Revenue generated through social networks has grown rapidly in recent years. The way people and businesses buy products and services has changed a lot and companies need to adapt to continue to do business successfully.
More and more companies are beginning to add social networks to their portfolio of sales channels and generate sales through Facebook, Instagram and TikTok. The Covid 19 pandemic has increased this trend even more. One of the main advantages of selling through social media is that customers can be targeted directly and the target audience is clearly defined.
The model is becoming increasingly important here, because only if companies are represented on the established social media platforms can they also reach their customers directly.
This topic is also part of gominga’s new study “The Marketplace World 2022“. Find out more!
What is social commerce?
Social commerce, or s-commerce for short, is a retail model that uses social media platforms to generate sales. The model is not about potential customers seeing and buying a product. Rather, it is about the entire customer buying experience taking place on social networks.
Social commerce is also referred to as the “future of commerce.” In this social media and e-commerce model, there is a merging of social media and commerce. It allows companies to market their products to potential customers via social media content.
By having a presence on various platforms, brands, products or services can be discovered and explored by customers. In doing so, there is no need to leave the social network to complete an order transaction.
Merging social media and commerce – social commerce
You might think that social media and classic marketplace commerce have little in common. While users search for interesting or educational content on social media, marketplaces like Amazon or Ebay are mainly useful for finding and buying things.
However, social media and e-commerce also have things in common, such as intelligent and data-driven infrastructure that knows users’ behavior and needs precisely. This has the advantage that products or services can be marketed in a targeted and efficient manner.
In addition, the two models have in common that the fulfillment process is very similar. Regardless of where products are purchased, various activities and capacities are required to successfully complete the ordering process. These include the provision of goods or fast and secure delivery to the customer.
Advantages of S-Commerce
One of the main advantages of the social commerce model is that it removes many obstacles from the customer’s point of view that can lead to shopping abandonment. Customers can learn about and purchase products directly, without having to re-register or fill out lengthy forms. This has the advantage of minimizing the potential customer’s effort to buy something.
Another advantage is that a buying process via a social network can be made much more interactive and personal. Customers can easily and quickly discuss purchases, share and comment on products, and read reviews from other users. In doing so, they don’t have to leave the social network and may decide to buy a product more quickly.
By using social media and e-commerce, it is also possible for companies to receive real and authentic feedback, which can be used to improve products and services. By having people comment with their personal profiles, a lot of trust is placed in the reviews as they can be attributed to real people.
Due to the large amount of data collected from users and customers, advertisements can be optimized and precisely adapted to the target group. This means that the advertising budget can be used better and more efficiently, which can lead to companies having to invest less capital in advertising measures to achieve the same result from a campaign.
Social commerce can be particularly worthwhile for companies that want to sell products to a young target group. Studies have shown that the majority of all younger users (under 35) use social media as their main source of inspiration when they want to make purchases.
Challenges of social commerce
While the social commerce model has many advantages when applied, there are also challenges that companies must overcome in order to be successful. For example, it could be argued that users of a social media platform do not have a direct purchase intention when they use social networks. Primarily, users are concerned with consuming content or connecting with others.
However, many potential customers spend a lot of time on social networks, and an advertising post is seen or shared correspondingly often. This can have a strong impact on a company’s sales, because the more people see a product or service, the more likely it is that a profitable action will be taken.
Another argument against using social commerce is that companies lose control over their customers’ data. If customers buy via social media platforms, the data is not stored with the retailer but with the platform. This circumstance makes it difficult for companies to learn more about their customers and the right target group.
However, even in this case, a lot of important data can be obtained when customers buy a company’s products. Through the possibility of direct feedback and on the basis of sales, companies can procure valuable information and thus adapt to customer wishes.
Conclusion on social commerce
Selling products via established social media such as Instagram, Facebook or TikTok is becoming increasingly important for most companies. Only if companies reach their customers where they feel most comfortable can they grow sustainably and be economically successful in the long term.
While s-commerce is not a full-fledged substitute for traditional sales via marketplaces, the two models complement each other and can function well side by side. If companies use both social media and various marketplaces, the advantages of both models can be combined. Therefore, most companies can benefit from using social commerce.