Social commerce is being adopted at a breakneck pace worldwide, with more and more users signing up on several social networks. It has been touted as the $2T sales opportunity and is pivoting MSMEs towards eCommerce growth.
Digital penetration is on the rise against the backdrop of a global economic downturn, with more and more neighborhood mom-and-pop stores, quaint boutiques, and cozy cafes inspired to leverage social networks. In fact, social commerce is the answer to helping small and medium enterprises in rural areas grow their income without leaving their hometown.
So, grab your smartphone and get ready to explore the fascinating world of MSMEs and their adoption of social commerce, where tradition meets technology and small businesses conquer the digital realm, one "like" at a time.
How Did MSMEs Get Around to Adopting Social Commerce?
The landscape of e-commerce has undergone a rapid expansion, leading to a remarkable diversification of its forms and functions. One noteworthy aspect of this diversification is the emergence of social commerce, which has particularly flourished in the mobile realm. In the past, the purpose of social networks was help people reconnect with their family, friends and acquaintances. But in recent years, there has been a repurposing following how Facebook groups became the new avenue for conducting virtual garage sales. As a result, new functionalities for selling were introduced and platforms were optimized for mobile browsing, which other social platforms have caught onto, such as the Instagram shop and WhatsApp for Business accounts. As a result, MSMEs have realized there’s scope for a new and profitable sales channel through which they can advertise and promote products and services and expand the user base.
Today, social networks have become thriving hubs for various types of transactions, including business-to-consumer (B2C), consumer-to-consumer (C2C), and business-to-business (B2B) interactions. Moreover, influential individuals are creating engaging content on these platforms, attracting a large audience that actively consumes their content.
Consequently, if your target audience aligns with the followers and consumers of these influential individuals, there is a strong incentive to tap into the power of social commerce. This recognition of its potential has prompted a significant buy-in from businesses and entrepreneurs alike. The rise of social commerce within the broader e-commerce landscape represents a paradigm shift in how businesses perceive and utilize online platforms to expand their reach and engage with customers.
Nevertheless, it is crucial to acknowledge that alongside these incredible opportunities, there also exist significant challenges that must be overcome.
- Financial Constraints
MSMEs face significant financial challenges, including poor cash flow management and low credit scores. Many MSMEs struggle with maintaining up-to-date books of accounts, leading to difficulties in tracking pending payments and ensuring a steady inflow of money.
This cash flow issue is further exacerbated during tough times when finding customers and receiving timely payments becomes challenging. To support MSMEs, the government has introduced initiatives such as low-interest loans, subsidies, and exemptions.
Another financial hurdle for MSMEs is a low credit score, often resulting from the lack of proper bookkeeping. This poor credit history leads to loan application rejections or high-interest rates when approved. It is crucial for MSMEs to maintain accurate financial records, including documentation of transactions and timely filing of tax returns. By improving their credit scores, MSMEs can access better financing options, enabling them to expand their operations and meet their financial needs.
- Technology Adoption and Infrastructure
For MSMEs, embracing e-commerce technology can be challenging due to limited resources and technical expertise. To overcome these obstacles, it is crucial to find user-friendly and cost-effective e-commerce platforms that align with business goals.
Additionally, investing in cloud-based solutions, inventory management systems, and reliable payment gateways can streamline operations and enhance customer experiences.
By conducting thorough research, MSMEs can discover an e-commerce platform that simplifies the process and maximizes their potential for success. Cloud-based solutions offer scalability and flexibility, ensuring websites remain accessible and responsive even during peak traffic.
Implementing effective inventory management systems optimizes order fulfillment, while reliable payment gateways facilitate secure transactions and build trust with customers. With these infrastructure investments, MSMEs can thrive in the e-commerce landscape.
- Managing Inventory and Fulfillment
Managing inventory efficiently can be challenging for MSMEs entering the e-commerce space. Accurate inventory tracking, stock optimization, and timely order fulfillment are critical for customer satisfaction. MSMEs should consider implementing automated inventory management systems that integrate with their e-commerce platforms. These systems can provide real-time visibility into stock levels, automate reordering processes, and streamline order fulfillment, ensuring a smooth customer experience.
The Rise of Social Commerce
When it comes to social commerce, think of popular platforms like Instagram, Facebook/Meta, and Pinterest as your new best friends. They're not just for scrolling through cute cat videos anymore; they've become powerful selling hubs too! In fact, the social commerce business is currently valued at a whopping $89.4 billion.
Now, you might be wondering how social commerce differs from good ol' e-commerce. Well, here's the scoop: e-commerce relies on dedicated apps and websites to sell products. It's more complex and requires extra effort to set up shop. On the other hand, social commerce is a breeze for small and medium-sized businesses (MSMEs).
The Evolution of Social Media Platforms
- Integration of shopping features: Social media platforms have incorporated various shopping features that streamline the purchasing process. For instance, Instagram introduced shoppable posts, enabling businesses to tag products in their posts and allowing users to make direct purchases within the app. Facebook has also introduced Marketplace, where users can buy and sell items within their local community.
- Influencer marketing: Social media influencers play a significant role in social commerce. Influencers have large followings and can impact consumer behavior by endorsing products and sharing their experiences. Many brands collaborate with influencers to promote their products, leveraging their influence and trust with their followers to drive sales.
- User-generated content and social proof: User-generated content, such as reviews, ratings, and testimonials, has become a vital component of social commerce. Customers can share their experiences and opinions, providing social proof for potential buyers. Social media platforms enable the easy sharing and discovery of user-generated content, which helps build trust and credibility for products and brands.
Statistics & trends showcasing the growth of social commerce
- Increasing user engagement: Social media platforms have massive user bases, providing a significant opportunity for social commerce. According to Statista, as of April 2021, Facebook had 2.85 billion monthly active users, and Instagram had over 1 billion monthly active users. These platforms offer extensive reach and engagement potential for businesses.
- Growing influence of social media on purchase decisions: A survey by GlobalWebIndex revealed that 54% of internet users use social media to research products, and 71% are more likely to make a purchase based on social media referrals. They have become influential channels for product discovery and research, impacting consumer decision-making.
- Rise of mobile shopping: With the widespread use of smartphones, social commerce has experienced significant growth. Mobile devices offer seamless access to social media platforms and enable convenient shopping experiences. According to eMarketer, in 2021, 90.4% of social media users accessed social platforms via mobile devices.
- Social media advertising expenditure: Businesses are investing heavily in social media advertising to tap into the potential of social commerce. According to Statista, worldwide social media advertising spending is projected to reach 177.8 billion U.S. dollars in 2023, up from 130.3 billion U.S. dollars in 2021.
- Live shopping and interactive experiences: Live shopping, where businesses host live broadcasts to showcase products and engage with viewers in real-time, has gained popularity. Platforms like Facebook Live, Instagram Live, and TikTok have introduced features that allow brands and influencers to sell products directly during these live sessions, creating interactive shopping experiences.
Reimagining the growth of Indian MSME's through social commerce
Businesses today have altered how they view themselves; instead of only showing off their strength, we can observe MSMEs that have mastered the transition from "me to we." Utilizing the digital business, digital customer, and even digital device spheres, organizations are broadening their horizons.
Social commerce platforms allow businesses to sell their products and services directly to consumers through social media, and they offer a number of advantages over traditional e-commerce platforms.
- Low cost: Social commerce platforms typically do not charge sellers a commission, which can save businesses a significant amount of money.
- Reach: Social commerce platforms have a large reach, which can help businesses to reach a wider audience.
- Convenience: Social commerce platforms make it easy for businesses to sell their products and services, and they can be accessed from anywhere.
These advantages make social commerce a very attractive option for MSMEs in India. The sector is expected to grow at a CAGR of 55-60% between 2019-2025, and it has the potential to empower over 40 million small businesses to leapfrog into online commerce.
Meesho, a leading player in the social commerce arena, has revolutionized the way MSME sellers connect with potential customers. Through its integration with popular social media channels like WhatsApp, Meesho empowers sellers to remain accessible to a much wider audience by tapping into their existing social networks, thus facilitating effortless transactions.
This ingenious approach has proven to be a game-changer, enabling countless MSMEs to establish a robust online presence, attract customers, and drive substantial revenue.
Another remarkable example of leveraging social media for MSME growth is the collaboration between Facebook and WhatsApp. Facebook, being a social media giant, has introduced an array of features and tools designed specifically to support MSMEs.
Among them is WhatsApp Business, a powerful platform that allows businesses to create comprehensive catalogs, showcase their products, and seamlessly interact with customers. By embracing these platforms, MSMEs not only enhance their online visibility but also cultivate meaningful relationships with their valued customers.
With Meesho and the partnership between Facebook and WhatsApp, MSMEs have a golden opportunity to thrive in the digital world. By harnessing the power of social media, they can expand their reach, boost sales, and establish themselves as formidable players in the market.
What Are The Best Platforms For MSMEs?
There are several platforms that are considered effective for social commerce, especially for Micro, Small, and Medium Enterprises (MSMEs). These platforms provide opportunities for businesses to leverage social media and online communities to promote their products and engage with customers. Here are some popular platforms for social commerce:
- Facebook: With its large user base and robust advertising capabilities, Facebook offers various features for MSMEs to showcase and sell their products. Facebook Shops allows businesses to create an online storefront integrated with their Facebook Page, while Facebook Marketplace enables direct selling to local customers.
- Instagram: As a highly visual platform, Instagram is ideal for businesses with visually appealing products. MSMEs can set up an Instagram Shop to tag and sell products directly within their posts and stories. Influencer collaborations and sponsored posts also provide opportunities for increased exposure.
- WhatsApp Business: WhatsApp is widely used for communication, and its business version offers features specifically designed for MSMEs. Businesses can create catalogs, share product information, and engage with customers through direct messaging, making it suitable for personalized and direct sales interactions.
- Pinterest: Pinterest is a visual discovery platform where users search and save ideas for various interests. MSMEs can utilize Pinterest to showcase products, create engaging content, and drive traffic to their online stores. Pinterest's Buyable Pins feature enables direct purchasing within the platform.
- Etsy: While not a traditional social media platform, Etsy is an online marketplace focused on handmade, vintage, and unique items. It provides a dedicated platform for MSMEs, particularly artisans and crafters, to sell their products and connect with a community of buyers interested in unique goods.
- TikTok: Known for short-form video content, TikTok has become popular for promoting products through engaging and creative videos. MSMEs can leverage TikTok's advertising features and collaborate with influencers to increase brand awareness and drive sales.
- YouTube: YouTube's vast user base and video-centric nature make it suitable for MSMEs to showcase products, share tutorials, and build brand loyalty. By creating compelling video content and incorporating product links in descriptions, businesses can drive traffic to their online stores.
Remember that the effectiveness of each platform can vary based on your target audience, industry, and product offerings. It's essential to assess your business objectives, target market, and resources to determine which platforms align best with your goals and where your potential customers are most active.
What Are The Impacts of Social Commerce on MSMEs in India?
Social commerce has had significant impacts on Micro, Small, and Medium Enterprises (MSMEs) in India. Here are some key effects:
- Increased Reach and Visibility: Social commerce platforms, such as Facebook, Instagram, and WhatsApp, provide MSMEs with an opportunity to showcase their products or services to a wide audience. These platforms allow businesses to create dedicated pages or profiles, attracting potential customers who might not have discovered them otherwise.
- Cost-Effective Marketing: It enables MSMEs to market their products or services at a lower cost compared to traditional advertising channels. They can leverage social media platforms' organic reach, engage with customers through interactive content, and run targeted ads to reach specific demographics. This affordability levels the playing field for smaller businesses, allowing them to compete with larger enterprises.
- Enhanced Customer Engagement: With the advantage of facilitating direct communication between MSMEs and their customers. Through comments, messages, and reviews, businesses can gather feedback, address queries, and build relationships. This personalized engagement helps MSMEs understand customer preferences, improve their offerings, and provide better customer service.
- Trust and Social Proof: Social commerce platforms provide a space for customers to leave reviews and ratings, influencing the purchasing decisions of potential buyers. Positive reviews and testimonials build trust and act as social proof, establishing the credibility of MSMEs. This aspect is particularly crucial for small businesses that might not have established a strong brand reputation.
- Simplified Transactions: These platforms are increasingly incorporating seamless payment options, making it easier for customers to make purchases directly within the platform. This streamlined process reduces friction, simplifies transactions, and encourages impulse buying. MSMEs can leverage this feature to convert social media interactions into sales more effectively.
- Opportunities for Collaboration: This enables MSMEs to collaborate with influencers, bloggers, or other complementary businesses, partnering with influencers or featuring on influential social media accounts can significantly boost brand exposure, expand the customer base, and drive sales.
- Data Analytics and Insights: Social commerce platforms offer analytics tools that provide MSMEs with valuable data on customer behavior, engagement metrics, and sales performance. By analyzing this data, businesses can make data-driven decisions, tailor their marketing strategies, and optimize their products or services based on customer preferences.
- Competitive Advantage: Embracing social commerce can give MSMEs a competitive advantage by differentiating them from businesses that have not adopted these platforms. By leveraging social media effectively, MSMEs can stay ahead of the curve and tap into the growing online consumer base in India.
However, when utilized strategically, social commerce can significantly benefit MSMEs in India, helping them grow, expand their customer base, and thrive in the digital age. MSMEs must adapt to the evolving market dynamics in order to thrive. Despite the challenges faced during the pandemic-induced lockdowns, a majority of MSMEs have experienced a resurgence in their businesses. They have observed that the current environment is more conducive to online sales than ever before.
The influence of social commerce has significantly expanded to tier 2 cities and beyond. This expansion presents a unique opportunity for MSMEs to unlock their full potential and tap into new customer bases. Start-ups are actively establishing networks of community leaders, influencers, and resellers in regional markets. To seize this opportunity, small businesses should consider leveraging social commerce as an alternative sales channel. Additionally, exploring supply chain financing can be a viable option for MSMEs to meet the increased demand and restore their operational cycles.