Conceptually, social commerce isn’t new — it has existed in some form ever since people have made recommendations to each other. Today social networks are more powerful than ever, and startups and corporations are innovating new commerce models that leverage the greater reach available to us.
It’s important to understand the blurry, yet persistent difference between social commerce and conventional e-commerce. Where e-commerce aims for a direct, digital translation of brick-and-mortar browsing, social commerce refocuses the entire customer journey to center on people.
Social commerce doesn’t silo our retail experiences from the rest of our lives; rather it leverages the power of community and connection to create opportunities in everyday life through social networks.
Globally, social commerce is on the path to becoming a $1.2 trillion industry by 2025, with the biggest gains being made in Brazil and India. The $2 billion to $3 billion social commerce market in India today is estimated to hit $70 billion in value by 2030, empowering around 40 million small entrepreneurs.
However, the true growth story of social commerce is in Southeast Asia, where it is already worth more than $13 billion.
Using social commerce to foster communal growth
The popularity of social commerce in Southeast Asia has been accelerated by high rates of mobile internet penetration, a mobile-first generation that spends a lot of time on social media, and high engagement.
But the biggest driver of social commerce is the fact that this is a collectivist society. At the heart of Southeast Asian culture and approach to life is a community that is interwoven into the fabric of everyday life. While Southeast Asians feel confident they can succeed as individuals, they still appreciate the value of their traditionally collectivist society.
Southeast Asians have a strong desire to belong in a community, and finding strong relationships is more important to them than their global counterparts. They use their networks for socializing as well as transacting, and they’re particularly enthusiastic about peer-to-peer services.
And this sense of communal belonging affects the way they buy.
The social commerce model leverages community leaders and influencers’ connections to generate sales by marketing directly to their friends and family. Through social platforms or a platform app, these leaders, acting as resellers, can order products at wholesale prices before redistributing to their networks at a markup; though in some cases, they may also earn a percentage commission.
Addressing logistics issues in tier 2 and tier 3 cities
Significant gaps in Southeast Asia’s logistics infrastructure have limited the reach of traditional e-commerce in tier 2 and tier 3 cities. Logistics bottlenecks here lead to lengthy delivery times, driving up the cost of products as logistics firms contend with complex challenges posed by each country’s unique geography.
For example, Indonesia is home to some of the biggest logistical challenges in the world. Delivery companies struggle to navigate its collection of over 17,000 islands with a network of land and sea transports, warehouse and delivery agents. This complexity led to high shipping costs in Indonesia: daily necessities in the rural east can cost 200% more than they would in tier 2 and tier 3 cities, according to Steven Wongsoredjo, CEO of Indonesian startup Super.
Considering the scale of the challenge, it’s not surprising that so many startups have cropped up to combat this issue. Startups like Super and Evermos leverage social commerce and streamlined logistics to let resellers buy goods in bulk, which results in lower shipping costs per person.
These startups make logistics easier by maintaining their own network of warehouses, hubs and delivery partners to ship products to resellers, who are then left to handle last-mile delivery.
Bridging the entrepreneurial gap
Social commerce has the power to democratize entrepreneurship for millions across Southeast Asia.
Most social commerce platforms don’t require any upfront investment, and resellers can rely on startups’ supply chains, payments infrastructure and logistics networks. This lets them focus on leveraging the assets they do have: their social circles.
Some of these social commerce startups are driven by a mission to empower anyone to become an entrepreneur. Meesho, for example, has launched a handful of initiatives to support would-be entrepreneurs.
Social commerce is also helping women start their own businesses and achieve financial independence in rural parts of these regions. Startups like Vietnam-based Mio let women run businesses from their home, allowing them to earn $150-$200 per month as resellers and supplement their monthly household income by 15%-30%.
Facilitating access to new markets
Social commerce gives small-to-medium sized businesses, which account for 89% to 99% of Southeast Asia’s economy, the opportunity to tap new markets and become easily discoverable.
Many of these businesses can’t access new markets because they lack resources for marketing and delivery, and they find it difficult to ascertain the types of products in demand in those areas. Social commerce can let these businesses leverage resellers’ networks to gain more visibility with their target audiences through an easy, structured and scalable process, as well as valuable insight into customer needs.
Solving for trust deficits
Consumers new to the internet and e-commerce in the less developed parts of Southeast Asia often have concerns about the product quality and safety of digital payments, which results in high customer acquisition costs.
But change is coming. Steven Wongsoredjo, the chief executive of Super, says that social commerce could fill this particular gap by leveraging the social capital of resellers.
Resellers are often community leaders, and their opinions can shore up trust around online purchases. They also hold significant power as they can directly engage with a buyer to manage delivery, returns and payments.
But hurdles remain aplenty
The potential of the social commerce industry is set to draw in more competition from both new entrepreneurs and established e-commerce players.
Established e-commerce firms can leverage their more mature supply chains and logistics networks to quickly leapfrog startups and new entrepreneurs. The current situation in China illustrates this point: E-commerce giants like Alibaba and JD.com have begun trialling social commerce models that link customers to manufacturers directly.
But it is clear social commerce holds significant potential to bridge many of Southeast Asia’s infrastructure gaps. The size of the social commerce market is projected to continue growing in the region, and recent investments — in Southeast Asia and elsewhere — are indicative of its potential for growth.
If the future is social, then social commerce is the future of retail.
Note: Evermos and Mio are both Jungle portfolio companies.
