Social Apps and E-commerce - Issue #10
The power of community beyond doubt, has the power to make or break any consumer product. As mentioned in the latest a16z article on “The power of Social+”
“The best version of any social product is one that’s intrinsically social”.
In today’s day and age almost every consumer product talks about having a social
aspect to it, but is every social product actually social or just tries to be “social” as an afterthought. Before we go into specifics let’s look at some of the benefits of having a social/community driven engaged product:
Better Growth loops
Higher retention rates thereby better customer lifetime value
Better consumer engagement models
Better safeguard against macro and micro trends
Better customer acquisition costs (for example customer acquisition costs
Is your product actually `social`?
There are multiple ways people try to make their app “social”. The most common way often times PM’s try to justify their products as social is by adding a “share to fb” (and other social platform buttons). But is this actually making the product social? According to studies almost 99.8% of mobile user’s never engage with social share buttons. A large part of this can be attributed to the fact that for the customers of the product the social graph is not a critical component of the overall product experience. Since the peer-to-peer functionality is not baked into the core fictionality, and might have been added as an afterthought, user’s don’t really need to use the “social” aspect. So is your product really “social”?
There are some great examples of social/community apps which have taken a basic job-to-be-done and created a social graph. Apps like Clubhouse, Fortnite, Tiktok, Overtime etc have combined their interaction and transaction layers to build a powerful social platform for their user. In this article we are going to be focussing on one such vertical - online shopping.
E-commerce space and the `Social` bug
In 2020 consumers spent over $861Billion online in the USA. US ecommerce market sales today account for ~ 21% of all sales (in-store + online). As we can see there is a huge opportunity space - in 2020 the 44% jump in online consumer spending can be attributed to COVID no doubt, but it will be hard to imagine a massive retreat from the consumer spending, as online spending habits have already been created.
Looking back at the ecommerce markets in 2015 in China, the market was considered saturated with two big ecommerce players - JD and Taobao, in combination totalling ~$433B of gross merchandise value. Pinduoduo, a startup, started in this crowded space with a social twist to e-commerce, and over the next couple of years has built an empire today to be China’s second largest e-commerce platform with an active buyer base of 628 million users. So what Pinduoduo did differently in an already established e-commerce space - it harnessed the social network and focussed on an interactive and social shopping experience. By building an engaged community with their team purchase model, and diving engagement with their rewards and games, they were able to find and tap on customers wanting a community driven shopping experience (like offline in store shopping) online. Some key highlights of Pinduoduo model are:
Consumers form groups in order to receive discounts from suppliers (shareability via WeChat etc enables not only social validation but also ensures increased user engagement). The team purchase model is better for both buyer and seller’s in the two sided marketplace - better discounts from consumer pov and seller’s benefit from getting larger orders and demand forecasts.
Daily Checkin’s promote higher user engagement and thereby allow a better customer lifetime value. Consumer’s while on one hand gain with getting redeemable points for rewards, Pinduoduo gains increased ecommerce traffic.
Price Chop motivates consumers to share their products to their network to get the product for free. This allows for higher consumer engagement, and lower’s the customer acquisition costs (for example customer acquisition costs for its competitor Alibaba is in the range of $126 vs for Pinduoduo is $26)
Online games ( similar to farmville) on Pinduoduo keep the user’s engaged (11M DAU’s). Ultimately all this ensures user engagement, increased merchant sales and increased revenue for Pinduoduo.
Pinduoduo is just one such example, there are similar products across various regions. Meesho in India today has over 2M sellers and has a MAU of 500k social store owners. Meesho harnesses the power of social platform’s like Whatsapp and Instagram and capitalises on social networks and referrals of its users. In the USA for example Instagram which boasts over 1B user’s, today uses its feeds influenced by friends and interests to direct users to shop for products.
There is still a gap however to fill the social e-commerce void in the USA. As US retailers continue to struggle due to traffic slumps and increased acquisition costs, social + in ecommerce will be an exciting opportunity space to look for in future
Apps like TikTok and Instagram are projected to generate $10B in 2021, Facebook and Instagram are rolling out shoppable livestreams, and whatsapp recently added stores, what we see is just the beginning of a social+ ecommerce era.
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💡 P.S. Opinions are our own and don’t reflect the opinions of any of our employer's or any of the companies mentioned