So You’ve Heard of Social Commerce
But why is it the new buzzword in the Indian startup world?
Nestled nearly between ecommerce and in-person commerce, riding on the shoulders of the social media boom, rests the social commerce industry. Recently in India, there have been a burst of apps exploring this format and innovating their own models within it. Meesho being the most popular, with behemoths like Flipkart venturing into the sphere with Shopsy recently.
But what is social commerce all about, and why is it suddenly so popular?
Social Commerce
In plain terms, ecommerce that leverages the social aspect — ie, social platforms, shared shopping etc — falls under this category. Pioneered by Pinduoduo and WeChat in China, this model incentivizes word-of-mouth and plays on economies of scale for the resellers and small merchants and business owners in Tier II and III towns.
In India, ecommerce has till now largely focused on Tier I cities, with a trickle down effect expected for smaller cities and towns.
The social commerce models usually flip this narrative and consider the unique ways in which people in Tier II below cities shop.
Rather than assuming they have lower purchasing power and/or propensity, it reaches out to the youth and millennials in these towns with (usually) non-branded FMCG products, especially in the fashion and lifestyle category.
Models
- Re-seller model: So far the most popular in India. A local merchant or micro-entrepreneur markets the products to their social circle after adding their margin, aggregates the demand and supplies the products to these customers. Within this model, some companies (e.g. Shopsy) take care of the payment and shipping as well, while others leave that task to the aggregator’s responsibility.
- Group Buying: Purchasing in a group unlocks deals that make the entire product cheaper for all buyers. This is the model that Pinduoduo employs. Big Basket in India is also starting to experiment with this model.
- Video Commerce: This can take the form of review videos to live-streaming of shopping experiences with viewers having the option to purchase in real time. BulBul, Roposo, and Simsim are examples of such apps.
Growth
In India, the current average order value is small, standing at ₹250. But this sector is growing rapidly which can be judged by the growing investment it is inviting.
Standing at US$2 billion (2020), this industry is forecasted to grow to US$16–20 billion in the next 5 years, and US$60–70 billion by 2030. This rise will be enabled by falling data prices, increasing mobile and internet penetration, advancement of payment solutions and rise of vernacular content networks.
