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The Rise of Social Commerce: Creating a New Selling Experience for Brands to Engaged Consumers

January 31, 2022

Social commerce is not a novel idea. In fact, social media companies have been chasing the dream of social commerce for years. Simply put, social commerce refers to the selling of products directly via social media. A social commerce platform, then, would incorporate key elements of both social media and e-commerce in order to provide an interactive and engaging online retail experience for its users.

Many social media companies have offered e-commerce solutions, including Instagram, Facebook, Pinterest, WeChat, WhatsApp, and Twitter. In particular, Twitter is currently testing its ‘Shop Module’ feature, which is a live shopping service specifically for users in the United States.1

In China, the growth of social commerce has largely been driven by two tech companies. Tencent and Alibaba—which respectively own messaging app WeChat and e-commerce giant Taobao—have successfully integrated social media, digital payment infrastructure, and product discovery into their platforms. With features such as livestream sales as key features of the social commerce experience, more than 66,000 livestreamers across China’s various platforms drew in an incredible 709 million viewers.2 In fact, social commerce sales in China were projected to reach US$363 billion in 2021.

Worldwide, three out of four consumers expressed a desire to purchase items through social platforms. This statistic includes Indonesia, Southeast Asia’s largest market.3 Like many other places, social commerce has been on the rise in Indonesia, with about 80% of Indonesian merchants already selling their goods online via social commerce.4 The gross merchandise value (GMV) generated from social commerce in Indonesia is anticipated to reach approximately US$25 million by the end of this year.5

TikTok: Making Major Inroads into Social Commerce

Another social commerce platform that everyone should keep their eyes on is TikTok, which is now best-known for its full-screen, vertical, and short-form videos that has empowered a new generation of content creators. TikTok is currently one of the world’s fastest-growing social media applications. It was also the most downloaded app in 2021,6,7 with 656 million users, and has more than 1 billion monthly active users from all around the world.8

In Southeast Asia, TikTok’s reach is vast as well. In October 2021, the app had 87.5 million active users aged 18 and above who were located in Indonesia.9

While it started out as a short-form video-sharing platform, TikTok now offers a unique blend of community, entertainment, and shopping. Taken together, these characteristics help it make product discovery on TikTok interesting and unique to the platform.

In fact, 52% of TikTok users say that they discover new products through TikTok commercials. Furthermore, 61% believe that TikTok advertisements are more unique than those on other social media and video platforms. Another 43% believe that the advertisements they see on TikTok blend in with the rest of the platform’s content.10 These numbers exemplify the effectiveness of TikTok’s social commerce strategy, in which near-seamless integration with existing platform content is a key cornerstone.

According to a YPulse survey, more than half of Gen Z consumers are now on TikTok, compared to 39% of Millennials.11 Although everyone’s purchasing power is limited depending on their personal income, the highest percentage of spending on e-commerce is occupied by both Gen Z and Millennials.

With their highly monthly spending, these two groups are expected to account for half of Indonesia’s total consumption by 2030. These are the generations that increasingly live online. They are voracious consumers of online content and services. Most importantly, they are the ones who will drive the future of the internet economy.12

The increasing importance of Gen Z and Millenial users is what encourages TikTok to go beyond entertainment by presenting unique e-commerce solutions, through means such as TikTok Shopping.13 Unlike e-commerce features on Facebook and Instagram, TikTok Shopping differentiates itself by allowing customers to directly check out from the TikTok app itself.14 Beyond just an online retail service, TikTok Shopping is a holistic suite of solutions, features, and advertising tools that empowers brands and merchants to meaningfully engage with their customers.

One of TikTok Shopping’s subsidiary services is TikTok Shop, an exclusive and innovative marketplace that is fully integrated into TikTok, bringing together online sellers, buyers, and creators. TikTok Shop allows merchants to tap into a full commerce experience. From uploading products to managing shipping, fulfilment, and point-of-purchase, merchants can use TikTok Shop to tap into TikTok’s vibrant user base and streamline the entire customer journey.

TikTok Shop as SIRCLO Commerce’s Latest Online Sales Channels

As an e-commerce enabler that empowers principals and brands to reach consumers, SIRCLO Commerce has collaborated with TikTok Shop to deliver a unique online shopping experience. Specifically, since September 2021, SIRCLO Commerce enables brands to leverage TikTok as a channel for their online marketing needs and goals.

SIRCLO Commerce helps merchants maximise features available on TikTok Shop, such as embedded product anchors in the form of the app’s dedicated short videos and livestream services. Furthermore, high-quality content will receive increased traffic support from the platform’s engaged community, making it easier for brands or merchants to quantify their market reach.

Among the many success stories is L’Oréal Indonesia, which has engaged SIRCLO Commerce to fully leverage TikTok Shop. Some brands under the L’Oréal Group that have successfully engaged with the TikTok community through TikTok Shop include household beauty brands Maybelline and Garnier. The performance of female-targeted beauty brands could be due to gender demographics on TikTok. Statistics from 2020 show that the user base on TikTok comprises 60% females and 40% males, which may thus contribute to the success that female-oriented brands receive on TikTok Shop.

According to SIRCLO’s internal data from September to December 2021, brands that engage TikTok Shop witness, on average, an increase of more than 2X in the number of customers who transact through the platform.

For customers, TikTok Shop can serve as a suitable alternative for meeting their online retail needs. SIRCLO’s internal data also showed that users of TikTok Shop also purchase on other e-commerce platforms, including Tokopedia, Shopee, and Lazada.

SIRCLO has developed a variety of solutions for business owners, ranging from entrepreneurs to enterprise clients. Among these solutions, SIRCLO Commerce, offers end-to-end services that cover marketing, merchandising, customer service, order processing and fulfillment, up to analytics reporting. For more details, visit: https://commerce.sirclo.com/.

Disclaimer

SIRCLO neither provides regulated advice nor guarantee results. The materials we convey reflect general insight and best practice based on information currently available, and do not contain all of the information needed to determine a future course of action. Such information has not been generated or independently verified by SIRCLO and is inherently uncertain and subject to change. SIRCLO has no obligation to update these materials and makes no representation or warranty and expressly disclaims any liability with respect thereto.

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