This blog post is the fifth in our Southeast Asia social commerce series. Please see the announcement of our research initiative here, and the full list of social commerce archetypes here.
Social platforms and e-commerce platforms used to exist in a symbiosis where the former harnessed consumers’ attention and the latter offered goods for sale, and where ad dollars traded hands in between.
The rise of Social Commerce has disrupted that status quo forever, with both types of platforms making moves to better delight consumers while capturing a greater share of the economic value.
That shift has created the phenomenon of Social Platform Commerce – e-commerce that happens entirely inside social platforms. While still in its early days, this archetype of Social Commerce is already proving consequential to Southeast Asia’s e-commerce landscape and forcing brands and retail companies to reconsider their online channel mix.
A note on terminology: This archetype is often loosely referred to as Social Commerce. Given our definition of Social Commerce as the broad umbrella of all business models that combine social and e-commerce, including experiences such as live shopping and group buy that may happen outside a social platform, we’re calling this particular archetype Social Platform Commerce, to emphasise that we are strictly talking of e-commerce that happens within a social platform.
In this post we define and size Social Platform Commerce in Southeast Asia, and explore its most important dynamics.
Social Platform Commerce is e-commerce where the critical parts of the purchase journey such as product selection, payment, and order confirmation, happen inside a social platform
A consumer browses Instagram on their morning commute, sees an exciting new product in a personalised ad between two Instagram Stories, clicks the ad, is redirected to Zalora and purchases the product there. This is one of the most common e-commerce purchase journeys of the last decade, and one that Social Platform Commerce is disrupting.
For what would happen if the entirety of the purchase journey could happen inside Instagram? Would that make the journey more smooth? Would it make new kinds of customer engagement possible? Would it improve ad campaign attribution? What would even be the value-add of Zalora anymore?
Until recently, questions like these were mostly theoretical. Social platforms and e-commerce platforms needed each other to efficiently translate consumers’ attention into clicks and purchases, as illustrated in the exhibit below:
This status quo has shifted however, for several reasons:
- Consumer preferences are evolving as new ways of shopping online become available and more common; traits like fun, engagement, community and instant gratification are increasingly important
- Sellers, such as brands and retail companies, want to offer the most entertaining, engaging and convenient purchase journeys to win the fight for consumer attention and spending
- Social platforms seek to capture a greater share of the economic value they create when passing high-quality traffic to e-commerce platforms through ads; keeping the purchases on their own platform improves their ability to capture value
- E-commerce platforms seek to lessen their reliance on social platforms for traffic acquisition; advertising and marketing is among their largest expense lines, and every organic visit is one that does not have to be bought
- E-commerce infrastructure such as payments rails, logistics platform integrations and customer service agent routing software has improved materially in the last couple of years, decreasing barriers to entry for new aspiring e-commerce platforms
The sum of these shifts is leading to a decoupling of the traditional relationship between social and e-commerce platforms, as both types of platforms try to “close the loop” of user journeys within their ecosystems in order to maximise value capture. Social Platform Commerce is emerging as a result, with new purchase journeys becoming possible and increasingly common that offer end-to-end e-commerce inside social apps like TikTok, Instagram and LINE.
While these new journeys are becoming increasingly popular, they have not supplanted the need for dedicated e-commerce platforms entirely. That is because social platforms still lack several important features and traits, ranging from clear navigation and product search to high consumer trust, that e-commerce platforms have.
We have illustrated some examples of social platform commerce purchase journeys in the following exhibit:
Examples 4 and 5 above do not qualify as social platform commerce because the transactions are completed off-platform. They are, rather, examples of e-commerce enabled by social platform marketing; an important but separate concept.
Social Platform Commerce commands GMV of 30 ~ 40 bn USD across Southeast Asia in 2022, equivalent to about 20% of total e-commerce in the region
The challenge of defining Social Platform Commerce as a separate and distinct term from Social Commerce becomes even greater when attempting to size it.
Our first attempt relied on scouring public sources for data points to triangulate. This approach did not yield a complete answer, but provided some useful insights:
Starting with consumer adoption of Social Platform Commerce, there have been a few surveys done on the share of internet users across Southeast Asia who use social platforms to make purchases, with wide-ranging estimates from 50% up to 90%. It is however not clear what share of that truly constitutes “end-to-end” purchases on social platforms versus, for instance, purchases on e-commerce marketplaces that originated from an ad on a social platform.
For example, this Krungsri research in 2021 reports that 86% of Thai respondents made a purchase using Facebook in the last 6 months (similar numbers for LINE and Instagram were reported to be 68% and 35%). 86% for Facebook may have been true for the survey sample, but appears unlikely for the total population, especially if we consider it to mean direct Social Platform Commerce (direct = transaction completed on the same platform) as described above.
Adding a second triangulation point of consumer spending, we scoured the internet to look for estimates, and found precious few. In one, by Essence Global, 62% of Singaporeans claimed to be spending between 51-200 SGD in 2021 on social platforms.
While this approach helped us establish a broad envelope of scenarios for sizing of Social Platform Commerce, we weren’t quite happy with the accuracy and granularity, and decided to get more data.
To that end we have just completed 18 primary user surveys across the 6 markets in the region. The results of these will be shared in more detail in our upcoming 2022 SE Asia Social Commerce Report.
For now we will share a short spoiler: In our estimate, the average SE Asia consumer who shops on social platforms spends between 90 and 120 USD per year, sizing this overall archetype to be 30 ~ 40 bn USD. This makes it the largest of all 4 social commerce archetypes we have covered so far!
The most important social platform commerce dynamics: Finding the right channel(s) to sell through, and selling the right way
Before entering Social Platform Commerce, brands and retail companies must consider which channel(s) to sell through, and whether their brand and products are fit for this type of e-commerce. Learn more about these key dynamics in the following sections.
Channel landscape: Southeast Asia’s social platform landscape is highly concentrated among a few top players, but differs from country to country
Scale is an important criteria for selecting the right social platform commerce channel. The below exhibit, which is based on insights from DataReportal’s Digital 2022 report, provides a high-level overview of the most-used apps across the region:
This platform leaderboard presents several insights for brands and retail companies who are considering social platform commerce:
- All of Southeast Asia’s largest countries have high usage concentration among the top social platforms; sellers should focus their efforts on evaluating the largest apps
- Meta’s social apps (such as Facebook, Instagram and WhatsApp) are very popular across Southeast Asia and highly integrated, but have limited social platform commerce capabilities; sellers must consider other apps, too, to hedge their bets
- The landscape is balanced between content-first platforms (such as TikTok and Instagram) and messaging-first platforms (such as WhatsApp and Telegram); these two sub-groups of social platforms fit different customer journeys and seller types
We have devoted the next section to a more in-depth comparison of the most popular social platforms’ e-commerce features.
Channel landscape: Social Platform Commerce features and ambitious vary greatly between platforms; TikTok is the rising star, while Meta appears to be faltering
All major social platforms have started building features for Social Platform Commerce, but the battleground is not even. While some players have deeply embraced e-commerce and turned it into a core part of the value proposition, others have not done much yet.
To help prospective sellers choose the right channel we have outlined the core features of the major social platforms below:
The Meta ecosystem (2 out of 5 stars)
Southeast Asia is a region with very high usage of Meta’s properties. Despite these advantageous conditions, Meta has been slow to release dedicated Social Platform Commerce features. All its apps offer some official platform selling tools, but they are lacking compared to peers. Here are the most important details:
- Meta’s official shop front solution, Shops, is offered across Southeast Asia for Facebook and Instagram. It allows sellers to set up and customise an online store on the platforms, and includes features like product tagging in posts and ads, as well as some useful integrations to Messenger for conversational commerce.
It does however not include a native check-out and order tracking flow, so sellers must instead leverage third-party software suites like EasyStore as a workaround, or link consumers to an e-commerce platform to check-out.
Meta has rolled out more advanced features in the United States, but there are no indications of them arriving in Southeast Asia anytime soon.
- Facebook Marketplace is another commerce product offered by Meta. It is focused on classifieds and heavily dominated by consumer sellers and unorganised business sellers often listing second-hand products. For those reasons it is generally not an attractive channel for brands and retail companies to sell on Facebook.
- Meta’s messaging-focused platforms, Messenger and WhatsApp, both offer some commerce features focused on business messaging, but do not support native end-to-end e-commerce journeys.
In India, WhatsApp has launched a promising native e-commerce shopping experience in collaboration with JioMart (link) earlier in 2022. A similar offering would likely perform well in Southeast Asia, but it is likely months or years away.
Facebook’s native shopfront, Facebook Shop, has major feature gaps compared to leading e-commerce platforms like Shopee. We have illustrated this in the below exhibit:
The Meta ecosystem is hard to ignore due to its impressive scale and user adoption across Southeast Asia. It does however not yet offer a compelling Social Platform Commerce suite in the region.
Meta has previously piloted native commerce features in some Southeast Asia markets, such as its check-out partnership with KBank in Thailand (Link), but we have not yet seen them gain mass adoption. There are likely several reason for this failure to scale:
- Meta has historically prioritised North America in its strategy, and its social commerce experiments in that market have been notoriously challenging
- Meta’s core commercial focus is advertising, of which only a subset is related to e-commerce; they might focus on other and larger opportunity spaces
- Meta’s properties are relatively open for third-party plug-in developers; the company may have decided to let vendors bridge the gaps in their product offering, rather than taking a more active approach
Whatever the reasons may be, we hope to see Meta shift to a more aggressive approach to their Social Platform Commerce offering.
TikTok (4 out of 5 stars)
TikTok might be known publicly as a social platform, but their intense focus on Social Platform Commerce makes it clear that they aspire to be both a social platform and an e-commerce platform.
This aspiration is brought to life through TikTok Shop, TikTok’s marquee commerce solution. It includes a number of distinctive features and traits:
- End-to-end integrated e-commerce, including a wide range of payment modes and integrations with numerous third party logistics companies
- A full-fledged seller centre with order management and sales tracking, similar to what Shopee and Lazada offer
- Direct integration of TikTok’s creator marketplace, where sellers can partner with TikTok creators and KOLs to produce sponsored content for fixed fees or sales commission
- A steady drumbeat of sales campaigns organised by TikTok, including shopping festivals like 11.11 where TikTok sponsors free shipping, cashbacks and other discounts
TikTok Shop has been closing its feature gap with leading e-commerce platforms. As illustrated in the exhibit below, TikTok Shop’s product detail pages are now comparable to those of Shopee:
These powerful features are brought to life through Shoppertainment, TikTok’s umbrella term for content-led, entertaining and impulse-driven e-commerce. Most TikTok e-commerce originates from a live stream or a short-form video, while its support for category-based or search-based navigation is still very limited. For that reason – the lack of several navigation and engagement features we consider table stakes in e-commerce – we grade TikTok as a 4 rather than a 5 in Social Platform Commerce features.
TikTok’s aggressive focus on e-commerce in Southeast Asia will come as no surprise to watchers of its Chinese sister-app Doujin (more info here), which generated more than 110 bn US$ of GMV in 2021.
We expect TikTok to follow a similar aggressive growth strategy here, making it very likely that it will emerge as the leader of Social Platform Commerce in the region.
Local challengers (3.5 out of 5 stars)
While Southeast Asia’s social platform commerce landscape is dominated by Meta and TikTok, there are also a number of local single-country challengers with high potential. We have covered the e-commerce features of the most important players below:
- LINE in Thailand: LINE, which started as a instant messaging app similar to WhatsApp and has near-universal adoption in Thailand, has incrementally expanded its native e-commerce tools over the past years. It now offers end-to-end e-commerce through its LINE Official Account scheme, complete with product catalogue integrations, support for conversational commerce and chatbots, and integrated payment and delivery.
- Viber in the Philippines: Rakuten’s Viber platform, which also started as an instant messaging app, has followed a similar path to LINE by introducing various e-commerce tools focused on conversational commerce. While its feature lineup is less complete than that of LINE, it is a viable platform for chat-based social platform commerce.
- Zalo in Vietnam: Zalo is a homegrown Vietnamese social app which started as an instant messaging app and gradually expanded to a full-fledged super app with e-commerce, ZaloPay payments, and even its own Zalo Bank financial services offering. Zalo offers a similar e-commerce feature set to LINE, where Zalo Official Accounts include an e-commerce catalogue and the ability for sellers to accept payments directly inside the app. Alibaba has published a good run-down of Zalo’s commerce features here.
Due to their high usage, sellers in Thailand, the Philippines, and Vietnam must consider the above channels when planning their Social Platform Commerce presence.
Shopping behaviour: Social Platform Commerce is mostly content-led, and best suited for low-value impulse buys; however, that could change in the future
Aside from making e-commerce journeys shorter and more frictionless, Social Platform Commerce also has an important second-order effect; it enables a new kind of e-commerce we call content-led e-commerce.
We have compared the key traits of content-led e-commerce with the traditional search-led e-commerce in this exhibit:
Search-led e-commerce, where consumers use product search and category-based navigation to find and select products they are interested in buying, has always worked well for purchases with a high degree of planning or existing purchase intent. For example:
- Online grocery purchases where consumers have a clear shopping mission and assemble large baskets of clearly identifiable goods
- Branded premium fashion purchases where consumers want to build trust in the brand, marketplace and product before committing to buy
Where content-led e-commerce is disrupting the e-commerce landscape is in impulse buys at lower price points. In these cases, it turns out, the native social content features of social platforms enable a whole new kind of e-commerce journey. For example:
- A live seller on TikTok assembles ‘mystery grab bags’ of cheap cosmetics live on camera; consumers can pay instantly in the app and see which 10 random products they will receive
- A viral short-form TikTok video shows a shipping container full of Nutella jars, for sale at 50% discount; consumers can make an instant in-app purchase and receive the order with delivery in a few days
At this early stage of maturity, content-led e-commerce is where social platforms have the biggest advantage over traditional e-commerce platforms. It is, however, also hard to access for brands and retail companies because it is very scattered and relies on low price points and high discounts to drive impulse buys.
What will happen next is more interesting. If we believe that all e-commerce platforms will seek continued growth over time, they will have to make adjustments to appeal to a larger and larger share of the available market.
As social platforms, through Social Platform Commerce, enter the e-commerce arena, they too will start to compete for more market coverage and share. We have illustrated this future ‘e-commerce battlefield’ below:
In the above exhibit we visualise the total e-commerce market on a spectrum from cheap to expensive products, and from content-led to search-led purchase journeys.
Shaded in grey we see the conceptual current positioning of Douyin in China, which is heavily content-led, and Amazon in the US, which is heavily search-led.
In black and orange we see the current Southeast Asia positioning of TikTok Shop and Shopee. The arrows illustrate their respective growth vectors:
- Shopee, Southeast Asia’s current e-commerce leader, will seek to expand its platform price band by including more official brand stores in high-ticket categories like beauty and electronics, while also strengthening features like live selling and content feeds to better compete with Social Platform Commerce.
Shopee already has a product and engineering team devoted to copying popular features from apps like TikTok, and we expect them to further ramp up investment in this area.
- TikTok Shop, the main Social Platform Commerce challenger in the region today, will seek to aggressively expand its addressable price band by on-boarding more high-quality brands, while also releasing features to better handle search-led shopper missions, including e-commerce product search and better navigation.
TikTok is already executing on the former competitive move, having hired dozens of account managers across Southeast Asia to on-board new consumer brands on TikTok Shop.
We cannot yet predict who will come out as the winner on this emerging battlefield, but the implications are clear:
- E-commerce platforms like Shopee will face greater competition than they have before; sellers will need to be present on more channels to capture consumer demand
- Social Platform Commerce channels like TikTok may appear unappealing for many sellers today due to their mass-market price and assortment focus, but that will change in the coming years; in order to learn and capture share early, brands must consider entering channels before that shift fully happens
Social Platform Commerce is emerging as a serious new addition to Southeast Asia’s e-commerce landscape. We expect it to become an important part of the online channel mix because it appeals strongly to both consumers and sellers:
- For consumers it unlocks shorter, easier and more fun purchase journeys
- For sellers, such as brands and retailers, it unlocks shorter purchase paths with less drop-off and better marketing spend attribution
All major social platforms are building features to enable social platform commerce, but with varying success and intensity. The most important implications for brands and retail companies today are:
- TikTok: The most intentional and aggressive player in social platform commerce; emerging as a must-have channel in mass price-point e-commerce, and will likely expand rapidly to higher price points like its’ sister app Douyin has done in China
- Meta: The undisputed leader in consumer reach across the region, but moving slowly on social platform commerce; Facebook Shop and Instagram Shop can help increase attribution and conversion for existing e-commerce advertisers, but otherwise we see opportunity for now
- Local champions: Vietnam, Thailand and the Philippines count challenger social apps like LINE and Viber among the most popular in their markets, and they are all developing e-commerce features; sellers in those markets should pay special to these platforms and consider entering them
Southeast Asia’s small and medium challenger brands have already adopted Social Platform Commerce aggressively, and we expect larger local and multinational brands to follow on as the market opportunity and go-to-market best practices becomes clearer.
We are preparing to launch our first proprietary Cube Asia market data sets for social channels, including TikTok, at the beginning of 2023. Please sign up for our newsletter here to stay updated in the meantime, and to receive our weekly insights about Southeast Asia’s social commerce and e-commerce market.