Social Commerce: The rise of ‘conversational commerce’

Social Commerce: The rise of ‘conversational commerce’

The Edge Markets - Technology·2021-06-07 05:11

For Sylvia Wong, who runs a home-based food business that she started last year, engaging customers through social media is a given. She relies on Facebook and Instagram to promote Mak Cik Wong Chili Pan Mee and to attend to queries, and uses a local WhatsApp Commerce platform to finalise orders and handle transactions.

Setting up an e-commerce store is too expensive for a small setup like Wong’s and the web of mark-ups as well as high commission fees charged by food delivery platforms are not sustainable, given her razor-thin margins.

So, she relies on social media to put the word out on her twist on the Hakka staple — a pork-free alternative served with sides of minced chicken, soft-boiled egg, crispy anchovies and blanched green bayam.

And, she also relies on conveniences such as live chats that give her the opportunity to address customer queries, from the source of ingredients used to the level of heat of the chilli mix that tops the hand-pulled noodles.

Conversational commerce, as Praneeth Yendamuri, partner at Bain & Co in Singapore refers to it, is growing across Southeast Asia as consumers increasingly value on-demand convenience and personalised experiences.

Conversational commerce offers a unique value proposition, says Praneeth. “It combines people’s favourite parts of offline shopping — for example, consulting with a salesperson in-store — and their favourite parts of online shopping, the convenience of shopping whenever they want.

“Even the e-commerce platforms in Southeast Asia are starting to adopt live chat and live buying functions to provide shoppers with similar experiences, while increasingly providing trust-based checks/verifications.”

According to the management consulting firm, the preference of buying from online channels has seen a leap, with 41% of consumers switching to purchase mostly online in the past year across the region, states Bain & Co in its “Digital Consumers of Tomorrow, Here Today” report.

“We have seen an unprecedented acceleration of digital adoption, owing to the pandemic. We saw five years of digital transformation in a single year as the digital consumer adoption in 2020 exceeded the 2025 forecast.”

The report adds that the number of digital consumers in Southeast Asia was estimated at 310 million at end-2020 — a number the firm had previously forecast would be reached only by 2025.

This indicates that almost 70% of Southeast Asian consumers had adopted digitalisation at the end of last year.

In 2019, Southeast Asia’s online retail penetration stood at 3%, on a par with India’s, says Bain & Co.

But the region’s online retail penetration rate has surpassed that of India, increasing 1.6 times to 5% in 2020. Southeast Asia’s e-commerce gross merchandise value (GMV) also grew 23% a year from 2018 to 2020, faster than the compound annual growth rate of China’s, India’s and the US’ GMV in the same period.

Personal connections drive social commerce’s popularity

Southeast Asia also has a higher percentage of internet users who are online consumers — 79% — surpassing India’s 20% and roughly on a par with the US at 75%.

“Social distancing has paved the way for the home-centric lifestyle as well as commerce with minimal physical contact. More categories are now purchased online, especially groceries, for which online penetration tripled,” says Praneeth.

It also helps that the region’s digital consumers have always been open to trying new brands. “Their purchasing habits are driven largely by inspiration and openness to digital discovery,” says Bain & Co.

A combination of social media, short videos and messaging was found to be people’s preferred online channels for discovering new brands and products, with 62% of consumers citing them as top channels for online discovery.

This is attributed to increased internet access, which means most consumer engagements now take place online instead of offline.

In Southeast Asia, 88% of consumers now cite online channels as their top source of brand engagement. In contrast, the remaining 12% say their top channel for engagement takes place via offline sources such as physical newspapers, word of mouth, brick-and-mortar stores, billboards, TV and radio, finds Bain & Co.

For Wong, the trend is meant to entice customers since buyers often offer genuine reviews, which is a deciding factor for new customers. 

“I am able to share my food pictures to entice customers as well as sharing reviews of customers for potential customers to look at.

“Separately, I am able to buy ads and target my audience based on the demographic and interest, which increases the chances of their ordering from me,” says Wong.

But instead of using bank transfers, Wong uses Yezza — a WhatsApp Commerce platform — which in turn processes orders, provides the cost of delivery and then directs consumers through a payment gateway to complete their transaction.

Wong says this platform is cheaper and less cumbersome to maintain, as opposed to setting up her own e-commerce site.

“Setting up from scratch will be expensive. The ‘readymade’ platform performs just as well and is much cheaper to subscribe to. I am not tied to a contract and have the freedom to terminate anytime,” she says.

Custom furniture maker Daniel Salehuddin too is highly dependent on social media, as it is the main marketing channel for Fine Grit Studio, which he co-founded with Khairul Asyraf seven years ago.

“Most of our orders come through our social media channels or customers learn about us from our social media. I would say 90% of our orders come from social media and only 10% are walk-in customers,” he says.

Communication is handled largely through WhatsApp — the most dominant social messaging app in the country — as customers can share photos and videos to make sure every detail of their order is agreeable and conditions met.

“It also helps when we have a record of the conversation if any issues arise. Personal connection is very important to build up trust between us and our client, and WhatsApp certainly helps in that area,” says Daniel.

Since the bulk of its orders is for custom-made items, most transactions take place via bank transfers. In the past year, Fine Grit also set up an online retail store selling readymade homeware and décor items.

E-commerce fraud is booming

But the experience is not always smooth. Global internet traffic has surged nearly 70% since the Covid-19 pandemic started, and the money spent by online shoppers has nearly doubled. Unfortunately, so has the incidence of fraud.

According to digital fraud prevention company, Sift, fraudsters seized on climbing transaction volumes and unanticipated consumer behaviour such as stockpiling, driving the average value of attempted fraudulent purchases up 69% year on year.

International school teacher Pushpa Suppiah, who buys food, clothes and household necessities from online retailers, had the misfortune of being scammed on Facebook.

“In September 2019, I ordered a three-piece lengha for my daughter and paid RM85 for it. I was promised it would arrive in two to four weeks but there was no sign of it. I couldn’t get the seller on the phone, so I messaged her on Facebook and was informed that she lost her phone.

“After some weeks, I messaged her again and was told that someone had died. And, that was followed by another explanation that the bulk of the shipment was sent to another address. After that, she stopped responding to my messages.

“Finally, I resorted to posting comments on her Facebook business posts and included proof of our conversation. She deleted the comments constantly but I kept it up. After nearly a year of this, my niece stepped in and put out a public post on community pages calling out the seller. Only then did the retailer refund my money and apologise,” shares the 58-year-old.

Such encounters are not isolated incidents, and far more sophisticated schemes have resulted in millions being siphoned out of the economy.

Last October, the US Federal Trade Commission reported that the number of complaints about social media scams has more than tripled, with reported losses adding up to US$117 million in just the first half of 2020.

The incident put Pushpa on her guard and she is now wary of direct online purchases.

“I cross-check comments and read reviews before I engage sellers on Facebook. But it has certainly been an eye-opening experience,” she says. 

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