The definition of social commerce has evolved immensely since the term was first used in 2005, and the variety of definitions has only made the term more confusing. I surely don’t have the silver bullet definition, but I thought it might be useful to explain the basic concepts of social commerce and share some research on the size of the market.
If you have ever asked a friend for a recommendation on where to eat or where to get your clothes dry cleaned than you’ve participated in the most basic form of social commerce. It’s normal to ask friends and acquaintances for recommendations on all types of professional services and products; everything from mechanics and barbershops to hotels and clothes. These questions and recommendations form the basis of modern day social commerce, but social commerce involves much more than recommendations. Social commerce also utilizes all aspects of social interactions that lead consumers to make buying decisions.
Put simply, social commerce is the form of e-commerce that emulates and enhances the offline social shopping experience. For example, rather than calling a friend to ask for a recommendation on where to eat, you can review multiple restaurant reviews and data points from your friends on Yelp. As another example, you can purchase a Groupon instead of getting a group of friends together and negotiating a discount at a local business. These are some of the most obvious examples of social commerce. However, social commerce companies come in numerous shapes and sizes, and all social commerce companies leverage one or more of the following social principles:
Social Proof – People want what others like them want
Scarcity – People derive value from exclusivity
Authority – People prefer to follow others that have perceived authority
Reciprocity – People like to help others that have helped them
Liking – People enjoy helping others they like
Consistency – People behave according to their public and voluntary commitments
(more about these principles: HBR, Scientific American, awarenes, Social Commerce Today)
Due to the variety of social commerce companies, the market size of social commerce is hard to determine. Social commerce companies range from e-commerce companies with business models dependent on social commerce (e.g. Gilt, Groupon, Fab, Beachmint, Totsy, Yelp, etc.) to companies that provide social commerce tools to traditional e-commerce companies (e.g. 500friends, Baynote, tabjuice, mybuys, etc.).
Booz & Co recently released a study estimating that the dollar value of goods sold through social media will reach $30Bil worldwide ($14Bil in the US) by 2015 up from $5Bil worldwide ($1Bil in the US) in 2011. This study only includes the dollar volume of goods sold through social media, which does not represent all of social commerce, but it is a good indicator of the evolving e-commerce market. Also, Business Insider published a report estimating that the flash sales segment (e.g. Gilt, Fab, One Kings Lane, ideeli, Totsy, etc.) of social commerce will reach $6Bil by 2015 up from an estimated $1.5Bil in 2011.
Ultimately, the social commerce space is very nacent and the way we connect and shop will continue to evolve in the years to come. The one thing we know for sure is that our social interactions will not disappear as commerce moves online.