How Social Networks Turn Into Marketplaces

Social networks are introducing new opportunities for retail and gradually turning into marketplaces. Is there any chance that they will replace traditional online stores? How will social commerce develop in the coming years?

The origin of the term “social commerce” is attributed to the search engine Yahoo. This search engine first used the term to describe how social networks were used for electronic commerce. In the mid-2000s, David Beisel and Steve Rubel independently developed the concept of social commerce. They included tools that allowed customers to receive recommendations from other users and then purchase products based on that advice.

Nowadays, social commerce refers to various ways of using social networks as a marketing tool. These are direct recommendations, pages of brands, social network stores, and social buttons on sites.

Social networks are services we cannot do without

The fact that buyers are attracted by lower prices and faster purchasing processes compared to offline stores explains the growing interest in e-commerce. However, every year, customers’ demands are evolving. Now they also want an emotional experience. This pushes sellers to create an ecosystem where shopping becomes an event, Criteo’s experts say in their prediction: The Future of E-commerce: The Road to 2026.

Social networks and messenger apps are turning into trading platforms: more than 30% of users already use them to make purchases. Such trends will determine the development of e-commerce in the coming years. Social networks will develop functionality for retailers, and sales of online stores via them will grow.

Social networks are becoming marketplaces

Social networks offer more and more business opportunities. Pinterest launched an object recognition function for photos and added a button to enable you to instantly purchase the items. This innovation was quickly appreciated by sellers, and not only online ones. Tok & Stok, a Brazilian furniture and accessories brand, has integrated direct Pinterest connectivity with its offline stores. Buyers can share the “pins” of the product they are interested in and receive the advice of friends without leaving the trading floor.

Instagram has introduced shopping tags: tags with the name of the product and price. By clicking on them, the user goes directly to the product page in the online store. American retailers note that shopping tags have significantly increased traffic to sites from Instagram.

Facebook added the Shop option to the site. With its help, entrepreneurs can demonstrate products and communicate with customers on their brand’s social network page. If the online store runs on Shopify or a similar platform, then photos, prices, and product descriptions are automatically exported to Facebook. Zuckerberg’s network also launched the Marketplace section – an analogue of Avito for C2C product listing ads.

Russian sites are also actively adding retail functionality. In 2015, a popular Russian-based social network VK launched a “Products” section, and a year later, an opportunity for communities to sell directly on the social network. Now users can place orders and pay for them without leaving VK. In November 2017, dynamic retargeting of ads appeared. These automatically created ads target social network users who left the site of a particular seller without making a purchase, with the intention of encouraging them to return.

What is profitable to sell on social networks?

There are several main target audiences most interested in shopping through social networks:

  • buyers of accessories, jewelry, bags, gloves, and toys, including collectibles;
  • buyers of handmade items;
  • buyers of clothes and shoes;
  • buyers of goods for children;
  • gadget buyers;
  • buyers of car products, primarily accessories and care products;
  • buyers of perfumes and cosmetics;
  • buyers of sports goods.

In many respects, the demand for these categories on social networks is associated with customer dissatisfaction with products presented in offline and traditional online stores.

The growth of the Internet in all regions, the increase in social network users, the emergence of new business opportunities, the tendency of online advertising to nativeness, and the ability to generate a varied consumer experience are all factors that stimulate the development of social commerce.

However, is it worth waiting for social networks to replace traditional online stores or at least compete with them on equal terms? So far, our experience is more likely to indicate the opposite: Andersen’s customers from the e-Commerce industry are actively investing in the creation of applications. We have developed software for Media Markt and other major online trading players. You can view other cases and get additional information on our website.