 2-3 years down the line were making an impact in real-time. One such model in the e-commerce domain was ‘Social Commerce’. In the last one year, social commerce has made e-commerce accessible to every age-group and income-group across the country. While the traditional e-commerce model will continue to flourish, social commerce is finding its fanbase amongst both sellers and buyers with several factors contributing to this growth including trust, engagement, lower customer acquisition costs, familiarity, and more. Social commerce is taking e-commerce to the masses, and I believe 2021 would be the year it will completely redefine the way we look at e-commerce:
Social Commerce: The best of both worlds model
The term in itself is self-explanatory. Social commerce brings the highly engaging and massy social media together with the proven successful model of traditional e-commerce. Simply putting it buying and selling on social media was never a new concept but it was not organised or happened at a very large scale. The pandemic acted as the catalyst. Overnight people lost access to necessities. It was no longer convenient or safe to order from platforms and things on the Covid side were still unfolding. The MSMEs stepped up and found a huge opportunity to do business and cater to consumers via platforms such as WhatsApp, Facebook, and Instagram. According to most retailers, about 40% of sales occurred via WhatsApp during the lockdown period in India (Moneycontrol). Along with lockdown restrictions, the fact that one can trust their neighborhood retailers/merchants and depend on them for product delivery added to the inclination towards social commerce. Apart from being convenient and user-friendly, commerce via social media became a phenomenon with the increasing time spent online. According to a Bain & Company report, digitally connected Indians spend an average of over three hours per day online, of which around two hours are consumed by messaging, social media networking, and watching videos. The report already showcases that India’s social commerce sector, which is a $1.5 to $2 billion Gross Merchandise Value (GMV) market today, has the potential to grow to $16 to $20 billion in just five years, increasing to $60 to $70 billion in revenue by 2030.
The Consumer in Social Commerce Ecosystem: It’s all about trust and convenience
The Bain & Company report also throws light on what deters non-transacting consumers from e-commerce. It’s a lack of trust. Social commerce is bringing in a sense of community, connection, and trust to the shopping experience. The report states that 75% of purchases are being made from a known entity. This is also true for tier 2 and tier 3 consumers who while being completely comfortable with smartphones and the internet find it difficult to order online – digital privacy, complicated UI, lack of understanding of return policies, fear of a defective product, and frustration of not having a human connection to solve queries. Social commerce is replicating the fun and engaging offline experience of shopping at your nearest retail outlet. With several and engaging content formats, social commerce is enabling a convenient and hassle-free product discovery process for consumers along with access to diversified product categories. It also offers vernacular content and search capabilities which is a big pull for small-town India.
The Seller in Social Commerce Ecosystem: Building Micro-Entrepreneurs
The social-first model is enabling small retailers and merchants to stay ahead of the curve. In fact, Bain & Company report states that small sellers make up 85% of all social commerce players. It further highlights the potential of the model stating that it has the potential to empower over 40 million small businesses and entrepreneurs across India. It is an opportunity for these businesses to acquire customers at low costs as compared to e-commerce platforms on the back of trust, engagement, and word of mouth. With social commerce, sellers gain access to not just a massive audience base but also a deeper understanding of customer behavior, especially in small-town India. Based on conversations and organic engagement, social commerce is also enabling these micro-entrepreneurs to gain authentic traffic and build customer loyalty. In this context, WhatsApp has been the most preferred platform right now. According to most retailers, about 40% of sales occurred via WhatsApp during the lockdown period in India. (Moneycontrol).
The 2021 trends of Social Commerce we can expect to see
While social commerce has gained widespread popularity in India, its true potential still remains untapped. There are still multiple avenues yet to be explored. With a majority shift of audience from Facebook and Snapchat to Instagram, it has become the new beacon of opportunities for modern marketers. Instagram has started giving out specialized features to such marketplaces and handles on the platform. With more and more people making the shift to Instagram, it is likely to become the next big thing in the social commerce ecosystem. We can also expect to see voice and vernacular being major growth drivers on such platforms with small-town India becoming a majority audience base for online shopping. The ecosystem is definitely changing and faster than ever but what would benefit players in the social commerce ecosystem is to acknowledge this change and be agile. Act and leverage the opportunity before the next wave of change takes over.
The author is founder and CEO, Bikayi