Social commerce spending to reach $10 billion to $14 billion by 2025: BCG report

Social commerce spending will reach $10 billion to $14 billion by 2025 and constitute 7% to 9% of online retail spending, according to Boston Consulting Group’s (BCG) latest report titled, “Ten Things You Should Know About E-Commerce in India”.

The category’s rising popularity reflects its strong value proposition, as it often combines the best of physical and digital commerce. For example, one long-time e-shopper reported, “I was able to customise my order easily, changing the buttons on a kurta set, which is impossible to do on traditional e-commerce platforms.” Meanwhile, a new-to-online shopper noted, “On chat, it’s easier to clarify product doubts, seek additional images and advice, etc., which helps establish trust with sellers.” Due to strong seller engagement, social commerce also benefits from a high conversion-to-purchase ratio.

Social media—from Facebook and Instagram to TikTok and YouTube—and chat apps such as WhatsApp and Facebook Messenger are becoming more digitally influential in India, but they are also emerging as significant sources of online buying. In fact, in BCG’s survey’s ranking of most-used e-commerce channels, they climbed from 8% of responses in 2018 to 23% in 2021, making them the fastest-growing channel for online purchases.

One reason for this development is that the pandemic has spurred an influx of new online buyers who are less digitally savvy than the typical pre-pandemic shopper and often struggle with traditional e-commerce platforms. These platforms also tend to be especially popular in categories where product trials or customization are crucial, such as BPC and fashion, and in categories where local shops have added an online channel, such as pharmacy and groceries.

Nonetheless, social media and chat do have some distinct downsides—such as a lack of professionalism, customers’ fears of being cheated, and the potential misuse of personal information—that inevitably arise in any channel operated by many small, disparate sellers. In addition, discounts are very important to Indian shoppers, especially smaller city residents, and e-commerce does not let them negotiate prices the way in-person shopping does. Finally, most of India’s newer online shoppers say that they are uncomfortable using complicated digital apps and would prefer a simpler channel, perhaps one in their own vernacular.

If companies can successfully address issues such as these, social commerce is likely to hit the upper end of our growth projections in 2025. For example, the availability of bulk discounts and the opportunity to buy online from local stores or known entities would convince the majority of our respondents either to start buying online or to buy more online. Many of the BCG respondents also said that they would be willing to buy online if they could interact with a seller for product-related queries or price negotiations.

A few emerging local e-commerce models are beginning to address some of these issues. One powerful example involves the use of live streaming and video shopping, and another relates to group buying.

Livestreaming and video shopping

One increasingly popular Indian social-commerce option today provides content on a live streaming and video-shopping platform that mimics real-world (nondigital) shopping in India, where the activity is a social experience and consumers like to get second and third opinions before buying. To do this, it uses relatable hosts and influencers in live video sessions to sell nonbranded products, primarily in categories such as BPC, fashion, electronics, and home goods. Potential customers can follow influencers, chat with hosts or audience members, and order products without leaving the live video. Many such consumers come from smaller cities or towns and are uncomfortable with e-commerce, so the platform offers content in several vernaculars to help them understand product descriptions and browse catalogues. The platform’s videos also try to mimic offline stores by including virtual “touch and feel” experiences and providing answers to product queries on such issues as assembly, usage, and maintenance.

Group buying

One growing Indian social-commerce player uses social media and messenger platforms to sell groceries and household essentials from lesser-known brands by allowing customers to form groups within its existing customer network or to be grouped randomly over an instant messaging service. Within each group, customers can share, discuss, and buy a wide range of products from multiple sellers, benefiting from discounted prices on group purchases but still receiving individual deliveries. This model taps into consumers’ need to trust the seller and their desire for discounts—the latter trait appealing to middle-class shoppers in particular.

The report findings were corroborated and substantiated by extensive, real-time transaction data gathered and analysed on the purchase transactions of over 800,000 consumers (about 200,000 e-shoppers), along with multiple industry reports and expert interviews. The survey underlying this report was conducted with over 10,000 Indian consumers, across more than 40 metros to tier 4 cities and 50 rural towns/villages, and was overseen by BCG’s Center for Customer Insight.