This week, social media giant TikTok announced a partnership with Shopify to introduce in-app shopping and a host of other e-commerce features to its popular short-form video platform. This announcement marks the latest in a long list of social media sites dabbling in e-commerce. As a result, we are wondering if TikTok, Instagram, and other social media platforms will threaten the “Amazons” of the world.
In our view, social commerce offers a rare “win-win-win” for consumers, platforms, and retailers. For consumers, the top priority is convenience. What once defined Amazon’s moat – one-click checkout and fast shipping – now is ubiquitous thanks to third party solutions like Shopify. Moreover, like it or not, social media sites can use troves of data to personalize our shopping experiences.
As the combination of convenience and personalization enhances engagement, social platforms are likely to win either directly, through sales commissions, or indirectly, through advertising. Based on ARK’s research, during the next five years, social commerce is likely to grow 50% at a compound annual rate from approximately $390 billion to nearly $3 trillion.
For retailers, never has it been easier to set up shop and sell to a global customer base. With the reach of platforms like Facebook, Instagram, TikTok, Snapchat, and Pinterest, retailers have access to millions, potentially billions, of customers, a reach limited historically to the largest companies in the world.
In summary, social commerce combines the convenience of online shopping with the network effects of social media, powerful growth drivers that are likely to put pressure on traditional e-commerce sites. For more on this topic, please stay tuned for our upcoming social commerce blog this week.
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