Social Commerce: The f\Buture of How Consumers Interact with Brands

 McKinsey: Social commerce: The Future of how Consumers Interact with Brands

Authors:

  Camilo Becdach is a partner in McKinsey’s Southern California office, where Zachary Kubetz is a consultant; Marc Brodherson is a senior partner in the New York office, where James Nakajima is a consultant; Alex Gersovitz is a consultant in the Bay Area office; Daniel Glaser is a partner in the Munich office; and Max Magni is a senior partner in the New Jersey office.

October 19, 2022 | Article

Browsing and shopping directly on social media platforms is a core feature of e-commerce in China. Now, this dynamic new way of buying is poised for rapid growth in the United States.

A two-hour live shopping event on TikTok brings in more than a week’s worth of sales at a flagship store.1 An interactive, shoppable Instagram live stream garners 40,000 comments. Augmented-reality (AR) lenses let Snapchat users “try on” makeup and send the images to friends.

Welcome to the dynamic world of social commerce, where consumers explore products and complete transactions through social media and content creation platforms, all in an app. This emerging form of shopping removes friction from the buying process, creates a more engaging journey for the consumer, and presents new opportunities for brands to generate consumer interest.

Already enormously popular in markets such as China, social commerce remains a small but rapidly growing segment in the United States (Exhibit 1). In 2021, $37 billion in goods and services were purchased through social-commerce channels.2

Exhibit 1

Social commerce is a small but rapidly growing segment in the United States.

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By 2025, that figure is expected to swell to nearly $80 billion, or 5 percent of total US e-commerce.3 Globally, the social-commerce market is expected to grow to more than $2 trillion by 2025.4

Discover NeXT Commerce

Social commerce is more than just a new shopping experience. It represents a paradigm shift in how consumers interact with brands: where, when, and how they shop. For consumer brands, this creates opportunities for a much more interactive, entertaining, and experiential journey (see sidebar, “Discover NeXT Commerce”). For example, leading brands are working with platforms such as TikTok to forge new relationships with consumers, shifting from traditional advertising strategies to fun, engaging content that is less overtly promotional. This content can be used to highlight unique product features or explain product complexities simply. For example, rather than watching an ad for a new skin-care formula, your favorite celebrity can invite you behind the scenes into their daily skin-care routine, showing you how they use the branded product and why they love it. Consumers can then buy the product directly within the platform, whether it’s on Instagram or TikTok or through YouTube Shopping.

The winning ingredients for social commerce in China

The evolution of social commerce in China offers a glimpse of the possibilities.5 By forging partnerships with wildly popular social influencers and participating in live-stream shopping—an experience that combines instant purchasing of a featured product and audience participation through chat or reaction buttons—brands in China have achieved conversion rates of almost 30 percent on social platforms.6 This is up to ten times higher than conversion in conventional e-commerce. Last year, goods and services purchased through live-stream shopping in China represented $132 billion, or 5 percent of total e-commerce gross merchandise value (GMV).7 More broadly, Chinese consumers spent more than double that amount—$352 billion (or 13 percent of total e-commerce)—on all social commerce. ... .'