Growing social commerce
This year marks 25 years since the first secure online transaction was completed, signalling the birth of online shopping and changing the face of retail. Ecommerce has come a long way since 1994, with increasingly sophisticated advertising and sales tools making online shopping more targeted and convenient.
It’s now quicker and easier for consumers to find products they like, put these in their baskets and check-out. This is leading to exponential growth in ecommerce, with the most recent Government figures showing internet sales account for around a fifth of total UK retail sales. This proportion of sales is on the cusp of significant growth, with social media commerce set to make online shopping even more relevant and convenient.
Platforms like Facebook, Instagram and, more recently, social video app TikTok, are all focusing on enabling their users to buy products within their sites. This heralds a huge shift in shoppers’ buying journeys. Consumers are already receptive to advertising as they scroll through social media. It’s a natural next step for them to shop whilst they’re socialising, rather than having to click-out of the social platform to a retailer’s website.
Shoppable social media will prompt massive growth in social commerce. PayPal’s annual commerce index predicts the number of UK businesses selling on social media will double in the next six months.
Social shopping habits
Looking beyond growth opportunities, it’s important to consider how social media will impact consumers’ buying habits. Advanced Supply Chain Group works with retailers across the UK and internationally, helping them to move tens of thousands of products every day.
We don’t deal directly with consumers but realise their buying habits impact the supply chains we develop and manage. With this in mind, we wanted to better understand how the real-time nature and immediacy of social media would affect how consumers shop.
We surveyed 2,000 online shoppers and found that social media platform selling tools will encourage 34% of consumers to buy more on impulse. This is great news for retailers, many of whom work hard to encourage spur of the moment purchases. Impulse buying can prove a valuable revenue stream, bulking-out baskets through cross and up-selling.
However, the growing number of impulse purchases are also a good indication of how ecommerce is increasingly becoming a two-way transaction between retailers and consumers.
Our research shows that 63% of these impulse shoppers are more likely to return items. This means shopping on social media will see a fifth of all online shoppers sending more of their purchases back to retailers.
This presents retailers with a huge challenge. They have to contend with a growing proportion of sales which will effectively generate no revenue, but still appear on the balance sheet as a cost. This is causing margin dilution and, in many cases, is leading to supply chain strategies and returns polices being dominated by cost-first decisions.
On the surface, this can seem a logical approach. If returns are costing the retailer, why not charge consumers to send products back? It covers the costs of ‘phantom sales’. This simply won’t work. Our research shows ‘paying for a return’ ranks as the biggest frustration for 22% of online shoppers when sending a product back.
Additionally, the ‘cost of deliveries’ ranks as the most frustrating factor for about a third of online shoppers. Consumers simply don’t want to pay for receiving or sending back goods. They are value-conscious and want their money to be spent on goods they are buying as opposed to transportation.
The most astute retailers are those who realise returns are an essential part of the sales cycle. Instead of making cost-first decisions about their returns policies and supply chain management, they are focusing on making returns consumer-centric. They are being innovative and actively addressing consumer frustrations.
Technology can help minimise consumer pain-points such as ‘waiting for a returns refund’, which our research found to be the second biggest frustration for 20% of online shoppers. With the right software, a retailer can effectively track a return through the supply chain, meaning they can keep consumers updated about the status of the return, refund them more quickly and also better manage their own stock inventory – the prime condition and sales availability of returned stock can be maximised.
Consumer-centric supply chains
Social media commerce is still very much in its infancy and has huge potential to influence the future growth of ecommerce. As online shopping continues to grow, so will the volume of returns and the importance of placing consumer trends at the centre of supply chain management and returns policies.
By placing consumers at the heart of their supply chain strategies, retailers will drive greater levels of consumer satisfaction and repeat sales. To truly achieve this though, it’s important not to make assumptions and to make decisions based on data and insight.
For example, it may come as a surprise to some retailers that our research found that placing a limit on how much consumers can order in an attempt to reduce returns, would not matter to 45% of consumers. It wouldn’t influence their decision to shop with the retailer or not.
The research also showed 19% of online shoppers would be more likely to shop with a retailer making such a move, compared to 20% that would be less likely to shop with a retailer limiting the number of items ordered.
Social media and online shopping are evolving in response to consumer trends. Returns and supply chain strategies must do the same if retailers want to drive sales in an increasingly competitive market.
Ben Balfour, commercial director at international logistics company, Advanced Supply Chain Group