Social Commerce: Emergence and Importance

Richard C. Geibel talks about the currently very fast-growing field of social commerce, which represents a new type of combination of social media and e-commerce. On the one hand, functions of e-commerce are adopted in the social media platforms (esp. Instagram, meta, YouTube, TikTok) and on the other hand, elements of social media are integrated into e-commerce (e.g. Amazon Life Shopping). In a three-stage model, the individual integration phases are described step by step and their interaction is presented in a comprehensible way. This development is particularly important against the background of recommendation marketing and the large group of influencers and also has implications for the future business model of social media platforms.

Furthermore, this article deals with the business fundamentals of social commerce, as this is a fundamental function of business administration, the so-called “transaction cost approach”. These include the
– Initiation costs
– Agreement costs
– Control costs
– Adaptation costs

The goal here is to further reduce the already low transaction costs of the Internet. This is done by integrating the functionalities known in the field of e-commerce, such as payment and fulfillment, into the familiar platforms of social media. This development is attractive both for end customers, as the purchasing process is simplified and accelerated, and relevant for influencers as intermediaries between product providers and buyers, as well as for social media platforms to expand their business model.

Ideally, the customer journey with its individual (4-7) phases and up to 100 individual customer touchpoints is compressed into a single point, i.e. the sometimes lengthy information, selection and decision-making process can be summarized in a single “moment of truth” when purchasing via social commerce.

The big challenge with this approach, however, is how the comprehensive and successfully implemented functionality of e-commerce should or can be transferred to the world of social media. There are many challenges to overcome, especially authentication (unique and verified identity), single sign-on (logging in across system boundaries), payment (especially payment systems and credit checks) and, of course, complex fulfillment (delivery of goods, warehousing, returns management, etc.).

Watch the video here

Further details and working paper at https://ecommerceinstitut.de