Will social commerce stunt the growth of ecommerce in Asia?
Facebook and Instagram are among the most popular social networks where internet users spend up to 3.7 hours every day
It is no surprise that social commerce is flourishing in Southeast Asia as Facebook and Instagram are among the most popular social networks where internet users spend up to 3.7 hours every day on average.
Add to that Asia’s high mobile phone penetration, the fact that Southeast Asians are reluctant to share their financial and personal information online, and less than 20 per cent of the population (except Singapore) use either debit or credit card to make payments, and you have the success formula for shopping via social networks.
It is very likely while browsing Instagram or Facebook that you’ve seen sponsored posts from many unknown brands selling clothes, shoes, or something similar. There’s also quite a high chance a coworker bought that nice top she’s wearing from a Facebook “shop.”
But how does social commerce affect ecommerce overall? And why is social commerce so popular amongst Southeast Asians? To answer these questions, ecommerceIQ decided to test how social commerce works.
Social commerce: surprisingly easy
In social commerce, an order is usually made online while the payment is done offline. Merchants set up “shops” on Facebook or Instagram and post images and details of goods for sale. Shoppers browse and inquire about product availability and arrange a method of payment, typically a bank transfer, through a popular chat app such as Line in Thailand.
To find a reliable shop on social media, many browsers skim through popular forums like Pantip in Thailand. Based on popular word of mouth and recommendations, the ecommerceIQ team chose to test an Instagram makeup shop by @lachompshop.
The search for products takes place by scrolling through @lachompshop picture gallery on Instagram. We decided to purchase a MAC lipstick, which was surprisingly selling for THB 550 (US$15), THB 300 cheaper than in MAC’s official online store.
The seller indicated her Line account in the Instagram “about me” section in case people have product enquiries. The seller replied within one minute of the team’s question and confirmed product availability with a screenshot of the product from her Instagram page.
She outlined details of the payment, which had to be made before the shipping of the product. The seller noted delivery would take three days, after easy negotiation she agreed to express delivery in two days at no additional charge.
The seller sent details of her bank account. The purchase process was simple – a brief exchange on the chat app followed by a bank transfer. Much easier compared to filling forms and providing payment card details when shopping on a typical ecommerce site.
Once the bank transfer was made, the transaction could not be cancelled. After payment, the seller followed up in Line with a tracking number from Thai Post.
The MAC lipstick arrived in a brown package one day earlier than expected, sealed with a protective clear tape. The total delivery time took only one day compared to the average two to five days quoted by online marketplaces. The product exterior was in good condition, wrapped in the original MAC packaging, and was the right color.
However, the lipstick texture was slightly smudged, possibly due to the heat during delivery. There was no pre-delivery text or call that’s typical in ecommerce purchases.
Once the seller was notified of the product arrival, she responded politely within five minutes. The personal touch was nice.
Social commerce is not all positive
Selling on Facebook or Instagram provides is inexpensive for upcoming and small brands. The direct communication with shoppers adds a personal touch, which Southeast Asian consumers find important in order to gain trust.
For customers, social commerce can offer cheaper prices and an easier way to get products which otherwise may not be accessible to them, especially in provinces where malls are almost non-existent.
It also gives customers flexibility in payment options if they do not want to share sensitive information online or do not own a credit card. Social commerce merchants typically request photo proof of the transaction’s slip after payment is made.
However, product authenticity and payment is a concern when buying from sellers on C2C platforms. Data from Page365 shows that 74 per cent of consumers are reluctant to shop online because they fear fraud and 33 per cent of consumers have complained about product imperfections when ordering from Facebook. There are cases where a customer pays a seller via bank transfer prior to a product delivery just to find out that the seller took their payment and cut off contact.
C2C shops are also usually less willing to accept returns. @lachompshop explicitly stated that unless the product was damaged or delivered in the wrong color, neither returns nor refunds would be accepted.
Social commerce will boost ecommerce
Based on our experience, shopping via social networks is so convenient that it overcomes concerns about the security of digital payments.
Thailand is the world’s biggest social commerce market where 51 per cent of online shoppers have purchased goods directly via social media. Every third online shopper in Malaysia and Indonesia have done social media shopping, while globally around 16 per cent of online buyers have done so.
Page365, a startup that helps small retailers sell products via social media, estimated that social commerce is worth more than US$500 million per year or around one-third of total ecommerce market in Thailand alone.
As the ecommerce market size in Southeast Asia is expected to increase nearly 15 times to US$88 billion by 2025, social commerce will likely grow as well thanks to a relatively low online presence of Western brands.
Seeing the popularity of social commerce, other businesses are looking for ways to enter the market. For example, C2C marketplace Shopee, one of the the most popular apps in the region, is trying to attract merchants currently selling on social networks by offering easy integration with their Instagram shops, reimbursed shipping, and cash on delivery fees to sellers. Facebook started testing social commerce payments in Thailand in June and launched the world’s first Facebook Shop in August.
Although it does take away customers from traditional ecommerce websites, the popularity of social commerce allows consumers to adopt online shopping habits, gain more trust in online merchants, and become more comfortable with online transactions.
Having a pleasant online experience through social commerce eventually will encourage customers to trust digital transactions and purchase on marketplaces and other online stores.
This article originally appeared on Tech in Asia.