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How Social Commerce Platforms Have Made a Difference

How Social Commerce Platforms Have Made a Difference

Social commerce platforms have enabled your friendly neighbourhood store to go digital, creating a ground-level differentiator

Illustration by Raj Verma Illustration by Raj Verma

Lokho Kesamai of Nagaland never thought his traditional recipe-based pickles would travel beyond the north-eastern states. He has been selling stuff like Pork Chunk Pickle, Dried Wild Apple, Chicken Chunk Pickle and Dried Gooseberry, among other things, for the past seven years but has mostly catered to the seven sister states.

“Now, I am getting orders from places like Mumbai and Delhi also. Although the bulk of the orders is still from the neighbouring states, there is a slow and steady rise in demand from other states,” says the 32-year-old founder of Hornbill Food Marketing.

Kesamai did not open offices in the ‘mainland’—as he refers to the states beyond the Northeast—nor did he appoint sales or marketing staff anywhere. All he did was register as a seller on NE Origins, a Sikkim-based social commerce platform.

Kesamai is part of a growing tribe of business people or entrepreneurs—known simply as sellers in the social commerce arena—who have taken their businesses digital in the past couple of years to overcome the challenge of connecting with customers during the Covid-19 pandemic.

Simply put, social commerce refers to commerce or trade done with a built-in element of tech-enabled social interaction. The interaction could be in the form of chats or even audio or video calls between the seller and the potential buyer. At times, the interaction could also be in the form of pre-recorded videos to ensure that the buyer can have a real-life shopping experience.

While many individual sellers have started using social media platforms such as Instagram or Facebook to market their wares, a large number of social commerce sites have also mushroomed across the country. Such social commerce platforms are playing a far bigger role than Instagram or Facebook, as they offer a lot of handholding and technology-driven tools to empower their sellers, a majority of who may not have even a basic understanding of the digital ecosystem.

The growing importance of social commerce can be gauged from the fact that earlier this year, a report by consulting major Accenture stated that the global social commerce industry is expected to grow three times as fast as traditional e-commerce to $1.2 trillion by 2025. It has pegged the current size of global social commerce at $492 billion.

“Growth is predicted to be driven primarily by GenZ and millennial social media users, accounting for 62 per cent of the global social commerce spending by 2025,” it says in its report, while highlighting the fact that around 3.5 billion people—representing over 44 per cent of the global population—use social media and on average, consumers spend around two and a half hours daily on social media platforms.

The Friendly Neighbourhood Seller

“We started NE Origins during the pandemic in January last year and in less than a year, we have 400 sellers and are registering a month-on-month growth of 15 per cent in our revenues,” says Rewaj Chettri, Founder & CEO, NE Origins. Catering exclusively to entrepreneurs from the north-eastern states, NE Origins has on its platform sellers with many indigenous products like wild honey from Nagaland, turmeric from Meghalaya and black rice from Manipur, among other things.

While one may feel that NE Origins has a very unique proposition, hence it has been able to clock such traction in terms of on-boarding new sellers, the unanimous view prevalent among social commerce platforms is that there is a largely untapped segment of sellers just waiting to initiate their social commerce journey. “We have 700,000 stores registered on our platform of which 200,000 are active on an average every month. We have been registering a growth of around 20 per cent on a monthly basis,” says Jasmeet Thind, Co-founder of Coutloot, which features among the largest home-grown social commerce platforms, according to data from Tracxn. In terms of sales, Coutloot is doing around `65 crore every month with more than 700,000 transactions, adds Thind.

A similar story is developing at Indore-based Kiko, which has turned social commerce into a live video shopping experience. “The Kiko Live section was launched around January end and we have already crossed 10,000 sellers on our platform. We are signing up around 200-300 sellers every day. We might sign up 10,000 more in this month alone,” says Alok Chawla, Co-founder & COO, Kiko. “In terms of number of buyer-seller interactions happening daily, we are seeing 1,000 calls per day where the call time exceeds a minute. Currently, we are doing `50 lakh a month GMV (gross merchandise value) but the real number would be much higher, as sellers have the option of using third-party payment gateways as well.”

Incidentally, the pandemic has proved to be a great enabler for the social commerce segment, a fact corroborated by the significant jump in the number of sellers that have come on board such platforms in the past couple of years. Small sellers earlier were not very digital savvy but they have been virtually forced to embrace technology, says Chawla.

The Indian Twist

What is the most common trait of an average Indian shopper? Ask anyone, anywhere in India and the prompt reply would be a love for bargaining.

While online e-commerce has seen a huge jump in volume and reach, it is all about searching for a product and buying it. There is no human or social element in the whole online shopping experience and that is where social commerce is fast creating a niche.

Indian social commerce players have been quick to understand the average Indian shopper’s psyche and consequently added interesting and innovative features to recreate the physical or real-life shopping experience in the digital world.

Coutloot, for instance, has built an automatic bargaining feature on its platform that provides the buyer a pre-set bargain price within a chat box. The buyer can then select and quote a favourable price, which he or she thinks is fair for the product. Furthermore, its chat and bargaining feature allows buyer-seller negotiations in their respective native languages as the translation is done on a real-time basis.

Kiko, on the other hand, has built its platform on the live commerce concept, wherein buyers and sellers can engage in a live video interaction to know more about the product, its price and of course, haggle. “We have created a one-on-one live selling platform. The live commerce element is the biggest chunk of social commerce in China. This is the fastest growing segment and eventually everyone will try to get into this space, though it is not a readily available technology that one can plug and play. Live commerce is pretty much the future of social commerce,” says Chawla.

Earlier this year, even Coutloot launched a video commerce feature that enables sellers to use short online videos and engage with potential buyers. This assumes significance as a recent report by RedSeer Consulting forecasted that the GMV of live commerce through short videos is expected to reach $5 billion in India by 2025, which is quite a lot.

Incidentally, the growing importance of social commerce can be gauged from the fact that even the traditional and much-larger e-commerce players, like Amazon, Flipkart and Myntra, are looking at the video commerce space quite seriously.

The Trust Factor

Although social commerce is growing by leaps and bounds, it has its own set of challenges and the biggest of the lot is trust.

Social commerce is all about selling non-branded and non-MRP products. Every product could be indigenous in its own way. For Kesamai, it is all about selling indigenous pickles of Nagaland. For others, it could be artwork or clothes or even spices or other condiments and the buyers may have no clue of what they are buying till the time they get the product.

Furthermore, since social commerce is all about dealing with unknown sellers, there is an added element of doubt with respect to payments, refunds and a redressal mechanism, among other things.

“Trust is the biggest factor when it comes to the growth of the social commerce segment. We are still at an early stage, when compared to the highly evolved markets like China or the US,” says Thind, even as he forecasts that social commerce has got huge potential in India.

Sanjay Mehta, Founder & Partner of 100X.VC, a venture capital fund that invests in early-stage start-ups, believes that the payment process is also a challenge, especially for social commerce platforms, as buyers would prefer cash on delivery given the general profile of the sellers, who would in turn want upfront payment for transactions.

Payment is indeed a challenge, as the shopping experience could be very unlike what the majority is used to when buying a branded product. Brands have put in place grievance redressal mechanisms, plus there is always the added comfort of buying from a well-known brand.

So, while there is an explosion of sorts in the social commerce segment, both platforms and sellers are trying different models to gain the trust and confidence of the huge community of buyers that has started looking beyond the tried and tested brands.

Interestingly, Thind believes that features like a video describing the store and product could go a long way in enhancing the trust factor as “offline commerce is all about trust and rapport between the buyer and the seller”.

The Investment Lens

Social commerce has not only given a fillip to small sellers’ businesses but also emerged as a new investment destination for start-up investors, who are always on the lookout for the next big investment wave.

“From an investment point of view, social commerce holds great promise,” says Manu Rikhye, Partner & MD, growX Ventures, an early-stage investment firm. “If we want to increase adoption of technology-led commerce, then this is the frontier that we have to cross. If you have to bring the next 100 million consumers into e-commerce, whether it is ordering, engaging or transacting, then you will need a strategy to integrate social commerce into your thinking.”

Data from Tracxn, a start-up data platform, shows that a little over a billion dollars—$1.15 billion to be precise—was raised by social commerce platforms in India in 2021 by way of 22 funding rounds. It was an exponential jump from the mere $60.5 million that was raised in 2020 through 13 funding rounds. Furthermore, a cumulative amount of $286 million has been raised through five funding rounds by social commerce platforms this year till April.

Mehta of 100X.VC strongly believes that social commerce is growing rapidly and is here to stay. “There is a good amount of services start-ups that are coming up in this space. Several new models are emerging in the social commerce space. Like how e-commerce was nascent in 2006, social commerce is at that nascent stage currently. But it looks very promising for investors to fund the social commerce space,” says Mehta.

The platforms that are new and native to the social commerce space will be far more growth-oriented than ventures or people who have their own websites or are old-school in their approach, he adds.

The Final Word

There is absolutely no denying the fact that social commerce is here to stay—globally as well as in India. But given the street-smart Indian shopper, social commerce platforms will have to continue to innovate and offer buyers an experience that is as close to real-life shopping as one can get in the digital world.

A report by management consulting firm Bain & Company pegged India’s social commerce GMV at around $2 billion in 2020, which was estimated to reach $20 billion by 2025 and further jump to $70 billion by 2030 on the back of a large mobile phone user base.

Further, it is estimated that currently 95 per cent of all retail commerce happens physically and the coming years could see at least 50 per cent of all physical retailers get into some kind of digital presence. This offers a phenomenal opportunity of growth for the social commerce players.

Exciting times lie ahead of us.

 

@ashishrukhaiyar