Social Commerce Is an Avenue for E-commerce Players to Grow Bigger in India
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Most Indians know someone who sells products from their home. This is pure social commerce. Startups saw the problem that these entrepreneurs experience, including managing their supplies and payment management, and hence social e-commerce came into being. The ubiquity of smartphones equipped with 3G and 4G propelled the category further. The most popular platforms for this segment include YouTube, WhatsApp, Facebook, and Instagram.
Social Commerce vs. B2C E-commerce
To understand social e-commerce, it helps to compare it with B2C e-commerce, in which Amazon and Flipkart are the Indian market leaders. Here are the key differences:
- Order sizes: B2C orders are usually larger, whereas the average order value within social commerce is small.
- End users: In most cases for B2C, the marketplace owns and acquires the end user. In social commerce, the end users are acquired by an intermediary.
- Logistics: In social commerce, most of the logistics are outsourced to third-party players.
- Customers: For B2C marketplaces, users are mainly in tier one and tier two cities. With social commerce, around 70% to 80% of demand comes from beyond tier two cities.
It’s clear that social commerce will be a focus for e-commerce players. After all, the number of Indian internet users sits at around 500 million to 600 million, and the big e-commerce companies have acquired the first 100 million. To scale up further, these companies have realized they can onboard users who are more comfortable transacting on social media platforms. They also have the advantage because social commerce marketplaces by design need a lot of cash to acquire users and service them.
Social Commerce Platforms
Flipkart started its own social platform called Shopsy. Amazon recently acquired GlowRoad. Then there’s Meesho. Both Flipkart and Amazon have made inroads in the social commerce market. The idea is to acquire users via social media channels, make them comfortable transacting online, then shift them to their larger e-commerce portals where they’ll transact on high-value categories such as electronics and appliances. The biggest advantage these platforms have is in terms of the quality of supply. On the social commerce platforms, there is no friction for the supplier to upload catalogs or products.
The social commerce market has succeeded mainly because of the active users on these platforms, a lot of whom have come on the internet for the first time, unlike users in tier one and two cities who are exposed to a lot of apps. More than 500 million people use WhatsApp daily per month.
With the proliferation of Amazon and Flipkart in India, we will see a lot of social commerce products being built, both for supply and demand. The category is estimated to be worth around $2 billion to $3 billion now, but it should explode to at least three to four times that in the next three to four years. With more Indians coming online and social media being their app of choice, the social commerce market is here to stay.
About Siddharth Kataria
Siddharth Kataria, based in Mumbai, is founder of fashion brand Swift Trends LLP. Previously, he was Associate Director at Meesho. In this position, he launched and scaled fashion/non-fashion categories under contract manufacturing; led multiple backward integration projects in partnership with multiple stakeholders to reduce cost overheads; launched fashion/non-fashion private labels to fill marketplace gaps; and handled strategic alliances and business development to fuel supply growth while leading a team of business development managers, ops managers, analysts, and on-field resources.
This e-commerce industry article was adapted from the GLG Roundtable “What’s Next for Social Commerce?” If you would like access to events like this or would like to speak with e-commerce industry expert Siddharth Kataria or any of our approximately 1 million industry experts, please contact us.