Social distancing has forced years of digital commerce transformation into just a few months. Social shopping in particular is having its moment in the sun as people spend more time flicking through their Instagram and Snapchat feeds. However, as lockdown eases to varying degrees around the globe and people start to feel more comfortable visiting physical stores again, brands would be foolish to put e-commerce on the backburner.
Snapchat’s debut into e-commerce was a carefully planned, augmented reality (AR) experience. The app first flexed its e-commerce muscle in 2018 in a partnership with Nike that saw it dish out exclusive codes to guests at the brand’s post-NBA All Star game party. Those who scanned them were able to buy the Air Jordan III Tinker within the app. The shoe sold out in 23 minutes.
The partnership highlighted Snapchat’s potential for hosting unique commerce experiences. Fast forward two years (and a global pandemic that has left people unable to visit the shops) and Snapchat is now deep into its e-commerce journey. Last week, the company announced the global rollout of its dynamic ads product. The tool lets brands automatically create ads in real-time based on their own product catalogue, then directs people to buy on advertisers’ own platforms. As product availability or pricing changes, these ads automatically adjust.
Retailers including Adidas, Farfetch and Topshop have been testing the ads, saying the format has provided strong returns. According to Rob Seidu, Adidas’s senior director of media activation in Europe, the sports giant saw a 52% growth in ROI versus normal Snapchat spend after running the e-commerce ads. The brand has subsequently funnelled more spend into the format.
Snap’s decision to rollout the product globally and open up these ads to more advertisers not only comes as marketers look to drive sales with squeezed budgets, but also amid a shift in shopper habits driven by the coronavirus crisis.
E-commerce in a public health crisis
Forrester and e-commerce consultancy Bloomreach recently questioned 320 digital experience and e-commerce decision makers, as well as 640 consumers, and found that Covid-19 has forced years of digital commerce transformation into just a few months.
Major brands have been pushed to rapidly overhaul their digital commerce experiences to keep customers spending and small retailers have had to enable online buying for the first time.
Compared to pre-Covid-19 plans, investment in offline channels such as physical retail stores and in-person sales has been cut in half by brands. However, most plan to increase their investment in online channels, with 64% of firms plan to spend more on their own websites, 58% on their apps and 52% on social media according to that Forrester research.
Forrester analyst Allen Bonde says that prior to Covid-19, search and social media were already “dominating” digital ad spend as both B2C and B2B brands invested in channels where they could reach influencers and customers more easily, while ideally also selling items to them via social commerce.
“Because of Covid, offline spending has dropped significantly and, as our study highlights, sellers are boosting investments in online channels, starting with their own website and mobile apps, but also on third-party social media platforms and marketplace sites like Instagram and Amazon.”
Customers are adapting too, with 50% saying they are shopping on digital channels for products they’ve never bought online before, with a focus on necessities early on in the quarantine. 70% are purchasing more than usual and over 90% of customers say their behaviours are different as they avoid physical stores, put discretionary shopping on hold and buy exclusively online, or as much as possible online.
A separate Kantar study covering Europe’s three largest e-commerce markets of France, Germany and the UK shows that these habits will continue well beyond the era of social distancing.
Already seeing faster growth than any other part of the retail landscape, Kantar predicts that e-commerce will further outperform retail in the year ahead. 32% of households said they had increased or significantly increased their e-commerce spend in the pandemic period and 33% believe their future online purchases will increase. This increases to 40% for the sustainability conscious shopper and 45% of households with children.
Around 80% of households say they will shop for non-essentials online in 2020. The biggest categories are clothing and home electronics, where 50% to 60% state they plan to purchase online in 2020.
Taking social commerce off the simmer
Beyond Snap, other social media platforms are aligning their own offerings to help power this shift. At the start of the pandemic, Facebook and Instagram (which already offers an extensive catalogue of ad formats such as Shoppable Stories) rolled out Shops, which lets small business owners turn their profiles into storefronts to counter the “economic shock” of Covid-19.
With an increased use of social media during the pandemic, there is a huge opportunity not only for these platforms to compete with the giants like Google and Facebook, but also for brand owners to build social commerce experiences to serve customers.
Alicia Solanki, who is the consumer brands managing director at communications consultancy Ketchum, argues that brands looking to capitalise on social commerce need to understand their audience “forensically” and as well as the platforms on which they are most engaged.
“While Instagram may be the right channel for fashion and beauty, consider the way Pinterest has become the go-to for home and interiors inspiration,” she says.
“As someone who has made an instinctive social commerce purchase – a BBQ grilling mat if you must know – it is clear that even after the pandemic has passed, consumers will continue to purchase just as much online as they do today, and perhaps even more.”
What will be interesting to observe, Solanki argues, is whether we bigger ticket items like cars and property are purchased in the same way. “There is still nervousness there, but the idea of browsing in a less pressurised environment with the guarantee of health and safety may tip consumers into making more big-ticket purchases online.”
Bonde highlights that 92% of buyers said the current Covid-19 situation has changed their behaviour toward shopping, so bigger purchases could indeed be on the cards. “50% are shopping online for products they’ve never bought online before,” he adds, pointing out that this is mainly across categories like grocery and household products (“which is not a surprise”) but also kid’s toys, pharmacy items and apparel, to name a few.
Lessons from China and South East Asia
China, where mobile payment platforms and services like Badiu, Alibaba and Tencent dominate, is often cited as a market where digital and social commerce has been a success story. Though eMarketer predicts that the country’s retail market is expected to decline in 2020 for the first time on record, shrinking by 4%, e-commerce is still braced for a boom.
Consumers will spend $2.09tn online across China, which is an increase of 16% – 7.7% points less pre-pandemic forecasts, but still hundreds of billions of dollars in additional spending compared with 2019.
In eMarketer’s inaugural social ecommerce forecast for China, it expects consumers to spend $242.41bn via social channels this year, up from $186.04bn in 2019. WeChat’s successful Mini Programs are proving to be a game changer for this category, even as China is evolving the very definition of social commerce.
In South East Asia, a report published this week by Facebook and Bain found that – accelerated by coronavirus – consumption had moved online, especially for groceries, food, remittances and fast-moving consumer goods.
In Q2 2020, at least 44% of digital consumers across Southeast Asia spent more on packaged and fresh groceries online. This trend is here to stay, says Facebook. Among consumers who have been buying more since April, at least 80% indicated they plan to continue buying groceries online even in the future.
In this region, brands have been investing in new social shopping experience, like the e-commerce live-streaming sessions powered by Lazade and Shopee.
Solanki agrees that western marketers should be taking lessons from their APAC counterparts. “On platforms like Taobao, China’s eBay-style platform that has more than 600 million users, there have been a significant number of brands hosting livestreaming sessions under their own store channel or partnering with influencers to do so.“
She adds: “Covid-19 has definitely accelerated this from a digital commerce perspective and it’s only a matter of time before it becomes more mainstream here in the UK.“