Successful social commerce platforms will not compete with incumbent marketplaces

As social media platforms like Instagram and Pinterest finally expand into social commerce, much has been said of the looming threat these platforms present to the likes of Amazon and eBay. An examination of how these social platforms differ from the incumbent marketplaces suggests that social commerce is a bigger threat to traditional e-commerce platforms than it is to Amazon or eBay.

Comparing Instagram to Amazon

The user journey towards a successful transaction on Instagram is very different from Amazon. On Amazon, shoppers start with a need and Amazon is heavily optimised to fulfil this need. This is evident by a few key traits of the marketplace:

Instagram is radically different:

While these marketplaces may sell similar categories of products (i.e., you can purchase socks on both Instagram and Amazon), very different types of sellers and products thrive within each of these models. Put simply, while Instagram almost exclusively rewards sellers who have a strong brand presence, Amazon is the go-to place for the goods differentiated by everything but the brand. Amazon fulfils the needs of shoppers looking for the most practical way to fill a need, while Instagram is about engaging with brands that shoppers love.

While products on Amazon are differentiated by their performance, products on Instagram are differentiated by their brand.
While products on Amazon are differentiated by their performance, products on Instagram are differentiated by their brand.

How will social commerce challenge retail?

While unlikely to threaten established marketplaces, social commerce is not simply filling an unoccupied space in the retail ecosystem. Today, shoppers in the west engage with brands through e-commerce websites and retail stores. Over time, established brands will rely more heavily on making sales through social commerce platforms than they will their dedicated e-commerce websites.

More interesting than the impact on established brands, though, will be how social commerce changes the way new businesses launch their brands. In a world where the best way to find an audience is through social media, and social platforms can facilitate any transactions end-to-end, there is diminishing value in establishing a standalone online store.

4 April, 2020

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