This year, over 102 million people will buy via social platforms in the US alone and by 2025, global sales via social commerce will exceed US$1.2 trillion. Among consumers – and not just Millennials – social commerce is gaining significant traction, growing three times as fast as overall e-commerce. It’s a natural progression in a world where almost everything we think, feel, and do is shared online. The pandemic has accelerated this shift and it has changed the game for retailers, c
, customers, and every part of the supply chain that connects them. More than a digital phenomenon, the change represents an entire shift in the power dynamic between buyer and seller, revolutionising not just how things are bought but, more importantly, how people shop and why.
Following in the footsteps of Instagram, which launched its shop in 2020, TikTok has entered the competitive space with its new shop function, enabling merchants, brands and creators to showcase and sell products directly to over 1 billion users through in-feed videos, LIVEs, and the ‘product showcase’ tab.
Having already operated a live-shopping feature across parts of Asia, where event-based shopping is particularly popular, the platform is well poised to disrupt the retail landscape and stage the next digital shopping revolution. Just like internet shopping did, it will change people’s shopping behaviour and as a result bring radical change.
Since its launch, TikTok has been aggressively competing with Facebook, Instagram and YouTube – luring younger users and influencers with short-from video clips generated by an algorithm that gets stronger with each impression.
Now, the company aims to create its own e-commerce supply-chain system, incorporating warehousing, transportation, delivery, returns management and, of course, analytics on user behaviour and shopping habits.
In doing so, it poses a huge threat to other platforms, including Meta (Facebook and Instagram), and Amazon, which has long owned the conversation around online retail.
For every opportunity, a risk
The concept of ‘newness’ is central to user experience on social media platforms, where content is refreshed several times during one online experience. The immediacy of fresh content, the pressure of influencers, the ease of purchase and the propensity to share opinions on everything makes social commerce a high risk/ high reward space.
While social commerce can provide greater reach and deeper engagement with customers, it also presents issues around supply-chain management. Because to compete, retailers must deliver on customer experience in an entirely new way.
Higher customer expectations
Today, customers expect brands to be ‘always on’: ready to provide real-time product information, delivery tracking and payment transparency at the click of a button.
For retailers, visibility into inventory and the capability to communicate real-time information to partners, suppliers, and customers is vital for delivering on this expectation.
Above all, social commerce is about offering a fast, easy, and frictionless end-to-end experience.
Naturally, customers who can search and purchase items in just a few clicks expect delivery to be equally smooth; different to the expectation they would have at a bricks-and-mortar store.
In fact, by replacing bricks-and-mortar stores or e-commerce sites with social commerce, retailers lose a significant amount of control over brand reputation, customer experience and security, all of which are crucial to maintaining customer trust and advocacy.
A successful social commerce operation relies on high-functioning warehouse infrastructure. Both physical and technical capabilities are essential for meeting customer expectations whilst remaining cost-effective.
Investing in technology can provide the visibility to track orders at the customer level – from hitting the ‘order’ button through to delivery, inventory control, rapid processing of both orders and returns, managing delivery partners and ensuring shipments arrive as quickly as possible at the time promised.
By designing the right physical and technical infrastructure at warehouse level, retailers can adapt to fluctuations in orders and seasonal spikes, and manage errors in the most effective way.
Warehouse dilemma: humans or robots
Along with getting the warehouse design and infrastructure in place, managing warehouse personnel presents a key challenge for the social commerce space. Because labour is an expensive component of fulfilment, decisions around manual or automated tasks are very important, indeed critical, for success.
For example, in deciding whether robots or humans should pick and pack orders, retailers must weigh up the risks and costs of ensuring physical safety for workers, speed and accuracy of output, and cost implications around recruitment, onboarding and retaining versus automating these tasks with robotics.
Further, to invest in automation will require the business to have a robust medium- to long-term business plan that is ‘iron clad’ in its ability to deliver the revenue and profits required to fund the automation investment. However, not having the automation will compromise a business’s cost to serve and accuracy, and ultimately make it very difficult to compete with companies that have high-efficiency systems and lower operational costs.
More sales means more returns
Consideration of reverse logistics is a major factor for retailers in the social commerce space, due to implications for warehousing space and transport.
Interestingly, customers who make purchases through social commerce channels are 20 per cent more likely to return the item than customers who purchase in-store. As such, inventory logging of ordered and returned goods is crucial to ensure forecasting is accurate.
This is especially so for social commerce sites that exist parallel to e-commerce and/or bricks-and-mortar stores. Customers expect a cohesive experience no matter what channel they’re purchasing from. By using software to track inventory accurately, warehouses can integrate replenishment with other systems, like payments and invoicing.
Transport and logistics
The decision to outsource or insource the fulfilment of orders can have huge implications for customer experience. For customers who purchase products through social commerce sites, their only physical interaction with the retailer may be when a delivery is made to their address and if that experience is poor, the brand’s reputation will suffer as a result.
Worse still, social commerce customers are highly likely to share opinions on their social media accounts, posing further threats to retailers’ reputations. By insourcing transport and deliveries, retailers can gain higher levels of control over the customer experience, though without very large scale within tight geographies, this can be very costly. However, this is the direction of the world’s leading e-commerce businesses and no doubt social-commerce businesses that attain the success required will follow.
Retailers must consider a number of factors – such as whether warehouse distribution is centralised or decentralised, the volume of orders and how far they are travelling, and whether quality third-party transport is available – to find the most cost-effective way to deliver on customer expectations.
To scale effectively and to meet surges in sales, many retailers establish networks to optimise processes. For example, when brands expect a spike in sales following a social campaign, having a delivery network allows workflows to be adjusted easily. In this case, having an efficient transport network can ensure orders get fulfilled on time and if a delay did occur, transport counterparts could offer ad-hoc services like overnight delivery.
While social commerce offers huge advantages for retailers, the instantaneous nature of the space demands modernisation in the supply chain to meet demand and remain cost-effective.
Without effective planning around warehouse strategy, design and execution, as well as clarity and commitment to a defined customer experience, supply chains will struggle to adapt to modern purchasing behaviour and will find themselves struggling in the social commerce space.