Social commerce

Social commerce is the use of social media platforms by businesses to market, sell, and distribute goods. Micro- and small businesses worldwide increasingly utilize social media platforms like Facebook, WhatsApp, Instagram, and TikTok as virtual storefronts, tapping into a global market of 4.8 billion social media users. The global social commerce industry is valued at $492 billion and is projected to grow three times faster than e-commerce, reaching $1.2 trillion by 2025. In India, for example, it is predicted that social commerce will be twice the size of the current e-commerce market within 10 years, with the potential to empower over 40 million small businesses. In Africa, where traditional e-commerce is still gaining traction, social commerce has become the primary avenue for small businesses to sell online. 

While e-commerce platforms offer additional services such as logistics and delivery, advanced data analytics, and built-in payment systems, smaller businesses, in particular, may be discouraged by associated costs and operational complexities like registration fees, taxes, and subscriber fees required by e-commerce. However, social media platforms compensate for these limitations by providing easy-to-use familiar interfaces, effective customer communication, low-cost advertising, and minimal upfront costs. Furthermore, social media platforms like Instagram, Facebook, and TikTok are increasingly incorporating e-commerce functionalities into their platforms. For example, the Shops feature on Facebook and Instagram enables businesses to establish online storefronts, allowing users to browse, explore, and make direct purchases within the platforms. Similarly, TikTok Shop provides a fully integrated commerce solution, enabling brands and sellers to showcase and sell products directly on the TikTok platform.

This insight brief takes a closer look at how small businesses can benefit from social commerce and identifies insights on how providers and organizations supporting small businesses can better equip small business owners with social media. 

Since its inception, Strive Community has curated evidence on the impact of digital tools, including social media platforms, on small business growth. The evidence shows that social commerce allows small businesses to do more—reach more customers, conduct more transactions, and sell a wider variety of products and services—in the same amount of time. Across South East Asia, a study found that small businesses that adopted digital tools, including social media, reported significant improvements to their operations. 

Many small businesses might never use any other digital tools outside of social media. However, research shows that when small firms join e-commerce platforms and social commerce channels, they are more likely to take up digital payments, including mobile money, to enable online transactions. In rural Indonesia, social sellers increased their uptake of financial services such as bank accounts, digital payments, credit, and insurance after joining the platforms. The researchers note that this was likely driven by the fact that social platforms incorporate financial services and thus lower barriers, as well as the fact that platforms have unlocked further business growth for participants; With these two factors, the demand for financial services has increased.

During the COVID-19 pandemic, the utilization of social media tools played a pivotal role in fostering innovation and resilience among small businesses. Surveys conducted by Facebook in collaboration with the OECD and the World Bank found that many businesses with an online presence were able to continue providing products and services to clients. For example, in 49 countries and regions, businesses on Facebook said that at least 25% of their sales happened online in the last 30 days. Another global study by DAI surveyed over 10,000 small businesses across 13 countries on their use of digital technologies during the pandemic. Results revealed widespread reliance on platforms like WhatsApp and Facebook to navigate restrictions and keep operations running. In Cambodia, for example, 43% of online small businesses reported using Facebook for customer communication in the previous month.

Supporting small businesses to better use social media ensures providers can meet firms where they already are and enable them to better participate in digital marketplaces. These familiar entry points can become gateways to introduce small businesses to more sophisticated digital services and practices that may go on to have a more profound impact on how they do business as previously mentioned. This section highlights what we’re learning about supporting small businesses via social media and commerce. As a living record of our learning, we will continue to update these insights as we learn from our programs and partners.

Tailor products to small businesses that rely on social media.

For providers, there is an opportunity to offer more services to small businesses that are only comfortable using social media. For example, Strive Community partner ChatGenie’s in-app Commerce Platform allows businesses to easily create and manage online stores within their existing social media accounts and super apps. Small businesses can use ChatGenie to create their own digital storefronts within apps like Facebook Messenger, Instagram, Viber, and GCash, the Philippines’ largest mobile wallet. Aside from that, the ChatGenie Dashboard allows merchants to manage sales and marketing tasks from one screen and includes features like a promo code generator, customer segment creator, and broadcast tool. 

In South Africa, Nedbank, in collaboration with Mastercard and Ukheshe, introduced a payment platform that lets small and micro-businesses receive secure in-chat payments from their customers via WhatsApp. 

Additionally, providers can offer features that create trust between small businesses on social media and consumers. Micro-enterprises leverage the sense of trust stemming from being either personally known within the social media network or being a trusted member of the online community to extend their customer base. However, trust, Accenture notes, remains a significant barrier, especially for higher-value transactions, with consumers fearing inadequate protection or refunds for social commerce purchases. Accenture recommends that a reliable end-to-end experience, meeting e-commerce standards, is vital for converting new social shoppers and boosting spending comfort. Collaborative efforts between platforms and SMBs are crucial to address security concerns and provide the expected support throughout the entire consumer journey. 

Create upskilling opportunities through social media platforms.

Strengthening small business owners' skills can empower them to effectively leverage social media platforms, expanding their reach and customer base. One of Strive Community’s key learnings is that the most effective way to reach small businesses with digital tools and solutions is through existing, active small business communities on social media.

This was tried and tested by Mastercard Strive partner MESH, an online community for Kenyan entrepreneurs in the informal community. MESH used social media micro-influencers to attract entrepreneurs to sign up to the platform; MESH also provides training videos. Mastercard Strive trialed this approach in Latin America with success through our partner, Hoob Marketing, which promoted Strive’s e-commerce training material in active, small business Facebook groups. This included groups for women- and black-owned small businesses, such as Dotsy, Clube da Borborleta, and Kilombu. This program used the organic accrued social capital, reach, and trust in these groups to distribute and drive engagement with relevant training content that supports the growth of these small businesses. Upskilling can also enable better product promotion and customer engagement. As mentioned before, it is crucial to find small businesses where they are. Offering training through social media platforms means that small businesses don’t have to deal with too many digital channels until they have the capacity to.

Use social media data to provide credit to small businesses.

A Women’s World Banking study of women entrepreneurs in India and Indonesia found that while many women social commerce entrepreneurs were eager for credit to grow their businesses, they were unable to access funds to do so. Leveraging digital transaction data can enable digital lending, Women’s World Banking recommends. 

In a recent study, researchers used a novel credit-scoring approach that combined conventional financial data with social media insights. Their analysis, conducted on 25,654 Dutch SMEs, incorporated 20 traditional financial indicators and 35 social media features and demonstrated a notable enhancement in the credit-scoring model's accuracy when social media data supplements traditional information. However, there are privacy concerns that providers must consider if they decide to use such data.

Support small businesses to transition from social commerce to more formalized e-commerce.  

While social commerce offers increased market access, businesses using social commerce informally and exclusively may struggle to formalize their operations, limiting their growth and investment opportunities. Another major hurdle of social commerce for small businesses is the lack of integrated payment and delivery systems, implying that sellers must negotiate terms individually with buyers for each sale, adding complexity to the transaction process. Additionally, social commerce does not offer the seller any protection should buyers refuse to complete the sale or if goods are damaged in the delivery process. For women, there is also a greater risk of facing online harassment compared to other online sales channels.

Business development providers can provide additional assistance to help more social media sellers, especially women, transition from social commerce to more formalized e-commerce, where incomes and reach have more potential to grow. This can be done through tailored training approaches that smooth the transition or encourage small businesses to consider adopting both social commerce and e-commerce.

Social commerce is an entry point to the use of digital tools by many micro- and small businesses who may not have the financial or human resources to adopt more formal digital marketplaces like e-commerce platforms. These small businesses need support to effectively engage in social commerce to further grow their revenues and customer reach and also adopt more business tools and practices. As we learn more about best practices and techniques for supporting small businesses using social media, we will continue to share these insights.