Hi friends, happy Saturday! đź‘‹Â Â
Welcome back to This Week in Retail! I’m so excited to start writing these weekly newsletters again. There’s no podcast episode this week, I’m currently figuring out how I want to relaunch my podcast so stay tuned!
This week we’re taking a second look at social commerce and the biggest contenders in the space as this outlook has changed a bit since last year given the macro economic environment.
Comment below and let me know what you think!
Social Commerce Opportunity
Social Commerce, or the buying and selling of goods or services directly within a social media platform, has been on the radar of large social media companies for many years now. And for good reason, the seamless integration of driving advertisements and subsequent sales on a single platform has the potential to be incredibly lucrative, however US social media platforms have yet to crack the code.
While social commerce is a newer phenomenon in the US, China has been an early adopter of this trend. In fact, social commerce in China is estimated to drive 14% of total eCommerce sales in China by 2023.
Why It’s Flopped So Far..
US consumers have yet to buy into social commerce, primarily due to the clunkiness of the user experience. Adding items to your cart and checking out isn’t a seamless process, and returns are extremely complicated and often expensive. Simultaneously, new tools within e-commerce website creation and management, like Shopify, are driving brands and marketers to opt for creating their own branded websites to drive purchases.
During 2020 and 2021 we saw a massive push towards social commerce from the all of the largest platforms including Amazon, Google, Facebook, TikTok, and even SnapChat. But since these initiatives were launched, the global economic outlook has taken a turn for the worst and almost all of these companies have begun to walk back their e-commerce initiatives in some capacity. This leaves a gaping hole in the market during a time when social media use is at an all time high.
TikTok seems the most primed to expand into this space given its virality, discoverability, and rapid growth within the US. In fact, TikTok just announced plans to open US based fulfillment centers in an effort to compete with Amazon’s FBA (Fulfillment by Amazon) program. This strategic move marks TikTok’s commitment to social commerce as its next major revenue stream, alongside the growth of its ads business.
This strategic move marks TikTok’s commitment to social commerce as its next major revenue stream, alongside the growth of its ads business.
The idea of TikTok launching fulfillment services could be monumental for not only the platform, but also for creators and small businesses. One of the most challenging parts of running a small e-commerce business is housing the inventory and dealing with shipping and returns. If TikTok is able to solve this problem for small businesses while also creating a seamless shopping and checkout experience for consumers it could become the winner in a highly competitive space.
An Unexpected Player
Another, somewhat unexpected player, in the social commerce space could be Twitter. Elon has expressed that he wants to turn Twitter into an “everything app” similar to China’s WeChat, which serves primarily as a messaging app, but has recently launched livestream shopping features. The social media landscape in the US feels incredibly disjointed so the creation of an app that seamlessly combines the best of every social media platform into one, while also allowing users to buy things directly from the app would be a game changer.
WeChat launched livestream shopping in February of 2020 right before the Coronavirus pandemic and it has been extremely successful. WeChat also offers WeChat shops which are e-commerce shops that brands can create and easily integrate with WeChat pay.
If anyone can pull this off, it’s Elon Musk, so it will be really interesting to see what Elon does at Twitter.
There’s Always Amazon..
Amazon has been incredibly innovative in the social commerce space, launching livestream shopping and creating “influencer shops”, which allows influencers to curate their favorite products in shoppable collections.
While Amazon already has the e-commerce infrastructure in place to execute on the “commerce” in social commerce, they don’t have the social media power that TikTok has. Consumers don’t view Amazon as a social app, so it would be challenging for them to pivot into an entirely new business model.
Forward Looking
In my mind, the three biggest contenders for social commerce in the US are TikTok, Amazon, and Twitter. Given the macro economic outlook, the next few years will be challenging as consumers cut back on discretionary spending, so the companies that can afford to continue to investing in this space are likely to be the winners down the road.
Retail+Tech News:
Adidas Terminates Partnership with Ye
Adidas ended its partnership with Ye, aka Kanye West, over his recent antisemitic remarks.
Hours later, Gap said it would remove its Yeezy items from its stores immediately.
Forbes said the loss of the Adidas partnership cost Ye his billionaire status.
Tech Stocks Fall After Earnings
Earnings continue to be challenging for growth companies, specifically Alphabet showings a dip in Youtube ad revenue.
Microsoft declined about 6% after the tech giant reported weaker-than-expected cloud revenue.
Amazon shares dip after the company gave weak guidance for the holiday quarter, and its third-quarter results also fell short of Wall Street’s expectations.
SheIn launches a resale platform, SheIn Exchange, as part of it’s ESG pledge.
U.S. Shein customers can buy and sell previously owned items via the existing Shein mobile app, according to a company press release. Shein Exchange is available to all U.S. customers, with plans to expand elsewhere globally next year.
This comes at the same time that a scathing documentary was released exposing SheIn’s poor working conditions.
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-Jackie
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