The Future of Commerce

Social Media is just as old as I am, around 20-year-old.

Source: Fox Business

The development of social media had all begun from Facebook when it introduced social feeds with friends request, then we have Twitter by limiting texts within a digestible 140-word box. We have Instagram innovating by making everyone a better photographer (with a single filter). We have Snapchat which uses AR and face cognitions, and now in 2020, we have Tiktok — incorporating music into short viral videos.

Taking a precedent view in hindsight, many could argue that to win, social media needs to (1) sorting the right contents to the right people, (2) collecting a diverse infinite amount of contents to distribute, (3) being the accessible/most downloaded app to expand network effects. However, history has told us that social media competes in providing the tools that can lever the ordinary people’s ability to create better content.

From a corporate perspective, the landscape of advertising has changed dramatically, given the increased availability of alternatives, varying from Linkedin, Tiktok, Facebook, Youtube, Snapchat, Pinterest, etc. In 2020, these platforms have begun to differentiate themselves; successful marketing campaigns were often seen on social media with an organic reach, like Snapchat, Tiktok, and Linkedin.

For Fortune 500 Companies, particularly for consumer brands and fast-food chains, have deployed an organic marketing campaign with “Social Media Challenges,” “Giveaways,” “Creative/Viral Videos” on a platform without organic reach. This could be drawn from two major implications: (1) Incomplete Transition from “commercial flashing Ads” to “organic campaigns” without moving platforms. (2) A strong status quo bias gives the stable, return-generating state for mega-corporate.

Organic marketing has become increasingly prevalent due to the consumer’s increased level of expectations within its social values. Purchasing decisions were made solely on products and their selling price like before, while company commitments to EDI, Social Justice, and Green Initiatives have increasingly involved consumer behavior. Most organic marketing would include an eventful theme or a social commitment for a company to better advertise themselves in front of consumers, which in contrast, carries greater uncertainty, requires greater creativity, but creates a significant potential for mass traffic and attention.

Social Commerce

By definition from Investopedia, social commerce is the use of networking websites such as Facebook, Instagram, and Twitter as vehicles to promote and sell products and services. The analogy was first introduced when Instagram was created, and social media influencers (as known as Key Opinion Leader — KOL) become a reality, followed by the development of live streams, brand deals, and paid communities — Social Commerce has become significantly predominant today than ever before.

From a functional standpoint, Social Commerce allowed content creators (giant media, music labels and influencers) to connect suppliers and customers, replacing advertisements as a source of traffic. Vertically integrating the funnel will not only provide convenience for customers direct from platform-to-platform to increase exposure and sales, but also having the social aspect in-house exclusively for your company will drive a loyal customer base at the very bare minimum. A great example of that would be Netflix Original Fans to Netflix subscription and Marvel Fans to Disney+ subscriptions.

Amazon’s retail presence was their competitive advantage over all other technology companies. With the hardware (Alexa, FireTV Series, Kindle), software (AWS) and retail (Prime/Marketplace), Amazon would only need a social platform to fully integrate the value chain from supply chain to distribution, but also customer journey (from content creation to purchasing decisions).

“I am stunned by the big tech companies to lack understanding that retail is the component of the (tech) stack… I believe retail is an actual part of the macro-stack of the biggest companies in the world” Gary Vaynerchuk

Facebook also have taken an aggressive approach onto expanding its social communication platform by integrating AR/VR development, however Facebook’s limited effort in retail has made its marketplace relatively less competitive than WalmartXTikok or Amazon.

Walmart’s Partnership with Tiktok would be one of the first piooner to fully take advantage of Social Commerce due to their capacity and momentum popularity. It would be interesting to see how the hyper-effectiveness of Social Commerce cannbalize digital advertising spending, increase individual content creators competition and prosperity, and boost valuations for media companies with higher monetizablilty contents.

Takeaways

In contrast to the beginning, every social media has its own flaws. Facebook has not been able to entertain people due to frequent advertisements and lack of activities from younger users, Twitter has confronted with false statements from political-sensitive users, Instagram has lost its momentum when there are too much promotions from brand deals, Tiktok is srcutinzed with its immature contents and toxicity comment culture. Social platforms will not always be perfect due to differstand standards set by the executives, meanwhile there are restriction that had limited what the app could do or not from the very beginning.

In conclusion, the future of retail is likely to be divided up among a few of the biggest tech or media companies. It will discourage new entries in retail without technology/shipping/content infrastructure, thus reduce the amount of competition, increase consumer’s reliance on big tech.

Having the control of how they want to represent themselves in front of consumers, control of the availability of the products as well as the listed price, control of the contents they create and distribution. It will immensely difficult to regulate from an external investigator perspective, which poses a threat for regulators in the future.

Starting from this article, I will be posting articles about pure strategy and technological development. Until April, I will maintain to push a quality article every two weeks. Thanks for reading.

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