Social commerce emerging as a new model for small and medium businesses to transact

Jaipur-based Ritu Bhansali started her skin-care brand, Everything Mom Made on Instagram amid the pandemic. In less than five months, Bhansali’s business page has garnered 2,300 followers. The company ships about 80 individual packages per month besides servicing bulk orders for weddings, rituals and catering to a host of corporates. “We were born on Instagram. The platform allows me to directly interact with my consumers,” Bhansali says.

Fashion brand Doodlage doubled down on social media platforms after Covid-19 hit sales through brick-and-mortar outlets. Co-founder Kriti Tula says business grew three times compared to pre-Covid with the help of Facebook and Instagram. The firm has been able to deliver not only in India but also expand its operations to Australia, Dubai, Singapore and Europe.

Social commerce is emerging as a new model for small and medium businesses to transact. A deluge of cheap smartphones and affordable data prices make it easy for consumers to access services on the internet. WhatsApp, Facebook and Instagram with a collective reach of over 400 million users allow businesses to tap into potential customers.

In fact, where social commerce is increasingly scoring over a typical e-commerce marketplace model is that it enables product discovery and conversation with brands to happen online. Analysts say the only way of finding a product on e-commerce platforms like Flipkart and Amazon is by means of a catalogue. But social commerce facilitates direct communication between buyers and sellers. Consumers can opt for product demos by way of videos, helping them make conscious choices. For instance, Bhansali says the bouquet of features on Instagram like photo sharing, enabling video calls, hosting polls give her insights into her regular planning of the business. “The pandemic has hastened the acceleration of offline-to-online journeys even outside the metro cities, and we have seen an increasing number of small businesses come online from smaller towns,” says Archana Vohra, director, small and medium businesses, at Facebook India.

Perhaps, companies have been quick to spot the distinguishing proposition of social commerce. Recently, Flipkart-owned independent platform 2GUD launched 2GUD Local. The online service allows local offline stores to showcase their products to consumers through long-format videos.

Radhika Sridharan, partner at Bain & Company, says customers typically take time to acquaint themselves with new brands and the fact that social commerce equips consumers to buy through familiar groups and individuals or purchase directly via the seller makes all the difference. Social commerce, which is a $1.5 billion to $2 billion market today, is estimated to be worth as much as $20 billion in just five years—and will likely hit nearly $70 billion by 2030, according to a recent report by the consultant. Ankur Pahwa, partner at EY, says the influencer and network-led approach will help brands reach tier III cities and beyond. “Social commerce is going to take off,” says Pahwa.

Apart from social media-led product discovery, business models like reselling and group-buying have also evolved within the space. The idea is to be able to reach end consumers through their contact base.

Meesho follows a reselling model. Suppliers list their product catalogue on the Meesho app, which, in turn, can be sold by individual entrepreneurs to their contacts by leveraging their network on Facebook and WhatsApp. Founder Vidit Aatrey says a lot of suppliers have been able to grow ten times since they have started on the platform. Over 50,000 suppliers and 8 million entrepreneurs run and manage their business using Meesho. “Over the years we have seen that categories like fashion, apparel, lifestyle, home decor form a larger share of the business,” says Aatrey.

Jaipur-based DealShare sources bulk products from local manufacturers and sells them to customers via the DealShare App and promotes their deals on WhatsApp groups. Users earn a discount every time they refer the products to their friends and family. The company supports more than 10,000 small businesses and claims that they have seen as much as seven times to 15 times annual growth post partnership with DealShare.