Just in time for the end of the year, the ZHAW publishes the Social Commerce Report 2021. The scientific work discusses the status quo of social commerce in Swiss companies. The focus is on the potential of direct checkout on Facebook and Instagram for online retailers. In this blog post, we present the key findings from it and offer a few recommendations for action.
The strong growth of e-commerce as well as the current developments in social media enable online retailers to create new sales opportunities, called social commerce. This provides opportunities for both companies and customers to interact. E-commerce is evolving from a product-centric environment to one that is customer-centric and focused on social interaction.
In mid-2020, the Facebook Group – operating under the name Meta since October 2021 – communicated that Direct Checkout on its Facebook and Instagram platforms would allow products to be purchased directly without leaving the platform via a link to an online store. A high reach, the steady increase in the use of social media platforms, and the rapid development of the smartphone as the first screen throughout the entire customer journey give Direct Checkout very high potential. However, as this is only in the test phase in Europe, we lack recommendations for action and frameworks for implementing and assessing Direct Checkout for Swiss online retailers.
In the Social Commerce Report 2021, Darius Zumstein and Dominic Bärtschi therefore set themselves the goal of examining the advantages and opportunities as well as the challenges and risks of Direct Checkout in more detail and assessing the consequences for Swiss online retail.
What's the difference between e-commerce and social commerce?
In the theoretical foundations of the report, the elementary differences between e-commerce and social commerce (with Direct Checkout) were identified. Three examples:
- Place of the transaction: One key difference is the place of the sale. In e-commerce, the legally relevant transaction of the purchase takes place in the store of an online retailer or in the customer portal of a manufacturer. In social commerce, the purchase takes place with Direct Checkout on the social media platform (Facebook or Instagram store) itself.
- Goal achievement: Another big difference is in the goals on the respective platforms. The goals of an e-commerce platform are sales- and process-oriented and are to be achieved by increasing the efficiency of sales/shopping. In contrast, the achievement of goals in social commerce is characterized by social interaction and user-centricity. The focus is on networking, collaboration and sharing information with others.
- Data sovereignty and data security: While the data of one's own online store is stored locally on one's own servers or cloud solutions, with Direct Checkout on Facebook/Instagram the company Meta has data sovereignty.
What do online retailers and social media professionals think of Direct Checkout?
An online survey of 151 online retailers and social media experts revealed the following:
- 60 percent have not yet considered Direct Checkout.
- More than 80 percent of companies will integrate Direct Checkout as an additional sales channel and not replace their own online stores with it.
- A minority of 28 percent of online retailers believe that Direct Checkout will lead to fewer sales in their own online stores.
- More than 85 percent of participants rate the seamless shopping experience and the promotion of impulse purchases as the most important benefits of Direct Checkout.
- Four out of five of the respondents see data sovereignty by Meta as a possible disadvantage of Direct Checkout compared to a company's online store.
"We see the checkout button on Facebook and Instagram as an opportunity to be able to increase sales for e-commerce customers (especially D2C) via social media, and provide the user with a seamless sales experience with personalized ads. But the main focus of data management should – as far as possible – remain with the online store."
How Direct Checkout works on social media
Based on the findings of the survey, the Social Commerce Framework for Facebook and Instagram was established. It consists of three main players:
Framework for social commerce on Facebook and Instagram with Direct Checkout. Source: Social Commerce Report 2021 (ZHAW)
- A – Users exchange ideas and share content on the social media platform (1). On the social level, users interact with the companies via likes, comments, or direct messages (9). On the commercial level, they come into contact with posts, product tags, or ads (2) and can buy the products directly via Direct Checkout (3) or indirectly via a link to the retailer's online store (5).
- B – The online retailers are active on the platform with their business profiles. In addition to content and ads, they operate Facebook stores and/or Instagram stores and display a product catalog with all the products on offer (0). If a user places their order via Direct Checkout (4) and pays for it with PayPal or a credit card (6), the online retailer receives the delivery and payment information (7). The online retailer delivers the products and pays the platform operator Meta a selling fee of 5 percent (7). The platform provides the status of the order (8).
- C – Meta, with the two platforms Facebook and Instagram, acts as an intermediary between the other two players and provides the required information, such as delivery information, order status (8), number of sales, and sales volume (10).
UGC, emotionalizing products, and sophisticated performance measurement
The Social Commerce Report 2021 concludes with recommended actions for online retailers to integrate social media selling into their marketing and sales strategy. An excerpt:
- Since many retailers are already pursuing omnichannel approaches, Direct Checkout should be integrated into the sales strategy as an additional channel. The online store can serve as a product feed for the platforms. As long as Direct Checkout is not available in Switzerland and Europe, sales should be made indirectly via Facebook and Instagram stores; the purchase is then completed in the retailer's own online store.
- We recommend using user generated content (UGC) in the form of reposts, hashtags, etc. UGC influences the purchase decision and increases sales in social commerce.
- On Facebook and Instagram, sell emotionalizing products that are suitable for impulse and spontaneous purchases. For this purpose, it is advisable to create a specific product catalog for social media selling.
- Online retailers should design success measurement and reporting, including sales-relevant KPIs, before using Direct Checkout or selling products via social media.
Gain experience with social commerce today
A major advantage for Direct Checkout on Facebook or Instagram is that many online retailers and users are already active on these platforms. The benefit for Swiss online retailers lies primarily in the potential for impulse purchases and the acquisition of newcustomers. Furthermore, it can be embedded in the strategy as an additional channel and enables online retailers to address the target group where they spend most of their time.
It should be noted that the use of Direct Checkout creates additional organizational, personnel, and financial costs and dependencies on the platforms. The question of when Direct Checkout will be available on Facebook and Instagram for Swiss online retailers remains open. Nevertheless, Swiss online retailers should already be using Facebook and Instagram stores today to gain initial experience of social commerce and their target groups. This also helps to estimate which personnel and financial resources will be necessary for social media selling.
Social Commerce at Webrepublic
Since the Covid crisis, at Webrepublic we have seen increased demand for social commerce services from new and existing clients. As an agency, we have responded by expanding our social selling services and training several of our social media consultants specifically for this purpose. This has resulted in a dedicated five-person team that exclusively serves social commerce clients.