Social commerce – purchases made directly on social networks – may seem anecdotal to some, but it’s taking off and is expected to grow three times faster than traditional e-commerce, reaching $1.2 trillion by 2025. And, in a sign of things to come, Amazon has just signed an agreement with Meta to offer a new in-app purchase function on Facebook and Instagram.
Developing sales through social networks through product placements or by using popular influencers is nothing new. Selling directly on social networks, on the other hand, is more recent. Whatever we think of this phenomenon, it’s growing and it’s a reality that needs to be taken into account when planning and executing supply chain processes.
According to a study by FIS Global, the shopping preferences of younger shoppers have shifted, with 70% of millennials and 78% of UK Gen Zers more likely to buy products directly through social channels Meanwhile, in the “Consumers and Convergence” study published by KPMG in 2010, only 8% of consumers in the G7 countries said they were ready to make purchases via their phone. Fourteen years later, however, 7 out of 10 do so, according to a study by Klarna.
Social Commerce is booming and according to Accenture, this market is already worth $492 billion worldwide, and is expected to make up 17% of total e-commerce spending globally by next year. Unsurprisingly, this growth is driven primarily by millennials and Gen Z, who it is estimated will account for almost two-thirds of purchases made on social networks by 2025.
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Social platforms are well aware of this, and they are developing more and more e-commerce functionalities in response to this trend. Only earlier this year, Meta and Amazon announced an alliance to offer a new in-app purchase functionality on Facebook and Instagram. While currently only available to US users, it enables users to buy products directly by clicking on an ad on one of these social networks, without leaving the platform.
Impact on supply chains
Social Commerce represents a new direct to consumer sales channel opening up for retailers, and one that should certainly not be overlooked in terms of fulfilment strategies and the shopping experiences it provides customers with.
However, Social Commerce and the direct engagement and interaction with customers can create logistical challenges for retailers, first and foremost, in terms of volume: traditionally, brands have been more used to handling larger order volumes and shipping products to a small-medium number of locations. With Social Commerce, retailers have to ship single units to sometimes hundreds of thousands of individual locations, all the while maintaining the consumer promise of timely delivery.
Social Commerce and its direct-to-consumer approach also demands even greater agility and flexibility in terms of the customer experience and customer service. Responding quickly to customer queries, comments and problems relating to orders, deliveries and product returns must be managed seamlessly to provide a personalised experience to each and every customer, but it must also be tailored to the medium of communications they also prefer – whether that might be email, phone, social media, WhatsApp or chatbot.
Finally, order management must also adapt, drawing on the advantages to be found from the unification of warehouse, transportation, and point-of-sale networks. And, of course, offering customers options for the delivery of their purchases too. From straight up, home delivery, click & collect, buy online collect in-store, kerbside pickup or delivery to a pickup point, these services need to reflect (almost) as much choice as consumers now expect when actually choosing products.
From omnichannel commerce, to supply chain planning and execution, if retailers are to offer a social shopping experience that is as seamless and joined-up as the physical and e-commerce experiences consumers have come to expect these last four years, retailers would do well to recognise the benefits of unification in the context of supply chain commerce – after all, it is these capabilities that will enable brands to fully take advantage of the trillion dollar opportunity that is Social Commerce.
