The big social media platforms and apps prevalent in the West are grappling with the challenge of introducing social commerce functionalities that open up new revenue streams without damaging the user experience. Snapchat’s share price tanked this week after it reported the slowing growth of its user base a new design, including social commerce-focused updates, has been a major negative influence on.
Social commerce, which is defined as the marketing to sales cycle of e-commerce being kept within a social media platform, is seen as the next major marketing and sales evolution for brands and a key future revenue stream for social media. While the channel is certainly growing and Facebook, Pinterest, Instagram and Snapchat are all testing new social commerce functionalities, it’s still some way from being considered mainstream.
Peers in China, however, seem to be getting the knack of how to build a successful social commerce platform more quickly. Not only is social commerce working and relatively mainstream, particularly among younger demographics, several new platforms and initiatives have gone viral. Chinese entrepreneurs are harnessing WeChat, Tencent’s messenger-based social media, to create what the Business of Fashion online media describes as ‘dopamine-fuelled shopping experiences that are viral, interactive and hyper-social’.
The latest example of this social commerce trend is Pinduoduo, founded by Colin Huang, a former Google employee. Pinduoduo bears some of the hallmarks of Groupon, in that group discounts are offered on products that only become valid if a minimum number of buyers commit within a defined timeframe. However, the start-up’s real success lies in how effectively it taps into WeChat’s social media ‘ecosystem’.
While Groupon buyers have to hope the platform itself attracts sufficient buyers to the deal they are interested in to meet the company offering its minimum requirements, Pinduoduo users are the active party. By inviting WeChat contacts to participate in a deal with them, they access additional discounts, which increase incrementally based on how many buyers each user brings to the deal. Buyers who are particularly successful in leveraging their network can get discounts of up to 90% on goods. It is social commerce built on highly effective multi-level marketing. ‘1-click buying’ and time constraints also encourage impulse purchases.
WeChat parent company Tencent led a $3 billion investment round last month and Pinduoduo, with almost 150 million active users, is now only second to Alibaba-owned Taobao among China’s ecommerce apps.
Rewards and gamification, as well as a quick, smooth buying experience are proving key to China’s social commerce success. While many of the products sold through Pinduoduo are of questionable quality, with suspicions that counterfeit goods are rife, luxury brands are also leveraging WeChat with great success. This usually involves gamification of some description. Dior promoted a recent store opening through an interactive treasure hunt with winners received tickets to the event and Guerlain used a ‘My Rouge-G’ game to promote a new lipstick collection, which involved players visiting physical stores to collect rewards.
One drawback of social commerce for brands is that user data is often kept by the social media platforms themselves. This denies brands the opportunity to build a re-targetable audience and locks them into the social media platform, something many are yet to fully realise. Nonetheless, Chinese and Asian social media are currently the pacesetters not the replicators when it comes to social commerce. It would be a surprise if the big Western social media don’t start to imitate their Chinese peers in the near future. The tables are turning.