Social commerce already has enormous importance in the Asia-Pacific market and is expected to experience a huge boom worldwide in the coming years.
In 2023, social commerce generated an estimated $571 billion worldwide. With a compound annual growth rate of 13.7%, revenues are expected to exceed $1 trillion by 2028.
In China, the social commerce market is already mature. Traditional e-commerce platforms such as Taobao and JD.com have long dominated the Chinese e-commerce landscape with their extensive product ranges and robust logistics capabilities.
However, the rise of social media and short videos has posed challenges to these traditional giants. Douyin’s live streaming sales and social commerce capabilities have shaken up the market and gradually eroded the market share of traditional e-commerce. Taobao’s market share dropped from 56% in the second quarter of last year to 44% now. Meanwhile, Douyin’s market share rose from 5% to 14%.
Although Asia Pacific has been a pioneer in social commerce, its adoption in the US has also seen a significant increase recently, with the number of social shoppers increasing from around 97 million in 2021 to nearly 107 million in 2023. Leading this trend is TikTok Shop, which has accelerated the adoption process in the US.
TikTok Shop currently accounts for the majority of social commerce in the country, mainly because it hosts more shops than other social platforms. Additionally, the integration of a one-click payment system into the platform allows users to seamlessly view, interact with, and purchase products within the content they already consume.
The success of TikTok Shop predicts future development trends in e-commerce and social commerce in the USA.
Decoding social commerce
The algorithm for TikTok Shop is different from TikTok’s content algorithm. TikTok Shop prioritizes paying advertisers over non-paying ones, followed by content with the most engagement and views. Product content is promoted similarly to other content on TikTok.
Influencer marketing is crucial for brands to expand their reach, and this is true for TikTok Shop as well. Influencers help brands acquire new users by engaging their own followers and attracting consumers interested in similar content. Influencers often help branded content rank higher on TikTok, leading to greater exposure as they generally receive higher rankings on the platform’s backend.
Currently, consumer packaged goods (CPG) are the most popular categories on TikTok Shop. The platform’s young audience tends to try products at affordable prices, which is why cosmetics and CPG products dominate. Fashion, especially fast fashion, is also thriving. These items, which can be visually demonstrated and trigger an immediate impulse to buy, tend to lead to more engagement, success, and conversion rates on TikTok.
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Using social commerce for brand growth
Consumers, especially millennials and Gen Z, are spending more time on social media. This trend is driven by their diverse media consumption habits and their status as social media natives. Gen Z grew up with social media. They use it to access user-generated reviews in real time when looking for buying advice. This behavior increases the amount of time Gen Z spends on social media. TikTok’s algorithm continuously feeds users with content they like, which further increases the time spent on the platform.
TikTok is currently working on converting its large user base and high engagement into actual sales. While it hasn’t yet found the perfect formula to drive sales in the U.S., it’s learning from its parent company ByteDance and its success with Douyin in China.
Social commerce will inevitably become an integral part of a brand’s channel mix and its ability to capture audience attention on social platforms. Single sign-on payment options combined with the type and format of social media content make it easier to convert consumers.
To effectively integrate the shop feature, social media marketers need to view social commerce as a form of ecommerce in its own right. This means they need to focus on quick, eye-catching content that encourages impulse purchases.
Differentiation and specific products for social commerce are also critical to success. Products presented in social commerce (often via live streaming and other engagement formats) can be different from those sold through other channels.
The development of e-commerce into social commerce
The rise of social commerce is part of the natural evolution of social media and e-commerce environments. Social media platforms have traditionally lacked a solution to convert and capitalize on their large user base. The introduction of a commerce component such as Instagram Shop and TikTok Shop is a natural evolution.
It also feels natural for users to purchase products they are interested in directly on the social media platform. They can easily read reviews and complete the transaction without leaving the platform. And of course, the platform can use the insights gained from this closed-loop data to influence future campaigns.
As the amount of time consumers spend on social commerce platforms increases, they will spend less time on traditional e-commerce platforms. In response, the future of e-commerce will be highly transaction-oriented. E-commerce platforms could become offline stores, serving specific needs and products.
All of these changes are currently being driven by changing consumer habits in Asia Pacific markets. And as long as TikTok Shop’s momentum continues, this is an inevitable development for the US – and perhaps the rest of the world.
“Data-driven thinking“” was written by members of the media community and contains fresh ideas about the digital revolution in media.
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