Social commerce is already huge in the Asia-Pacific market, and it’s poised to blow up worldwide in the coming years.
In 2023, social commerce generated an estimated $571 billion globally. With a compound annual growth rate of 13.7%, revenues are expected to surpass one trillion dollars by 2028.
In China, the social commerce market is already mature. Traditional ecommerce platforms like Taobao and JD.com have long dominated the Chinese ecommerce landscape with their extensive product ranges and robust logistics capabilities.
However, the rise of social media and short-form video has posed challenges to these traditional giants. Douyin’s live-streaming sales and social commerce features have disrupted the market, gradually eroding the market share of traditional ecommerce. Taobao’s market share dropped from 56% in the second quarter of last year to 44% now. Meanwhile, Douyin’s market share surged from 5% to 14%.
Although the Asia-Pacific region pioneered social commerce, its adoption in the United States has recently surged, too. The number of social shoppers increased from approximately 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 represents the majority of social commerce in the country, mainly due to hosting more stores than other social platforms. Plus, the platform’s integration of a one-click payment system allows users to seamlessly view, engage with and purchase products within the content they are already consuming.
Here’s how the success of TikTok Shop forecasts the future development trends of ecommerce and social commerce in the US.
Decoding social commerce
The algorithm for TikTok Shop differs from TikTok’s content algorithm. TikTok Shop prioritizes paying advertisers over nonpaying ones, followed by content with the most engagement and views. Product content is promoted similarly to how other content is boosted on TikTok.
Influencer marketing is crucial for brands to expand their reach. This is equally true for TikTok Shop. 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, the most popular categories on TikTok Shop are consumer-packaged goods (CPG). The platform’s young audience is inclined to try products at accessible price points, making cosmetics and CPG products dominant. Fashion, especially fast fashion, also thrives. These items, which can be visually demonstrated and trigger an instantaneous impulse to purchase, tend to drive greater engagement, success and conversion rates on TikTok.
Harnessing social commerce for brand growth
Consumers, particularly 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 real-time user-generated reviews when searching for advice on purchases. This behavior increases Gen Z’s time spent on social media. TikTok’s algorithm continuously feeds users content they like, further increasing the time spent on the platform.
TikTok is currently working to convert its large user base and high engagement into actual sales. Although it has not yet found the perfect formula for driving sales in the US, it is learning from its parent company, ByteDance, and its success with Douyin in China.
Social commerce will inevitably become integral to a brand’s channel mix and its ability to capture audience attention on social platforms. Single sign-on payment options, combined with the nature and format of social media content, make it easier to convert consumers.
For existing social media marketers, effectively integrating the shop feature requires treating social commerce as a distinct form of ecommerce. This means focusing on fast, eye-catching content that drives impulse purchases.
Differentiation and having specific products for social commerce are also essential for success. Products featured on social commerce, often through live streaming and other engagement formats, may differ from those sold through other channels.
The evolution of ecommerce into social commerce
The rise of social commerce is part of the natural evolution of social media and ecommerce environments. Social media platforms have traditionally lacked a solution to convert and capitalize on their large user bases. Introducing a commerce component, like Instagram Shop and TikTok Shop, is a natural progression.
For users, it is also natural to purchase products that interest them directly within the social media platform. It’s easy to read reviews and complete the transaction without leaving the platform. And, of course, the platform can use the insights derived from that closed-loop data to influence future campaigns.
With time spent on social commerce platforms on the rise, consumers will spend less time on traditional ecommerce platforms. In response, the future of ecommerce will become highly transaction-driven. Ecommerce platforms may become akin to offline brick-and-mortar stores, serving specific needs and products.
All of this change is being driven now in Asia-Pacific markets due to changing consumer habits. And as long as TikTok Shop’s momentum continues, it’s an inevitable evolution for the US – and perhaps the rest of the world.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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