Can social media be a retailer’s best friend?

The Covid-19 pandemic and the subsequent lockdown shut down millions of neighbourhood mom-and-pop stores. But they still found a way to do business—by using social networks to connect with customers, take their orders on messaging apps, decide on a payment method, and then deliver goods at their doorstep.

Social commerce, which essentially means using social networks such as Facebook, Twitter, and Instagram, among others, to promote and sell products and services, has become the best friend of small retailers in India, and not just because of the pandemic.

In fact, according to a recent report released by Bain & Co. in partnership with Sequoia India, small sellers make up 85% of all social commerce players, forming its backbone.

“Small sellers who are now able to sell to first-time online buyers, will form the backbone of this sector. We encourage the entire Indian retailer ecosystem, 85% of whom are currently small retailers selling their products offline, to internalise the findings of this report and embrace social commerce in order to stay ahead of the curve,” said Mohit Bhatnagar, managing director, Sequoia Capital India LLP.

These small retailers primarily sell products offline, with up to 35% of their revenue coming from social commerce, says the report titled The Future of Commerce in India – the rise of social commerce. Small retailers have taken a fancy to social commerce because of two main reasons: the reach of such platforms, and the with which one can sell products—from sharing catalogues to interacting with customers. Consumers, too are drawn in by the ease of use of such platforms. Another important aspect is trust, with 75% of purchases being made from a known entity. Fashion is the most frequently purchased category in social commerce; then comes beauty and personal care, followed by food and grocery.

According to the report, what has also driven growth in the sector is the fact that it fulfils unique consumer needs. For example, in categories such as food and grocery, purchases are driven by convenience, trust and cheaper options, while for fashion and home decor, it satisfies the need for variety and customisation, community connections and fun shopping experiences.

Another finding is that nearly half of India’s consumers do not have a specific product or brand in mind when shopping via social channels and they discover products through peer recommendations and other influences. Therefore, social commerce is a tool for discovery and therefore purchase for such customers.

“Social commerce presents a great opportunity for customers and sellers to discover one another. Almost half of consumers do not know what they are looking for and are not loyal to specific brands. Nudges or recommendations from relatives and friends are a big driver of action, and impulse purchases present an opportunity for sellers,” said Radhika Sridharan, partner and leader in Bain India’s Customer Strategy & Marketing practice.

The report says that social commerce has the potential to empower over 40 million small businesses and entrepreneurs across India.

According to the report, India’s social commerce sector, which is a $1.5 billion-$2 billion market (in terms of gross merchandise value or GMV) now, can grow to $16 billion-$20 billion in just five years, increasing to $60 billion-$70 billion by 2030. In other words, the country's social commerce sector will be two times the size of the current e-commerce market in 10 years. The growth would be driven by formats ranging from conversational commerce on chat platforms to video-led commerce, or a vibrant social reseller community.

While India has the second-highest number of connected users globally, at around 572 million (which is 41% of the population), with only 8% of Indians (about 105 million) shop for products online. And their average spend is $286 per year—much lower than other markets.

It says that digitally connected Indians spend on an average more than three hours a day online, of which around two hours are taken up by messaging, social media networking and watching videos. Social and video platforms have more universal usage for both online transactors and non-transactors—who number about 400 million. They do not buy because of a lack of trust, the biggest impediment to online commerce. Order-taking and management processes are key pain points for both sellers and customers, the report says, adding that the use of better consumer insights to enable curation was a key experience driver for both buyers and sellers looking to scale.

According to Shraeyansh Thakur, vice president, Sequoia Capital India LLP, the rise of online commerce has just begun. “Social commerce is playing a key role in democratising online commerce, connecting brands, consumers and small businesses directly through social platforms and meeting the modern consumers’ need for personalised, differentiated products. Social-first models have been able to scale with much lower customer acquisition costs globally and we are seeing similar trends with Indian startups experimenting in this space. While early in its evolution in India, it’s set to scale rapidly in the next 5-10 years, offering a huge opportunity for innovative new products and business models.”