The Rise of E-Commerce and Opportunities for Social Commerce and Livestreaming
Since the beginning of the Covid-19 pandemic, we have seen a few years of digital commerce innovation condensed into just a few months. Coresight Research estimates that online sales in 2020 will increase by around one-third from 2019, to $746 billion. This would account for around 19% of all retail sales in the US, roughly double the proportion just six years ago.
Many consumers may never go back to their old ways of brick-and-mortar shopping, and even those who have begun to return to stores are likely to keep a heightened share of their purchases online: Coresight Research’s recent US consumer surveys indicate that over one-quarter of consumers consistently expect to shop more online and less in stores in the long term. The bottom line is that the omnichannel, digital-focused shopping experience is here to stay.
To differentiate their businesses, retailers must find the most productive niches within the increasingly crowded e-commerce space. We see the rise of social and livestream commerce as two of the most important trends in e-commerce. Social commerce is the use of social media platforms to either directly sell, or promote and refer, products to consumers. Livestream commerce encompasses the promotion and selling of products by influencers or companies via live video streams on their websites, e-commerce sites or social media platforms.
Why Now Is the Time To Invest in Social Commerce
At Coresight Research, we often look to China as one indicator of how US retail may develop. Chinese consumers tend to be quicker to embrace new trends in online retail that subsequently take hold in the West. Social commerce sales in China reached an estimated $149.0 billion in 2019, and are projected to hit $234.1 billion this year, according to Tianfeng. It is also worth noting that social commerce in China is a broader segment, encompassing other forms of social buying—such as S2B2C (supplier to business to consumer) platforms, which aim to shorten the supply chain between factories and consumers. Even with this caveat, social commerce remains in its comparative nascent stages in the US: Estimates made by TechNavio indicate that social commerce produced $22 billion in sales in 2019, comprising just 4% of all e-commerce.
However, the opportunity for social commerce to thrive in the US is very real. The time spent by consumers on social media has picked up in recent years: Since 2015, it has seen a CAGR of 8.8%, faster than the average growth rate of 6.6% for the prior six years, according to usage data from BroadbandSearch. The rise of TikTok has facilitated engagement with the Gen Z consumer, and Facebook now reaches every age group in the country almost evenly. Now may be the ideal time for retailers to invest in social commerce, as consumers of all ages are spending record amounts of time on social media.
A growing number of these consumers are integrating social media into their shopping process. Fully 57% of US Internet users now use social media either to research products or make purchases, according to a November 2019 Coresight Research survey. Social media is a particularly attractive avenue of commerce for younger Internet users: 47% of US consumers aged 18–34 engaged in social commerce in October 2019, up from just 33% in 2018, according to data from Bizrate Insights. The increased use of social media in retail should lead to the social commerce market growing at a CAGR of 31% between 2019 and 2024, according to projections from TechNavio.
Brands and retailers have increasingly diverse options to take advantage of this market growth. In May 2020, Facebook launched Shops, a platform for businesses to set up free storefronts on Facebook and Instagram. Integrating storefronts into two of the US’s most popular social media platforms should further accelerate the growth of social commerce by reducing friction in the customer journey: Fully 77.6% of US consumers who use social media for product discovery abandoned purchases due to a lack of built-in purchase functionality, according to Coresight Research’s survey.
Livestream Selling Is a Key Component of a Social Commerce Strategy
Livestreaming is fast becoming another go-to option for retailers looking to enter the social commerce market. To be sure, not all livestream selling takes place on social media platforms: In China, e-commerce giant JD.com hosted a four-hour livestream event on its website and app during this year’s 6.18 festival in June. However, livestreams on Facebook, Instagram and TikTok are powerful tools and remain the most common form of livestream selling in the US. Livestreaming allows brands or influencers to interact with customers in a more authentic, engaging way and enables consumers to understand the details of a product without having to go into a store.
China may again serve as a promising bellwether for the global livestream selling market. Livestream commerce in China reached an estimated $63 billion across major platforms in 2019, according to Chinese financial services firm Everbright Securities. We conservatively estimate that livestreaming could grow to a $25 billion industry in the US by 2023.
Recent US livestreaming developments seem to point to this being a reasonable growth estimate. During the pandemic, brands in the US have increasingly turned to livestreaming as a substitute for product launches and in-store customer engagement: Tommy Hilfiger, for instance, launched its entire spring lineup via livestream. Smaller companies have also begun to find ways to simplify and monetize livestreaming, including CommentSold. CommentSold allows consumers to shop products without leaving the livestreaming platform by adding items to their digital cart instantly as they watch a video. This intersection of innovation—brands using livestreaming to engage better with consumers, and social platforms improving livestream purchase functionality—should create a perfect storm for livestream selling to thrive.
Key Insights
It is unlikely that consumers will switch all of their shopping back to brick-and-mortar stores post crisis, but they are also not going to settle for sub-par online options with clunky purchase functionality and opaque product descriptions. Experiential retail will move more online to become experiential e-commerce as consumers crave fun, interactive and personalized online shopping experiences. Social commerce and livestream selling are two of the most effective ways that retailers can meet this demand.
