What Is Social Commerce and Why Is It the Game-Changer in China’s Retail Scene?
If you think you understand e-commerce but have not practised it in China, you have a lot to learn. While most social media platforms have always attempted to drive e-commerce with Buy Buttons and the like, few have made much impact. Not so in the massive market in China.
What is Social Commerce?
Most people are familiar with e-commerce as well as social media but few grasp the successful combination of the two, Social Commerce. The main reason most people are not that familiar with it is that in most parts of the world, particularly the west, it has not been very successful. China, however, is having phenomenal success with social commerce.
Social commerce is a form of e-commerce that is powered by social media platforms. It relies on recommendations, social interaction, user ratings and shared pick lists to drive sales.
What Differentiates Social Commerce and Traditional e-Commerce?
E-commerce and social commerce share many similar characteristics but they are different models and it is important to understand the difference.
With standard e-commerce, goods and services are sold electronically via the internet. Payments are made and the product is shipped to the consumer (or sent electronically when not a physical product). Shopping can be done on a computer, tablet, or, increasingly, from a mobile phone. The seller manages the transaction through their website or an agent or other third parties. Products may well be advertised on social media but the platform does not conduct the sale.
Social commerce is driven through social media platforms. It is more than merely marketing on social media, however. The seller may integrate with the social media platform but the influence takes place in the social environment. Unlike e-commerce, buyers learn from the experience and opinions of others on the social platform.
Peer reviews and recommendations are powerful selling tools and have proved to be extremely effective. Savvy social media marketers can increase sales even further by offering group discounts. This encourages customers to actively seek out and recruit others to make a purchase. Social commerce is a fun way to shop that is particularly popular with the younger generation.
Leading Social Commerce Platforms in China
While many attempts at social media have failed in the west, it is thriving in China. Here are some of the top players:
With more than 200 million users, Pinduoduo is one of the largest social commerce platforms in China and indeed the world. Founded in 2015, it has grown exponentially in a short space of time. It is powered mainly by the WeChat mini-programme.
It relies heavily on group purchases where shoppers encourage others to make a purchase in order to qualify for greater discounts. It offers a wide range of products at heavily discounted prices. Goods are shipped directly from the manufacturers which help to keep costs down.
Xiaohongshu (Little Red Book)
Another powerful social commerce platform in China is Xiaohongshu. Only slightly older than Pinduoduo, it is also extremely successful and growing rapidly. It uses a slightly different approach in that the platform targets style conscious, younger middle-class shoppers. It is the platform of choice for many young female Chinese consumers with a strong focus on fashion and beauty. While users are predominantly female, Xiaohongshu is actively perusing more male members. Xiaohongshu aims to provide a great user experience and it encourages users to form a shared community.
One of the main reasons for the success of Xiaohongshu is celebrity endorsements and particularly the abundance of key opinion leaders (KOLs). They are a powerful influencing factor.
Another difference is that Xiaohongshu holds its own inventory. This helps to control quality and delivery service.
Xiaohongshu currently has 100 million registered users and 30 million monthly active users. It also operates cross-border.
This social selling application also operates off WeChat as well as Weibo and has in excess of 20 million followers. It is aimed primarily at Chinese consumers that live abroad.
Another social commerce site in China, Look relies heavily on key opinion leaders who earn money promoting brands and products on the application. It focuses on fashion and is attracting a lot of interest from other parts of the world.
Why Is Social Commerce in China so Far Ahead of the Rest of the World?
This is a common question and there are many reasons for this. Most similar ventures in the west have failed. Many were perhaps a bit too early. There is no doubt that the concept of group discounts and social shopping is booming in China. The model works.
Most versions that failed tried to target the individual shopper and tried to manipulate an existing social media platform into a social shopping experience by simply adding in a buy button. This would never gain the same kind of momentum true social commerce has done.
The mini-programmes used in WeChat encourage people to share to get discounts of up to 90%. That alone is a compelling incentive to recruit and encourage friends, family, and other social connections.
China also has great internet availability and huge mobile adoption. Many consumers skipped the PC stage altogether and only use their mobile device for online activity. There is low resistance to mobile or social shopping as many consumers are not in the habit of shopping at traditional brick and mortar stores and there is little loyalty to them. There is also a rapidly growing disposable income for large parts of the market.
Last but not least, the Chinese are more accepting of new technology and are seeking an entertaining experience more than a simple transaction. They crave social approval and interaction.
These are the reasons why social commerce has taken off more rapidly in China, compared to the rest of the world.