Myriad companies have made digitally driven commerce work for them, but others have struggled to find success or are unsure where to start.
Between livestreaming and big players like TikTok, Amazon and Twitter getting into e-commerce in the metaverse, social commerce is going to be a force to be reckoned with.
This market’s gross merchandise value in the U.S. is expected to be $99 billion by 2025, and it’s expected to grow 25% each year, according to GP Bullhound Global Insights’ Technology Predictions 2023 report. That is compared to China’s $1.02 trillion market, predicted to grow at 26% each year. Overall, the market is forecast to hit $3.8 trillion by 2030.
“When you know what you want, you search for it, but when you don’t, this is where live commerce makes sense.” Voggt's Kevin Loiseau
It’s also an area that we have followed intensely, especially since shopping was forced online at the beginning of the pandemic. And a lot of companies are doing compelling things.
Take Kahani, for example. Its founder, Jesse Pujji, told TechCrunch in October that the future of mobile e-commerce was going to look like TikTok, Instagram and Snap, and modeled Kahani’s first product to be a “Stories-like” feature so that brands could show their clothes being worn “live” versus static images of the front and back views.
Earlier this month, Amazon launched Inspire, a social media-inspired feature that provides a TikTok-like shopping experience with short-form videos and photo feeds.
Though the pandemic-induced online shopping frenzy has cooled as more people venture out again, with all of the different methods out there for digital commerce, driven in large part by livestreaming and social media, it’s time to take a look at where this industry is headed, who the dominant players will be, what the challenges to adoption are and what brands will have to do to keep up.
Trend watch
Arun Arora has been watching a lot of these trends unfold from his perch as senior partner for McKinsey & Co. and global leader of its NeXT Commerce initiative.
“I’m encouraged to see how many people are trying things,” Arora told TechCrunch. “If you like the metaverse I think that there’s more to come. There are more nascent platforms that are focused more on teens who are moving into shopping. I love to see how they navigate the path since teens don’t usually have money. I’m also encouraged by different segments of the population and different platforms talking about how to add shopping in whatever form it takes, whether it’s through partners or themselves.”
Andrea Hippeau, partner at Lerer Hippeau, has been investing in direct-to-consumer for over a decade and has seen its evolution over time. She points to Warby Parker, one of the first brands to cut out the middle entity to get products right to the buyer, as an example of a trend that will continue. Then came digital marketing, where retailers could target people over social media with advertising.
“Those platforms were giving brands free money to advertise on their platform, but when that stopped, we saw brands go back to brick-and-mortar or wholesale because it didn’t make sense with the unit economics to chase down rising costs,” Hippeau told TechCrunch.
And that is the state of the market today, she noted.
“I definitely think people have tried social shopping in different formats and nothing has really stuck,” Hippeau noted. “It comes down to the infrastructure in place versus people wanting to shop that way. We also always ask people what to buy. But more are trying to monetize on TikTok and new social media platforms.”
She sees more companies reaching mass adoption of digital commerce in the next three to five years, especially as more embrace personalized online shopping. That could come in a number of forms: a homepage that changes based on preferences or products you want to see, for example, or live personal shoppers available over Zoom that can detail products.
Price point will matter here, Hippeau noted, because the higher the price, the more hand-holding customers will need — especially in a recession — because they will want to see the product and hold it, so companies will need to build something with a similar experience.
One of the trends she is watching play out is embedded social shopping, where you can see feeds from friends or people you follow on social media. Hippeau believes there will be an opportunity to harness that kind of thing and take it outside of current social platforms, but the format of how that will appear is yet to be determined.
She also has her eye on the metaverse, which she says has been attempted many times before, but shouldn’t be overlooked.
“It is very early,” Hippeau said. “Maybe when my 4-year-old is a teenager, it might be popular. It already is for a smaller population of people, especially for gamers, which is a huge space. It might be that the metaverse will work if it is away from the mainstream.”
Just “doing livestream” won’t cut it
As mentioned earlier, China continues to be a powerhouse when it comes to social/livestream commerce, but startups in other parts of the world are fighting to assert their dominance in areas where it is still nascent.
One of those is Voggt, which launched in November and touts itself as “Europe’s first live video e-commerce platform.” The company is creating a community around collecting and trading playing cards, comic books and figurines, sports memorabilia, fashion and sneakers.
“It’s thinking about social media as a place to build and grow relationships with your existing customers versus customer acquisition through digital ads.” M13's Anna Barber
In that short time, Voggt has landed 50,000 registered users in the United Kingdom and is building a similar following in three other countries, Kevin Loiseau, its founder and CMO, told TechCrunch.
With the rise of TikTok, Twitch and YouTube, it makes sense that commerce and video would eventually pair up. However, Loiseau said some retailers are trying to copy what is being done in China, where live commerce is a way of shopping, rather than seeing what works in their region.
“They are basically promoting a product through live comments,” he added. “That doesn’t really work because it doesn’t bring value to the users. That’s why we are focusing on the community — people who are passionate about something and want to connect through that — rather than just trying to push a product.”
If retailers don’t want to be left behind, “an edge” is most important, which essentially comes down to experience, Loiseau said. But, he cautions that not everything works in live commerce. If you are going to buy a USB charger, you’ll go to Amazon or wherever is easiest. To have a connection, the product needs to create emotion and tell a story, he explained.
“Live commerce is not going to replace e-commerce because you are going to have sellers that don’t want to do a show,” Loiseau added. “When you know what you want, you search for it, but when you don’t, this is where live commerce makes sense. If it is something that creates an emotion or the experience is better, it will work.”
Future investment
M13 partner Anna Barber told TechCrunch that if Gen Z is starting their search on TikTok rather than Google or Amazon, it’s a good indication TikTok will give them “a run for their money.”
“The implications of that are huge because, of course, it’s also possible to transact on TikTok, so any brand that wants to be relevant with Gen Z has to be thinking about TikTok as a distribution channel,” Barber added.
M13 and other venture capital firms are investing in a lot of technology supporting the TikTok ecosystem. She pointed to companies in her portfolio, like Bounty, which helps brands connect with customers on TikTok at the point of purchase and invites them to post about the brand.
When brands initially thought about digital advertising, Barber said they approached it like television or print advertising rather than a new channel, and for many, it didn’t work as well. In fact, she explained that even something that works on Instagram may not work on TikTok. That’s because TikTok “is all about authentic communication that is user-driven,” so a bottom-up approach works better for brands.
As a result of this shift in mindset, many of the changes are driven by TikTok and then adopted across all the social platforms, she added.
Remember all of a sudden seeing social media advertisements during the pandemic from brands that you probably used but didn’t know everything about? That was the idea.
“The interesting point is brands used to think about digital marketing as initial customer acquisition — saying, ‘I need to tell customers about me who don’t know about me already,’” Barber said. “What you’re seeing are brands engaging with customers that are already their customers, but getting them to buy something new or to buy a different product. It’s thinking about social media as a place to build and grow relationships with your existing customers versus customer acquisition through digital ads.”
Looking five years into the future, she believes there will “always be a place for going back to the question of impulse shopping and entertainment versus utilitarianism.” Consumers might not always try new products but will need to reorder the same brand of shampoo they have used for 20 years. Brands will have to figure out how to do that as quickly as possible, Barber said.
It’s not about simply setting up a subscription base but using artificial intelligence to be able to predict when the customer is going to need something, sending a text message asking if they want a refill, and then shipping it out, she added.
Barber concurred that the entertaining and discovery-based forms of shopping will be video driven.
“When you look at how Gen Z feels about video, it is their communication medium,” she said. “It’s hard to imagine a world where shopping is completely video driven, whether it is on a social platform, on Amazon, which is also starting to launch live shopping, or on a brand’s website. However, video is so much more powerful of a medium to show a physical object and really show you what it looks like and what it can do. When combined with a narrative of someone talking about that product, that’s why the conversion rates are so much higher.”
Predictions
While I was reporting this story, I asked my sources for predictions on the future of digital commerce. Here’s a sampling.
Alessandro Casartelli, executive director at GP Bullhound Global Insights:
In 2023, we look for livestream shopping to enter the mainstream, adopted by major global brands in the West, thanks to its high measurable ROI in a period of tightening advertising budgets. The move toward the West is imminent, with TikTok and Shopify creating their live shopping features and companies like Pop and Groupon advocating the advantages of group buying. With social commerce likely to grow three times as fast as traditional e-commerce in the next four years, we expect the sector to be a hot spot for investors and acquirers.
Cynthia Nelson, chief strategy officer at Revo Video:
Media companies will look to shoppable videos to generate more revenue: In 2022, streaming services have discussed ads to offset the growing subscription costs. In 2023, we’ll see the rise of media companies finding new revenue streams by incorporating live and shoppable videos into their content platforms. From QVC-type shows to being able to buy what your favorite actress is wearing in a movie or TV show, everything will become more interactive and shoppable to help their bottom line.
Ranjan Roy, vice president of strategy at Adore Me:
Loyalty and membership will be the key areas of focus for digital commerce as we head into 2023. What we’ve learned is that it’s nearly impossible for a retailer to expect that they can acquire new customers through the online or brick-and-mortar store, hope that they don’t return the item, and then hope that they shop again, all while maintaining profitability. Building robust loyalty and innovative membership programs will become increasingly central to retailers’ business strategies, as the battleground will shift from customer acquisition to retention.
Dan LeBlanc, co-founder and CEO of Daasity:
Furniture and home goods stores have already been taking advantage of augmented reality to enable customers to visualize how furniture, appliances and other goods will look and fit in their homes prior to making a purchase. In 2023, we will see clothing retailers use the same tactics, leveraging AR to enable consumers to see how certain items look and fit on their bodies in real time. While some upscale fashion brands have already been toying with this technology, platforms that sell clothing will standardize this practice in the coming year. Since AR is still a newer technology, there will likely be road bumps, but early adopters may find themselves saving on returns costs down the road.