Should social commerce be the next big move for legacy brands?

Authored by Pranav Kosuri and Douglas Andersson, Co-founders, Brandie

Similar to the paradigm shift of offline retail to e-commerce (making it clear that one could no longer ONLY have old retail), there is a new paradigm shift happening that brands need to start to plan for. The online sales trend is increasingly shifting from e-commerce to social commerce. According to a 2021 report by Bain & Company, social commerce as a sector has the potential to grow to $16–20 billion by FY25 at a compound annual growth rate (CAGR) of 55-60 per cent. 

Why legacy brands need to act now?

Social media users in India are expected to grow to around 448 million in 2023. This rise is not just because it is a great tool to build a community and connect with people; it has also metamorphosed into a place where people interact with brands and shop. Social commerce is a direct beneficiary of this rapid rise of social media users, i.e., buy-sell via social media platforms.

With the emergence of new home-grown brands that are born into this new landscape and have this as their primary marketing avenue are winning the race and eating market share. By not having massive overheads, they can promise better quality and conscious products; social media has become their primary outreach field. Through social media, brands are getting in touch with their target audience and finding their place in a booming market space. Fighting these new brands will be the next big hurdle for legacy brands to overcome. 

What about the already-established legacy brands that have their websites, retail stores and substantial supply chains? 

They enjoy a loyal customer base who buy from them irrespective of the platform because they consistently deliver quality products and services. However, there is limited market depth, so it's crucial now that brands use all the touchpoints to bring and retain customers who have moved on to a different space. 

Legacy brands are focussing and spending on marketing campaigns and building an online presence to drive e-commerce numbers. However, they need to remember to tap into the market beyond metro cities, where the reach of e-commerce is still limited. Instead, brands can leverage their existing consumer trust to enter the social commerce space and build awareness about the brand.

These big brands must recognise social commerce as the future of online sales. Neglecting the competitiveness of social commerce by more prominent brands will allow the smaller ones to take over the space and keep higher margins as they don't have to spend on maintaining any massive overhead. So the prominent players need to observe, learn, adapt and compete with these players to retain their customers. Another reason is to tap and influence new users in non-metro markets, where social media platforms are doing quite well. For example, 80% of India's approximately 650 million smartphone users are from Tier 2+ cities. The next big opportunity is serving this set of customers with very different needs and aspirations from their Tier 1 counterparts.

Social commerce sites, such as Instagram stores and Facebook pages, are gaining popularity among users because they are developed around building a community, a dedicated base of followers who admire the brand, talk about it, and even share and promote them. Social commerce also leads to a much more engaged shopping experience, which helps forge long-term clientele. Having customer reviews, ratings, discussions and more contribute immensely to the growth of a brand. Social commerce also hastens the consumer journey from inspiration to purchase by addressing communication barriers between seller and buyer. With these added benefits of community building, user-generated content and word-of-mouth marketing, customers have a greater opportunity to connect with the brands they love through the ability to quickly see relevant information like product descriptions and pricing with a single click on social media platforms. 

New brands are currently driving the bulk of social commerce in India. Legacy brands invested in e-commerce because that's where the growth lay then. They need to take the next step of social commerce, where the online shopping experience is moving. Big players have the advantage of budget and resources to have a universal online sales presence on e-commerce portals and their social handles suiting the needs of diverse consumers- but they need to act now!