The state of social commerce
Social media is peaking in China with the number of active users almost doubled from 653 million in 2016 to 1 billion in 2020. Similarly, Indonesia is also experiencing similar growth trends, doubling its active social media users from 79 million in 2016 to 160 million in 2020. Despite its low penetration, Indian social media users are also the number to be reckoned with as there are 400 million active social media users in 2020. A large number of social media users has been shifting the e-commerce market in recent years.
E-commerce activities traditionally take place in online stores and marketplaces facilitating interaction between businesses and their customers (B2C). Alongside social media mushrooming among internet users, its usage has penetrated the e-commerce market. Nowadays, social media is widely used to enable the customer to customer (C2C) interaction, allowing more personal touch into e-commerce interaction. Social commerce platforms like Chinese Pinduoduo, WeChat (Haowuquan), as well as TikTok; Indian Glowroad; and Indonesian Evermos have leveraged e-commerce experience, enabling users to discover and purchase goods/services within its platforms.16 17 18
Within the last five years, the Chinese social commerce market has been growing exponentially with 6300% growth between 2016 and 2019. In 2019, Chinese social commerce makes up 12% of its gigantic USD 1.5 trillion e-commerce market.20 Compared to the Chinese however, the Indian and the Indonesian social commerce has a much larger contribution to the overall e-commerce market, constituting around 45% and 52% of the overall e-commerce sector respectively.21
Considering its relatively low social media penetration among the other two markets, Indian social commerce is surprisingly big. Despite being the smallest social commerce market, Indonesian social commerce is expected to be the fastest-growing market compared to China and the Indian market in the coming years. Also, the Indonesian e-commerce consumers favours social commerce purchases as 64% of e-commerce transactions took place within social media platforms.22
The central role of social media in driving e-commerce purchases
Looking from the consumers’ behaviour perspective, Chinese, Indian and Indonesian e-commerce consumers probably share one thing in common. These consumers seem to be susceptible to messages delivered by the human factor; friends, families and social influencers inflict trust to consumers.23 24 25 Moreover, Chinese consumers are massive creators actively sharing their personal experiences and testimonies of products/services.26 Research has also shown that 89% of Chinese millennials have a tendency to share their purchase experience online through the use of social media.27 Through social media, the interaction between sellers and their customers are facilitated. Therefore, sellers may establish rapport with their customers, influencing them into making purchases. On top of it, social commerce also acts as a safety net for e-commerce consumers and sellers protecting them from fraudulent activities.28 Sellers will receive payment after a certain period of time during which orders have to be fulfilled.
With the ongoing heightened concerns about the pandemic, Indonesian people’s movements are being minimized under the monitor of government officials. Therefore, with more people staying at home, an increase in daily social media usage could occur. Facebook recently released its own data regarding their products usage which included Facebook, Instagram, and WhatsApp. Their data findings indicate that in many of the countries hit hardest by the virus, total messaging has increased more than 50% over the last month.29 Similarly, Kantar, a consulting firm, recently performed a research which results show that in China, overall Facebook usage increased by 37%, while China’s local social media apps saw usage climb by 58%.30 At this rate of increase, the current circumstances could be shedding more light into the benefits of social commerce and the range it provides.
The rise of conversational/chat commerce
The customs of speaking directly with sellers when making purchases is now accommodated aptly through e-commerce due to the constantly evolving nature of technology. Since 2015, this process has been coined as 'conversational commerce' by Chris Messina in his piece that was published on Medium.31 Broadly speaking, conversational commerce represents the intersection of messaging and shopping.32 These past few years, businesses have been engaging in direct communication with its customers through various digital instant messaging applications such as WhatsApp, LINE, Instagram Direct Messages, Facebook Messenger, and so on. These direct communication practices have opened the doors for online transactions to happen due to its personalization and convenience. In 2019 alone, 83% of consumers engage in conversational commerce to learn about a product or service, 76% to get support, and 75% to make purchases.33 The human interaction facilitated through conversational commerce certainly has made consumers feel the online hospitality and service to a greater extent without having to move around. It has brought consumers one step closer to experiencing the attention that they usually get from a sales associate of an offline store.34
There are many adoptions to conversational commerce in its purpose of being at the consumers' service. A suitable case study to illustrate this is WhatsApp, Indonesia's second most active social media platforms in 2019.35 In 2018, WhatsApp took a leap to approach conversational commerce in 2 ways; the launch of WhatsApp Business with small businesses in mind and WhatsApp Business API for medium to large businesses. Each service has its own approach in stimulating in-chat transactions to happen, such as automated catalogs, responses, notifications, and other in-chat features that are highly customizable.36 37 In Indonesia, SIRCLO utilized WhatsApp Business API in releasing a conversational commerce tool called SIRCLO Chat.38 The platform features an interactive dashboard with features entailing in-chat purchases, automated product recommendations, and automated push notifications.39
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Kebanyakan penjual kebingungan untuk membalas semua pesanan melalui chat sehingga respons lambat dan calon pembeli jadi kabur. __ SIRCLO kenalin SIRCLO Chat nih yang bisa membantu kamu untuk membalas semua chat yang masuk dengan otomatis. Selain itu, dasbor SIRCLO Chat juga bisa dipakai oleh beberapa admin dan terintegrasi langsung oleh katalog produkmu. Selain itu, kamu juga memberikan notifikasi untuk mengingatkan pembayaran dan membuat transaksi secara langsung di chat. Penasaran gimana cara kerja SIRCLO Chat? (Link in bio) __ #SIRCLO #SIRCLOstore #SIRCLOcommerce #Connexi #SIRCLOChat #ecommercesolution #chatcommerce #chatcomm #suksesbisnisonline #bisnisonline #jualandiwhatsapp #jualandichat #bisnisonline #bisnisdigital #umkm #usahakecil #tipsmarketing #whatsappmarketing #admin #jasaadmin #chatbot #jasachatbot
With the latest technological advancements, the merchant-customer interaction isn't limited to only that of humans, but also Artificial Intelligence (AI) or Chatbots. Chatbots have the ability to stimulate interactions automatically with consumers based on a set of predefined conditions, triggers, and/or events , replicating human interaction.40 Chatbots are the programs behind automatic text responses on various messaging platforms such as WhatsApp Business services or even voice responses such as Amazon Alexa.41 42 Its ability to replicate human interaction has led to a majority of Gen Z and Millennials globally (69.5%) imagining a future where 100% of purchases are done digitally or online.43 To put it simply, tools such as WhatsApp Business as well as chatbots' progressing developments play significant roles in pushing conversational commerce to becoming the future for e-commerce.
In conclusion, the Indonesian social commerce trend will be the next growth driver in the coming years. This is because social media facilitates a trustworthy relationship between sellers and buyers, which will increase the likelihood of purchase decisions. Indian social commerce further suggests that social commerce can persist in a market with low social media users. Social commerce is targeting a larger group of Indian population, that is people residing in smaller cities and villages. It leverages push marketing strategy, pushing products and advertisement messages through people’s smartphones. Therefore, marketing efforts cost less and convey messages massively.44
Indonesian social commerce also seems to be more prominent compared to that of China. Social commerce constitutes around 37% of all e-commerce markets in Indonesia, while it only contributes 12% in the Chinese market. We should expect that Indonesia's social commerce will be significantly greater than what we have seen in China.
SIRCLO neither provides regulated advice nor guarantee results. The materials we convey reflect general insight and best practice based on information currently available, and do not contain all of the information needed to determine a future course of action. Such information has not been generated or independently verified by SIRCLO and is inherently uncertain and subject to change. SIRCLO has no obligation to update these materials and makes no representation or warranty and expressly disclaims any liability with respect thereto.