social commerce

Asia’s mobile phone penetration matched with the high popularity of social networks has paved the way for social commerce to flourish in Southeast Asia. More and more online shoppers are using social media channels like Facebook and Instagram to browse and to negotiate a purchase of beauty products, apparel and other goods instead of buying it on typical ecommerce websites.

Thailand is the world’s biggest social commerce market where 51% of online shoppers have purchased goods directly via a social media channel.

Social commerce has been practiced by every third online shopper in Malaysia and Indonesia, while globally around 16% of online buyers have shopped directly via social media.

Across the region, Facebook and Instagram are among the most popular networks and on average, internet users spend from 1.6 hours in Singapore to 3.7 hours in Philippines on social media every day. This, the fact that Southeast Asians are reluctant to share their financial information online and less than 20% of population (except Singapore) use either debit or credit card to make payments drive social commerce in Southeast Asia.

How Social Commerce Works in Thailand

Usually merchants set up ‘shops’ on Facebook or Instagram, or both, and post images and details of goods for sale. Potential shoppers can browse and inquire about product availability and arrange a method of payment, typically a bank transfer, through a popular chat app such as LINE.

In social commerce, the order is usually made online while the payment – offline.

Social media ‘shops’ offer nearly anything from food, beauty and health products of various brands to apparel and accessories, sometimes secondhand or with minor defects. 

How Big is Social Commerce in Thailand?

The consumer-to-consumer (C2C) market size in Thailand is significant. Page365, a startup that helps small retailers sell products via social media, estimated that social commerce is worth more than $500 million per year in the Land of Smiles alone. However, it is difficult to accurately measure the market size as majority of sales from social media are conducted via bank transfer and merchants refrain from disclosing their real revenues.

ecommerceIQ decided to test one of several popular forums where shoppers frequently discuss favored and reliable Instagram/Facebook stores for makeup. The team chose an Instagram makeup shop by user @lachompshop due to popular word of mouth and recommendations on Pantip forum.

Case Study: The Social Commerce Journey

The search for products takes place by scrolling through @lachompshop picture gallery on Instagram. ecommerceIQ decided to purchase a MAC lipstick, which surprisingly was selling for 550 Thai baht, 300 Thai baht cheaper than in MAC’s official online store.

social commerce

social commerce

On social commerce shops products usually are browsed by simply scrolling through the seller’s Instagram picture gallery.

social commerce

A lipstick on MAC’s official online store costs 850 Thai baht while @lachompshop offered to sell it for 550 Thai baht.

The seller indicated her LINE account in the Instagram ‘About Me’ section so she could be easily reached for further product inquiries. The seller replied on LINE within one minute of the team’s question and confirmed product availability with a screenshot of the product from her Instagram page. The exchange was short – the seller noted delivery would take 3 days and after the team negotiated for express delivery in 2 days at no additional charge, she outlined more details – payment had to be made before shipping of product.

The seller sent her bank details so that 600 Thai baht (included 50 baht delivery cost) could be transferred to her account. The entire purchase process was simple – a short exchange on the chat app with a following bank transfer compared to filling online forms, payment card details, when buying online.

social commerce

The exchange with the seller took place on March 29, 2016.

social commerce

MAC lipstick that was ordered by ecommerceIQ team

Once the transfer was made, the transaction could not be cancelled. After the payment was done, the seller followed up in LINE with a tracking number from Thai Post so delivery could be followed online.

The MAC lipstick arrived in a brown package, sealed with a protective clear tape, and actually even a day earlier than expected. The delivery time in the end was just 1 day compared to 2-5 days waiting for products bought online from brand.com store or marketplace.  The product was in perfect condition in terms of exterior, in the original MAC packaging and was the right color. However, the lipstick texture was slightly smudged, possibly due to the heat during delivery. There was no pre-delivery text or call as would be in a typical ecommerce purchase.

social commerce

The new lipstick was delivered before expected for a nice surprise after agreeing on the purchase via Instagram shop.

Once the seller was notified of the product arrival, she responded politely within 5 minutes adding an element of personalized contact to make the experience more positive.

The Good and the Bad of Social Commerce

Facebook and Instagram provides an inexpensive opportunity for upcoming, small brands to sell online at a lower cost compared to creating a full-fledged webstore. The direct communication with sellers also adds a personal touch, which Southeast Asian shoppers find important to gain trust in the seller, the brand or product.

However, the same trust with regards to product authenticity and payment is also a concern when buying from sellers who stock various products on C2C platforms. Data from Page365 shows that 74% of consumers are reluctant to shop online because they fear fraud and 33% of consumers have complained about product imperfections when ordering from Facebook stores. There have been cases reported when the customer transfers money to a seller via bank transfer prior to a product delivery just to find out later that the seller took their payment and cut off contact.

There is also risk of receiving fake products and C2C shops are usually less willing to accept returns, as in the case with @lachompshop who explicitly stated that unless the product was damaged or delivered in the wrong color, returns nor refunds would be accepted.

Yet, for many, especially in provinces where malls are not easily accessible, social commerce is an easier way to get products they want without having to shop online and without having a credit card. Although it does takeaway from ecommerce websites, the wave of social commerce allows consumers to adopt online shopping habits and eventually encourage them to trust e-transactions. 

What to Expect Next

Seeing the popularity of social commerce, other businesses are looking for ways to enter the market. This June, Facebook started testing social commerce payments in Thailand and later decided to launch the world’s first Facebook Shop in August. LINE, which is widely used to communicate with buyers of social media shops, launched its own ecommerce app LINE Shop already in July 2014.

C2C marketplace Shopee, which is among the most popular apps in Thailand, is trying to attract merchants currently selling on social networks, to its online marketplace by offering easy integration of their Instagram shops and reimbursing shipping, cash on delivery fees to sellers.

The positive experience ecommerceIQ had testing social commerce shows why for many it may be more convenient to shop via social networks than overcome concerns about the security of digital payments to shop online even if it means a few added small risks. 

As the ecommerce market size in Southeast Asia is expected to increase nearly 15 times to $88 billion by 2025, social commerce will likely grow as well thanks to a relatively low online presence of Western brands

 

BY AIJA KRUTAINE AND ANUTRA CHATIKAVANIJ

 

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