What Is Social Commerce and How Does It Work?

Social commerce is one of the hottest recent trends for online businesses seeking to maximize their sales. It is the natural evolution of social media product marketing. And it can significantly increase sales by allowing your products to reach a larger audience, as well as by decreasing friction during online shopping.

So, what is social commerce and how can your business take full advantage of it?

Social Commerce Explained

In recent years brands have taken to social media like fish to water. Marketing your products through social media allows your business to reach your target demographic easily for a lower cost than traditional print and media advertising. 

However, once your ad intrigued a potential customer they would need to go to your website to make a purchase, taking them off the social media platform. Marketers needed to create strategic advertising funnels that would coax prospects through the steps toward clicking the checkout button. 

Social commerce allows you to avoid this process altogether, allowing businesses to sell products directly through their social media content.

How Social Commerce Works

Imagine that you are a consumer with a cooking hobby scrolling through short-form video content on TikTok or Instagram. You see a video of a person demonstrating the use of a cool and interesting kitchen gadget that could save you time. The video is informative and entertaining, and you can clearly see how this product could make your life easier. 

Below the video is a “buy now” button. You click it and see that, with your current income level, this purchase would not be a significant expense. You think about it for a second and think, “Why not?” You make an impulse purchase, paying directly from the app. 

Of course, in this scenario, this ad did not reach you by chance. Instead, it was specifically targeted toward you because of your demographics and interests, by an expert marketing team. 

This is the beauty of social commerce. Marketers and business owners have the data and tools to hyper-target their campaigns to their ideal customers wherever they are online. This gives customers the opportunity to buy products right then and there, with minimal friction.

The Benefits

There are significant benefits for business owners and marketing managers who take advantage of social commerce. Those businesses that master it quickly will be able to outpace the sales figures of their competitors. 

Gen Z consumers are becoming the primary users of social media and social commerce, and their disposable income and purchasing power are currently rising rapidly.

Reaching a Larger Audience

YouTube pioneered the social media recommendation algorithm. Later, TikTok perfected the concept. Now, many social media platforms are shifting from a model based around connecting to friends and family, such as on early Facebook and Instagram, to a content creator and algorithmic recommendation model.

In the past, content had to be shared to reach a large audience. Many marketers may remember sad and empty business social media pages with a few dozen followers and little to no engagement. 

Nowadays, it has become easier for businesses to be discovered by large and passionate audiences. Platforms themselves show popular videos to users with related interests. A high-quality, entertaining or informative video can quickly reach a large audience of potential customers.

If you add paid social media advertising to the mix, companies that stay on top of current trends can create highly effective ads and social media advertising strategies with relatively small budgets.

Even long-established companies and institutions can use the expansion into social commerce to connect with new generations. This helps to build a customer base that will remain loyal to them in the future.

Reducing Friction in the Customer Journey

Social commerce removes many of the obstacles that a potential customer typically encounters during the purchasing process. The most significant obstacle removed is the need to go to another website or app to make a purchase. 

Most businesses optimize their online stores for mobile users. But, navigating a site on mobile may still be frustrating enough that a user simply goes back to browsing the social media platform they were just on. Making it possible to complete a purchase without disrupting the flow of their user experience avoids that potential frustration.

Also, once a potential customer finds the product they want to buy, they still have to enter their information and complete the checkout process. Entering payment information can be a significant friction point in the customer journey. The longer the whole process takes, the more likely it is that your potential customer will be distracted and abandon the process altogether. 

Some businesses have tried to fight this by selling their products on marketplaces like Amazon, where customers only need to click a “buy now” button to make a purchase. However, this approach still requires your target user to leave the social media platform they are currently on, something they may be reluctant to do.

Social commerce helps minimize this friction by allowing customers to view and buy products right there on the social media platform as soon as they view the ad or other content. Once a social media user has bought any product from any business on a specific social media platform, they become more likely to buy other products on that platform in the future. 

Friction is also reduced since social media platforms can save the payment and shipping information of users, just like large ecommerce retailers like Amazon, making it simpler for them to complete impulse purchases.  

Building Trust and Credibility Through Influencer Marketing

Social media platforms allow you to place “buy” links on your own ads and videos. It also allows you to partner with online influencers who can place links to your product catalog on their content.

Influencer marketing can be a great way for brands to quickly reach a large audience. Because audiences have already developed a relationship of trust with their favorite influencers, a recommendation can motivate many people to purchase your business’ products or services. 

This applies doubly if the influencer in question is already an authority in your niche. For example, a guitar influencer recommending a specific guitar strap or guitar string model to their audience can carry significant weight.

If you can partner with multiple influencers your target audience watches to recommend your product, this effect is compounded. And since social commerce makes the buying process as frictionless as possible, it is easier than ever to act on that desire.

Collecting Data To Fine-Tune Your Marketing Strategy

Most social media platforms make their money by selling audience access and data to advertisers. Since the largest social media platforms are all free to use, the ability to address their users is one of the main things a social media platform can charge money for.

This means that advertisers and businesses who use social media platforms for advertising and social commerce have access to a potential treasure trove of data. This can be used to identify ideal audiences and optimize strategy for them.

Through social commerce, brands can get access to detailed analytics and see exactly who their main customers are on each platform. For example, Facebook allows brands to view information on customer age, gender, education, jobs, relationship status, hobbies and interests.

Marketers can use this information to further tailor their advertising to their target audience, increasing return on ad spend. This means that the more you sell through social commerce, the more effective it can become, through data-based optimization.

The Challenges

Social commerce does come with its own unique challenges which advertisers and businesses need to be aware of. Learning how to work around these can help separate businesses from their competitors.

Risk of Distraction

If your customer finds your ad while scrolling through TikTok or Instagram posts, it can be very easy for them to keep scrolling and forget about it. This means that your ads need to be relevant and captivating enough to grab their attention and keep it there. 

You are essentially competing with every other creator on their platform whose videos they will see once they scroll away. To stand out, your post must be at least as interesting to your target customer as the videos of other creators.

This means that you need to target your ads as accurately as possible so that they are relevant to the users you are seeking. You also need creative and captivating ad content. Try to create ads that would be unique and interesting enough to entertain in their own right — even if your product did not appear in them. This can be a challenge, but the return on investment can be significant.

Partnering with influencers can make creating entertaining and captivating ads easier since the creator’s audience will already be more likely to want to view the content because of their presence.

Minimal Customization Opportunities

Most social commerce platforms do not allow for significant modifications to their stores and sales tools. This can be both a challenge and a blessing in disguise. 

On the one hand, it can be difficult for some businesses to broadcast their brand identity and differentiate themselves from competitors. A lack of customization options can make it difficult to sell certain types of products. For example, high ticket purchases can be more difficult to market and sell through social commerce, because customers may need more information than they can get through a single ad or video before making a decision. 

On the other hand, the fact that many social commerce posts look and feel similar can reduce feelings of friction for customers. A growing number of customers habitually buy products through social media channels. They may feel less opposition to purchasing your product if the process feels similar to other times they’ve bought something.

Lack of Intent To Purchase

An obvious problem is that your target audience may not be currently looking to purchase a product when they see your ad. If your product or ad is interesting and relevant enough to them, you can overcome this challenge. Even if they don’t make a purchase, every time a user is exposed to your ad creates a touchpoint, and each impression helps to build brand awareness and continue their customer journey.

Social Commerce vs. E-Commerce: How They Differ

Social commerce means selling products directly from a social media content or a paid ad, using the platform’s built-in shopping tools. 

E-commerce, on the other hand, signifies selling products online from your own business website or a custom app. 

Social media commerce is growing rapidly. Analysts predict that the value of social commerce will experience three times the growth of traditional e-commerce in the next few years. They predict social commerce will grow from its 2021 value of $492 billion worldwide to $1.2 trillion in 2025. 

The Biggest Social Commerce Platforms in Business Today

Currently, the biggest platform in social commerce is Facebook, with 19% of consumers stating they have purchased a product through them in the past month.

However Instagram, YouTube, and TikTok are close behind, with 12%, 9%, and 8% respectively. As the spending power of younger generations increases these statistics may gradually shift in Instagram, YouTube, and TikTok’s favor.

How To Deliver a Unique and Enjoyable Social Commerce Experience

The truth is that most social media users are there to be entertained, not to spend money. This can be an important concept to remember when crafting ad strategy. 

Try not to be too pushy in your sales tactics, and produce content that’s engaging, informative, valuable and relevant to your audience. If your ad creatives are entertaining enough that the right audience enjoys them, it can incline them favorably toward you.

Enhance Your Social Commerce Strategy With AUDIENCEX

If your business is trying to branch out into social commerce or improve its current social commerce strategy, then an experienced and effective partner in the space could be just what you need. 

AUDIENCEX is a full-service, omnichannel digital advertising partner that considers each channel and how it fits into your holistic strategy. Our industry-leading experts, advanced data science, seamless media access and predictive analytic tools can help any brand or agency improve your reach and sales on social media and beyond, throughout the entire digital advertising ecosystem.

Our search and social solutions are driven by best-in-class strategy, expert campaign management, award-winning creative and teams that are agile, experienced, and ready to work closely with you to achieve any campaign goals. Reach out today to find out how we can help your marketing performance reach its full potential.