November and December are traditionally stellar months when it comes to global e-commerce. While we have long anticipated a massive transformation in the e-commerce industry, our projections around the evolution of consumer behavior, technological tools, and business models, have all materialized earlier than predicted. This rapid acceleration has largely been driven by Covid-19, which has prompted an unprecedented wave of online shopping. In just the first quarter of 2020, prior to the wide scale rollout of nation-wide lockdown policies, the U.S. e-commerce industry doubled, condensing a decade-long growth trajectory into a single quarter.
The fintech industry has also exceeded growth projections due to the pandemic-fueled shift in consumer behavior and the accompanying rise in online payments. Pre-pandemic innovation in payment processes, particularly around clearing and settlement, fraud prevention and improved user experience, accelerated significantly due to COVID. But now, e-commerce players support a full suite of financial services for their customers. For example, Shopify, a leading platform for online businesses, generates a significant portion of its revenue from financial products, including clearing and credit services.
It was only natural that social media companies would join the party. Until recently, their activity in the realm of e-commerce was mostly limited to publishing sponsored ads by sellers. However, closer collaboration between e-commerce businesses and social media platforms holds much greater potential.
Introducing social commerce: the integration of online shopping into users’ daily social media experience. Social platforms have identified the incorporation of e-commerce tools into their offering as a way to enhance their value proposition to consumers. The platforms benefit greatly from acquiring valuable consumer data while keeping users engaged in their ecosystem. Sellers, on the other hand, are able to leverage the social media platforms’ ability to personalize user experience, which translates into higher conversion rates. Increased user demand by consumers has further incentivized social platforms to prioritize payment and shopping options.
Social commerce is also driving competition among the platforms. Instagram, Tik-Tok, and Pinterest are just a few of the players that have announced new e-commerce solutions, but they all have the same goal in mind: to attract new sellers. Whereas previously, social platforms focused on improving their value proposition for consumers, the sellers are now firmly in the driver’s seat. Platforms that accommodate sellers and adapt to their needs, particularly in terms of marketing, technology, payments, and logistics, are able to substantially differentiate their offering. In a world of diminishing consumer loyalty to the networks, the social media companies’ ability to provide a personalized experience, alongside a broader range of relevant tools, is essential to keeping shoppers on their platform.
We’ve seen this trend pick up serious momentum over the past year. Facebook, for example, introduced Facebook Shops, a collaboration with Shopify that enables the 1.7 million sellers on Shopify’s platform to sell directly on Facebook, eliminating the seller’s need to open a dedicated store on Facebook. TikTok, for its part, launched TikTok Shopping, a solution that allows Shopify sellers with a TikTok account to display their catalog directly on the app. TikTok went the extra mile when it announced that sellers could let the platform manage logistics and supply chain activity for them.
Google hasn’t been sitting idle either. It handles billions of daily searches for consumer goods from three billion Android devices globally. Moreover, Google has done an excellent job at leveraging its search engine to facilitate digital commerce. For example, it displays products from various shops directly on search results pages, creating a convenient shortcut for consumers. In parallel to announcing partnerships with GoDaddy, WooCommerce, Shopify, and Square, the industry giant has also eliminated the registration fee on Google Shopping to attract more sellers.
The e-commerce playground is clearly changing, and the market share of traditional players such as Amazon and Walmart is at stake. The inherent bond between fintech and e-commerce has motivated large players to enter the shopping arena and as social commerce grows in popularity, tech companies and social media platforms will continue to offer new e-commerce services, while new startups will emerge to seize new market opportunities. A shopping revolution is indeed underway.
Galia Beer-Gabel is VP of Business Development and Operations at Team8