Over the past two decades, the retail industry has experienced unprecedented disruption as consumers have increasingly embraced new and emerging digital engagement channels. While physical stores have long been the primary channel for retailers to engage with their customers, the rapid emergence of digital channels—such as e-commerce, mobile and social—has begun to disrupt that model, and today’s retailers must adapt to meet the new realities of consumer engagement.

While the shifts to e-commerce and m-commerce have been well documented, it is the shift to social commerce that represents the next great opportunity for today’s retailers. The explosion of social media technologies—such as social platforms (Facebook, Twitter, Google), sharing sites (Pinterest, Instagram, YouTube), localization sites (Foursquare, Shopkick, Nextdoor) and messaging platforms (WhatsApp, Snapchat, WeChat)—have created a vast ecosystem of digital networks that customers spend more and more time in to live, love, share and, as of recently, shop. 

The shift toward social media usage has been dramatic and significant. Social media adoption has become pervasive among internet users, especially young consumers. According to Smart Insights, more than two-thirds (67%) of all online users are active on social media, with nearly all (90%) of Millennials checking in on social media regularly.1 And active users are spending a lot of time on social channels, with usage now accounting for more than 28% of all media time spent online, according to GO-Globe, a web development company.2 Those between the ages of 15 and 29 spend several hours (two to three) per day on social media—surpassing the amount of time spent on traditional media like television or even email.

zoom iconTwo-thirds of online users are active on social media, many utilizing different apps.This social channel shift represents one of the greatest opportunities—and challenges—the retail industry has ever faced. The great promise includes the ability to connect to customers on a more personal level and in more meaningful and immediate ways than ever before. New and emerging social media capabilities promise to open new markets and create new business models, and they offer new channels of commerce. This explosion of new social touchpoints and capabilities, however, also presents an unprecedented challenge for retailers to guide, manage and influence the customer experience in an environment that at times seems largely out of their direct control.


Social commerce—or the ability to purchase products and services directly through a social media platform—is becoming increasingly accepted among today’s consumers. A recent study by BigCommerce indicates that more than 30% of all online shoppers—including more than 50% of U.S. Millennials—are likely to purchase from a social media network.3 Furthermore, social commerce already comprises nearly 5% of the projected $375 billion U.S. online retail marketplace for 2016, according to Forrester Research.4

With nearly 50% of Millennial spend occurring online, American retailers should look to Asian markets as a harbinger of the potential of social commerce, where social commerce platforms such as WeChat and XiaoHongShu, or “Little Red Book,” effectively influence and facilitate millions of daily transactions between consumers and businesses. As a social media–powered merchandise review and shopping application catering primarily to consumers under 30 years old, XiaoHongShu has exploded to $200 million in annual sales and 15 million distinct users in less than two years, according to Channel NewsAsia.5

Recently, leading social media platforms such as Facebook, Instagram, Snapchat and Pinterest have begun to facilitate direct sales without requiring consumers to leave the platform. While these social commerce offerings are still in their infancy, retailers and brands should be paying close attention now, as market research estimates that customer spend directly through social media platforms could exceed $60 billion as early as 2017. This includes buying directly through platforms and through retailer links that enable consumers to directly check out on their platforms—a number that could grow to a staggering $100 billion in the coming years.

While the buy button and similar social commerce mechanisms have seen limited initial success in North America, the explosive potential of this medium and the success in other parts of the world cannot be ignored. While consumers seem to be increasingly willing to purchase via social platforms, retailers have been slow to enable social commerce capabilities that are simple and easy to use. The rapid advance of social commerce technologies, however, is creating an ecosystem that will enable retailers to process social transactions that are more seamless, personalized, and more broadly trusted and accepted by consumers. Through advancements in technologies from digital wallets to artificial intelligence bots, social media platforms are quietly assembling an ecosystem of capabilities that will enable consumers to purchase with a simple tap of their finger and without ever having to leave the social media platform.


It’s clear that social media has rapidly matured from a simple networking tool to a full-fledged commerce ecosystem, and the opportunity for retailers is enormous—and only growing.

According to a study by Forrester Research, U.S. online retail sales will grow to more than $530 billion by 2020, with social media playing a large role.6 Social networks have already been estimated to influence approximately 80% of all online purchase decisions, representing nearly $425 billion of forecasted online sales.

In addition, consumers are increasingly willing to purchase via social media, but retailers’ capabilities have yet to catch up to capture this demand. A recent study of U.S. consumers by Citi Retail Services indicated that 60% of consumers are willing to purchase through social media, representing a potential of more than $315 billion of 2020 forecasted online revenues.7

zoom iconRetailers are not including their full product portfolio on social media.Limitations in digital wallet capabilities, cumbersome checkout processes and online inventory availability are all factors that contribute to social commerce revenues in the United States being only around 5% of total online revenues. According to a recent Baymard Institute survey, one such barrier, cart abandonment, is the result of close to half (40%) of consumers quitting the shopping experience between purchase decision and purchase completion simply because the checkout process is too lengthy or complex—an issue directly addressed through the exponential growth of buy button and digital wallet technologies.8 Additionally retailers are not showcasing all of their products when they do utilize social networks. Research from DataPop shows that retailers are posting information about only 7% of their products on social media.9 Once retailers overcome these barriers, social media platforms will be able to capture a share of this swelling consumer demand.

As retailers embrace social media as a viable and legitimate commerce channel, the potential revenue generated through social commerce could grow from approximately 5% of online sales to 20% over the next five to seven years, representing a potential $100 billion market opportunity for retailers. This rapid growth in social commerce will be drive both by a shift in commerce from traditional mobile and e-commerce channels to social networks and by an increase in overall traffic and conversion rates that takes advantage of the social factors that drive conversions.

Welcome to the social commerce economy.

zoom iconSocial commerce has huge potential to open new markets and create new business models, and it represents new revenue opportunities for retailers.THE RETAIL CALL TO ACTION

In order to remain relevant and compete in this new environment, retailers need to rethink the way they approach social media to transform it into a robust revenue-generating commerce channel. Retailers will need to:

  1. Create a social commerce strategy: Not all social media platforms are the same, nor are they right for each retailer and their unique target audience. Retailers should start by selecting a few key platforms to establish their social commerce capabilities in the channels where their potential customers are increasingly spending their time. Focusing on the right platform to target the right audience is key. From there, the strategy should address how key dimensions of digital commerce—such as the product assortment, merchandising content, digital marketing, pricing and promotion, checkout and payment, and fulfillment—could and should apply to each social media platform.

  2. Make genuine connections with customers: One major benefit of social commerce is the ability to make deeper connections with customers. By engaging with them via polls or asking questions about what they want to purchase, retailers can make smarter product development choices and also manage inventory for the products they discover are most popular.

  3. Establish a frictionless social commerce experience: In order to capitalize on the social commerce potential, retailers need to design and develop a social commerce experience that is as simple as a single click to avoid customer drop-off during checkout. While current social commerce offerings require multiple steps and often redirect to an external e-commerce site, future capabilities should enable shopping experiences that live entirely in the social platform and that are integrated seamlessly into the overall transaction.

  4. Make social commerce an omnichannel priority: As social commerce matures, retailers increasingly need to focus on integrating social commerce into their broader omnichannel initiatives. Key integration points should include master data management, enterprise order management, e-commerce, customer care, mobile and in-store digital technologies.

  5. Build on social analytics capabilities: Retailers need to build their social analytics capabilities by investing in the processes and tools that allow them to rapidly and intelligently respond to consumers’ behavior on social media. Companies that can measure and track their progress, making adjustments as needed, will rise to the top. This will help increase consumer conversion and reduce inventory stockouts, in addition to improving their product mix, brand perception and customer loyalty.

  6. Align the organization to enable social commerce: To truly make social commerce work, businesses must link their social commerce goals to the goals of the broader business and align its people, processes and technologies to clearly define who owns social media responsibilities. Companies that are able to foster alignment among groups involved in social commerce will find themselves far better positioned to actively engage their consumer base and drive bottom-line results.

  1. Smart Insights, 2016
  2. Social Times, 2014
  3. BigCommerce, 2015
  4. Forrester, 2016
  5. Channel NewsAsia, 2016
  6. Forrester, 2016
  7. Citi Retail Services, 2015
  8. Baymard Institute, 2014
  9. Fourth Source, 2014

23 August 2016