How Merchants Can Leverage Social Commerce

In our thoroughly networked world, many are constantly glued to their mobile devices, devouring the musings, postings, and comments that are the lifeblood of social networks. This shift of attention from stores to social media represents both a threat and an opportunity to merchants who must adjust rapidly, but can take advantage of the exploding world of social commerce.

What is Social Commerce?

As the name suggests, social commerce is commercial activity that takes place on, or because of content delivered by, social networks. Given the broad range of potential activity that users undertake on social media, this exciting and rapidly growing corner of e-commerce can take many forms, including

• Self-posting: maintaining a strong brand presence on social media and promoting goods and services in various ways, including reviews, ‘drops’, and collaborations with existing influencers
• Sponsored posting: many influencers (social media users with a substantial following) are willing to promote goods and services for a fee. In the early days of the medium this was often as simple as holding up the product and saying nice things. Today’s consumer is looking for greater transparency and authenticity, so a successful post generally includes the influencer providing an authentic-feeling recitation of their own product experience
• Live-streaming: there are plenty of platforms now that offer an opportunity for brands or influencers to broadcast live shows, in which they show off their wares and encourage viewers to buy in real-time straight from their devices.
• Advertising: what’s old is new again, as straight-up advertising (whether static ads in Instagram feeds, or video pieces running pre-, mid-, or post-roll on YouTube) increasingly directs the user to immediately-accessible checkout opportunities.

Benefits for Merchants

Social commerce is especially valuable for merchants whose goods and services may be a little more complicated to understand. Someone selling, say, a pound of potatoes, doesn’t need to provide a massive amount of information to the potential buyer; by contrast, someone offering a piece of clothing, may need to do more to persuade the shopper that this is the perfect thing for them to pick up today. Running a collaboration with an influencer who tries on and models that clothing in real-time on a social media platform might be just the kind of demonstration that pushes the buyer over the edge.

Social Commerce Challenges for Merchants

The challenges in making social commerce work for merchants fall into two camps:

• Conceptual: for merchants who have no background in social commerce, coming up with ideas that are both practical and likely to appeal to their target audience can be a struggle, and often end up being driven more by anecdotal evidence than data. However, there is a robust ecosystem of companies and consultants who can help merchants work their way through conceiving, planning, and executing a social commerce strategy. 

• Operational: merchants must make quite stark choices for their social commerce strategies. Will they, for instance, simply jump aboard an existing social network and allow customers to buy through the e-commerce platform of the network (causing a certain amount of logistical challenges, and resulting in what can be fairly high fees), or will they try to direct buying customers to their own interfaces (which will require them to optimize their systems for mobile devices as well as computers). Meanwhile, they must decide whether influencers with whom they collaborate will simply send customers to the merchant’s site (which necessitates tracking mechanisms, particularly when influencers are to receive a percentage of proceeds), or whether they will themselves take delivery of inventory to be re-sold (another logistical challenge).

Managing Social Commerce Payments

Much as e-commerce businesses often start off using a full-service PSP before pivoting to an automated payments system using multiple payment gateway partners, merchants embarking on a social commerce endeavor will characteristically start with the simplest transaction approach possible: simply using the social network’s systems to make sales. However, the fees they charge can sink a social commerce program from the get-go: Instagram, for instance, charges a 5% sales fee, which can rapidly eat away at the margins for e-commerce companies.

As a result, to make social commerce work, merchants really need to direct interested consumers back to their site for purchasing, ensuring that the interface is properly tuned to the most popular devices - computers, tablets, and especially mobile phones. In this way, they can gain the benefits of the direct-to-consumer connection of social commerce, while also protecting their business model at the point of sale.

For many merchants, this will mean building a more sophisticated buying interface than is necessarily possible with the basic offerings of a full-service PSP. Indeed, the potential for sales across national borders, using a variety of different alternative payment types, and with varying levels of risk, almost demands the creation of a well-tuned payments automation system, which maximizes the chances of closing a sale, while keeping the costs of doing so low.

World-class Payment Strategies for Social Commerce

Many innovative merchants use a third-party token vault, such as that offered by Basis Theory, to ensure they have control over their transactions, from the interface to data storage and reuse to PSP fee arbitrage. The token vault takes charge of securing customer data both in motion and at rest - reducing the risk and cost of the merchant remaining PCI-compliant - and makes that data available to be submitted to the right PSP for each transaction. And that flexibility empowers the merchant to use their preferred web builders to create exciting, frictionless checkout experiences, as well as the right payment ecosystem partners to deliver an excellent customer experience without incurring unnecessary processing costs.