Social commerce the next frontier of online commerce — market sizing

During the lockdown, you would’ve observed your mother shopping for Sarees/Kurtis through a Whatsapp group? Did you also come across furniture stores selling office chairs (for WFH) through Instagram/Whatsapp?

Was this common in India before a year or so? No.. Now, this new mode of buying and selling goods through social media platforms (Instagram, FB stores, Whatsapp, etc.) is called “Social commerce”. There are a lot of startups that are trying to help such social merchants (Meesho Official, BulBul, etc.) set up an online store. Social commerce in India is in a nascent stage.

For another interesting case on India’s EdTech startups, checkout: https://themanagementconsultant.medium.com/interesting-education-technology-edtech-startups-to-watch-out-for-in-india-2021-9de7daf9f74c

Includes a guesstimate and problem solving case

Coming back, looking at this from the customer’s perspective, social commerce has a lot of advantages:

• Bargaining power
• Trust on the merchant
• Convenience in communicating with the merchant directly

All this makes the shopping experience fun and engaging.

For a merchant using social commerce:

• Can build a loyal customer base
• Easily cater to the people in their locality
• Can easily communicate with his customers

Now what type of products get sold this way? You would not buy iPhone 12 from a random social seller, right? That's just too risky. The most selling product categories on social commerce are Fashion, beauty, personal care, food & groceries.

How is this opportunity evolving? India has the second-highest number of internet users. The data prices in India are among the lowest in the world. Only ~41% of Indians use the internet. This gives a great opportunity for merchants to reach their customers through these new modes. Also only ~8% of Indians shop online. These people on average spend ~$300 annually online (this is significantly lower than other markets). So there are a lot of customers who could be connected through this mode and a great opportunity to capture the wallet share of the existing customers.

Given this information, the problem I had to solve was this: We have a social commerce platform — it is in a very early stage. But we do not have a product-market fit right now. So we want to identify sellers of categories of products we should acquire. Please recommend.

Let me tell you how I approached this:

1. First I tried understanding what social commerce is, why merchants are using this, why customers are purchasing through this mode, what category of products are sold this way, who are the players, how is this space evolving, what other countries have a similar landscape, etc. — This is just for me to understand the current landscape.
2. Then, I tried looking for some numbers. What is the current market size of social commerce? I could not find the exact number. But I found that it is ~5% of the e-retail sales. So the market size of social commerce is ~$1.5Billion to 2Billion.
3. Then, I identified what percentages of each product category contribute to the social commerce market size calculated above.
4. Based on these, I was able to get the current social commerce market size for different product categories. But whenever we are recommending something, it is good to show how the future is going to be.
5. So for this, I identified which country has followed a similar trajectory in social commerce. Turns out, China’s social commerce was in a very similar state a few years ago.
6. Now I divided China’s growth into three stages: Nascent stage, Exponential growth stage, and Maturity. I identified the growth numbers in each of these stages. Indian as we have seen is in a nascent stage. So based on the identified growth numbers and market sizes, I projected the social commerce market size in India and recommended which product categories to focus on, to begin with.

Hope this made some sense. Follow for more content on the Indian market and cases/interview prep. Share this with your friends who might find this interesting.

Respond with any alternate methods/extensions you can think of. Will help me improve the content I post. Also, happy to hear your suggestions on what I could post. :)