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India's emerging social commerce poised for growth
E-commerce transactions where buyers and sellers interact social media platform with each other before concluding a purchase is called as ‘social commerce’. In conventional e-commerce, buyers browse through a digital catalogue, whereas in social commerce, buyers and sellers complete their transactions/purchases through their social media accounts by interacting on various social media platforms (such as Instagram, Facebook and Pinterest).
According to a Bain & Company report, social commerce in India (in terms of gross merchandise value) was estimated at ~ US$ 2 billion in 2020 and is projected to reach US$ 16-20 billion by 2025 and US$ 60-70 billion by 2030. Share of social commerce in India’s e-commerce market (US$ 38 billion in 2020) is expected to increase from the existing 1-2% to 4-5% of the projected US$ 140 billion market by 2025.
Increasing preference for online shopping
According to Forrester Research, Indian e-commerce sales increased by 7-8% in 2020. Also, the e-commerce sector recorded growth as most consumers shifted to online shopping as opposed to stepping outside due to lockdown restrictions.
Rising number of online shoppers
The number of online shoppers in India is expected to reach >250 million by 2022, according to RedSeer. Owing to a high level of social media engagement among people, social commerce is expected to play a significant role in expanding e-commerce.
The industry is witnessing increasing investments from key global players. For example, in 2020, Facebook invested Rs. 43,574 crore (US$ 5.7 billion) in Reliance Jio and Google put in US$ 4.5 billion in Jio Platforms.
2020 also witnessed significant developments of the domestic players. For example, the acquisition of Future Group by Reliance Retail to expand Ambani Group’s presence in the e-commerce space. In January 2021, Udaan, a B2B e-commerce platform, raised US$ 280 million (~Rs. 2,048 crore) in additional financing from new investors—Octahedron Capital and Moonstone Capital.
Also, there is a rising number of small and midsized sellers in India that are adopting e-commerce as their distribution channel. In December 2020, Amazon India reported that ~4,152 sellers on its marketplace surpassed the Rs. 1 crore (US$ 136.90 thousand) sales mark, while the number of sellers with >Rs. 1 crore sales increased by 29% YoY.
Widening social media influence
E-commerce is becoming the next-gen tool for Indian manufactures, with ~28% millennials buying products sparked by social media endorsements and while the remaining regularly track brands / trends on social media platforms to stay updated on brands and products. E-commerce players are making significant efforts to build their social media presence, adapt digitisation and promote products on these platforms to reach the younger generation.
Social commerce emerging as a new business model for small and midsized businesses
Social commerce is evolving as a new communication channel and transaction model for small and midsized companies, as it allows efficient online product discovery and easier conversation with brands.
Moreover, this model could empower >40 million businesses by offering a direct line of communication to customers and a niche market to every retailer because of India’s large consumer base.
With a combined reach of >400 million users, social media platforms such as WhatsApp, Facebook and Instagram allow companies to tap into potential customer base.
Key SMEs taking the lead
Key SMEs are leveraging social commerce to expand in India and worldwide and focusing on creating new business opportunities.
For example, in 2020, Jaipur-based Ms. Ritu Bhansali, Founder, Everything Mom Made, started her skin care brand on Instagram and the company acquired 2,300 followers in less than five months. Besides supplying bulk orders for weddings, and catering to a host of organisations, the company ships ~80 individual packages each month.
According to Ms. Kriti Tula, Creative Director and Co-owner, DOODLAGE (a fashion brand), with the help of social media sites such as Facebook and Instagram, DOODLAGE grew 3x compared with the pre-COVID levels and expanded footprint to markets including Australia, Dubai, Singapore and Europe.
In addition, various features on social media platforms—such as Instagram’s photo sharing, video calls and hosting polls—help sellers gain valuable insights on consumer preferences to boost sales and plan business strategies.
Evolving business models such as reselling and group buying
In addition to social media-led product discovery, business models such as reselling and group buying have also evolved in this space.
For example, Meesho, India-based social commerce platform, follows a reselling model, wherein suppliers list their product catalogue on the app and individual entrepreneurs/businesses connect with them via Facebook and WhatsApp for relevant purchases. In India, >50,000 suppliers and 8 million entrepreneurs run and manage their businesses using Meesho.
DealShare, a social e-commerce start-up based in Jaipur, sources wholesale goods from local producers and sells them to customers through the DealShare App. The company also offers deals/discounts on its WhatsApp group and each time, users refer/share items to their friends and relatives, they get discounts. It supports >10,000 small businesses.
Social commerce players vying for bigger market pie
Social commerce in India is witnessing two-sided value creation—from seamless customer social media shopping experience to the overall development of social commerce players. In line with their strategy to gain social media platform insights and enable brand development, social commerce players are focusing on creating employment opportunities for resellers and suppliers on their platform.
As per RedSeer Consulting, social commerce players are expected to grab ~5% of India's e-commerce market (US$ 140 billion), at a CAGR of 65% between 2020 and 2025. For these players, ~25% consumers are estimated to be from tier I cities, ~20% from metros and the remaining from tier II and tier III cities.
The ‘Make in India’ Initiative
The ‘Aatmanirbhar Bharat’ initiative is bolstering the social commerce industry by allowing domestic producers to transform their business strategy and shift from in-store sales to online deliveries. Also, the ‘#VocalforLocal’ movement is encouraging technological innovations, making the country competitive and improving its global economic engagement.
The Indian social commerce industry is enabling users to shop instantly through AI-driven, brand-tagged user-generated content and creating employment opportunities, making it a win-win sector for India. The number of active social media users in India is expected to grow to ~448 million by 2023 from ~330 million in 2019; this in turn is expected to boost social commerce in the country.
In addition, the ‘Aatmanirbhar Bharat’ initiative caters to the ambitions of domestic producers by empowering them to establish their social commerce base, thereby accelerating the industry and its overall gains. Also, to meet the rising consumer demand, retailers and wholesalers are implementing omnichannel models.
Moreover, growth in social e-commerce would also drive allied industries such as logistics & warehouse, agri-tech and omnichannel sales.