LONDON, Dec. 27 (Reuters Breakingviews) – One of China’s biggest exports in 2023 will be its social e-commerce phenomenon. TikTok, YouTube and Amazon.com (AMZN.O) are among the companies rolling out features that combine online shopping and sharing. The latest fashion is also bound to run into some limitations.
There is preliminary evidence that the sale of goods through live social networks works beyond the People’s Republic. Viewers enjoy interacting with celebrities and so-called influencers, but the ultimate goal is clicks to purchase. Social sensation Nisrin, for her part, has attracted 500,000 TikTok followers, while selling up to £10,000 ($12,313) worth of makeup and other products in a single video shoot.
TikTok, owned by ByteDance, introduced the concept to the United States and Britain to replicate the success of Douyin. Its Chinese sister app enabled the sale of $119 billion worth of goods in 2021. Amazon recently introduced its own copy, Inspire. OnlyFans, a video service known for its sexual content, also allows creators to sell personalized merchandise to subscribers.
Live online shopping revenue will help offset reduced marketing budgets. US social media ad spending, which has been growing around 30% a year, will decline by an average of around 12% over the next three years, to reach $114 billion by 2025 , according to the Statista data portal. By contrast, consulting firm McKinsey projects US social media e-commerce sales to rise 20% annually over the same period, to $80 billion.
The appeal makes sense. Retailers want to attract and keep shoppers online. If customers can learn more about products through interactive live streams, it should reduce returns, a costly aspect of e-commerce.
However, many products will not adapt to the environment. Cosmetics work better than, say, electronics. Social networking services may also have a hard time charging additional fees to influencers and retailers. Amazon and others offer shopping features at no additional cost. And competitors may ultimately be your customers. Venture capitalists have invested $700 million, according to research team Pitchbook, in startups like Firework that provide such technology to brick-and-mortar retailers.
The network effects will be powerful. On TikTok, a two-hour live shopping event helped a small beauty brand generate a week’s worth of sales at its flagship store. These anecdotes are what will make e-commerce go viral on Western social media.
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(This is a Breakingviews prediction for 2023. To see more of our predictions, click here.)
CONTEXT NEWS
Amazon.com on December 8 introduced a feed called Inspire, which allows consumers to shop from videos and photos posted by influencers, brands and other customers.
OnlyFans, a subscription service known for adult content, revealed on November 17 a partnership with the Spring e-commerce team to allow creators to sell personalized products.
Edited by Jeffrey Goldfarb and Katrina Hamlin
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