Facebook chats power a new $48bn market in social commerce

Bloomberg

Samantha Proyrungtong, co-owner of an artisan food shop in downtown Bangkok, keeps three phones and a laptop glued to Facebook and Softbank Group-backed Line Corp.’s social-media app throughout the workday. She needs them not to hear from friends and relatives but to get orders from customers since her shop, Vivin Grocery, relies on chat applications for a big part of its sales of goat cheeses, locally sourced jams and organic vegetables.
Throughout Southeast Asia, consumers’ affection for haggling and interacting with businesses is fueling a boom in social commerce. Unlike the US or China, where most consumers do their internet shopping with established platforms run by companies like Amazon.com Inc. and Alibaba Group Holding Ltd, in Thailand almost half of all e-commerce takes place through social media or chat rooms on Facebook, WhatsApp or Line’s app.
Social commerce accounted for about 44% of Southeast Asia’s $109 billion e-commerce market last year, according to Bain & Co.
Customers can talk directly with store employees or the owners themselves about prices and sales, and the relationships built through personal conversations have helped drive social commerce’s popularity.
The rapid adoption of commerce via social media across the region could offer valuable lessons to internet giants like ByteDance Ltd and Facebook’s Instagram, which are experimenting with the format as they try to disrupt the traditional styles of platform commerce.
The pandemic has led global brands such as Chanel and Louis Vuitton as well as Thai brick-and-mortar retailers to register for accounts on Line, spurring a 25% annual growth in official accounts in 2020, said Norasit Sitivechvichit, chief commercial officer of Thailand’s most-used messaging platform, which charges retailers based on their messaging activity and number of followers.
“Chat commerce has become a disruptor,” he said. “Not just small and medium-size enterprises are conducting chat commerce on Line, but also global and local corporate brands.”
Vietnam led the region, with social commerce accounting for 65% of its $22 billion online retail economy, compared to $4.2 billion in 2018. Social commerce revenue in Thailand grew from $3 billion three years ago to about $11 billion in 2020, half of the total e-commerce market.
The popularity of personalised buying experiences and human-to-human conversations in an online shopping setting has led traditional retailers to allocate resources to chat platforms as shoppers remain home because of the pandemic. Thailand’s government in April announced new restrictions on malls, requiring them to shut by 9 pm from May, to curb a surge in Covid-19 infections.
In countries like India, the popularity of shopping through WhatsApp has led Reliance Industries Ltd. to target 20% of sales at its Hamleys toy stores through direct selling over the messaging application. The Facebook-owned messaging application added shopping carts into its chat rooms last year to court more merchants and tap onto its 2 billion user base to shop on its platform.
A search for home decor, fashion accessories or tech gadgets on Facebook or Instagram will often lead shoppers to find businesses’ pages, wares offered and prices listed on social media profiles filled with carefully orchestrated photographs to make their pages look enticing, similar to a digital photo catalog or magazine.
Unlike more established e-marketplaces, though, the chat applications on social media pages aren’t designed for commerce and don’t include payment systems, so customers need to use external payment methods, such as direct bank transfers or e-wallet services like Amazon Pay and GrabPay to finalise sales.
The popularity of social commerce creates challenges for regulators. Independent vendors or individuals operating home businesses on social media platforms can offer cheaper prices in part because they often don’t include tax charges, and authorities have difficulty confirming that stores operating on social media pages pay the correct amount of tax, according to Sommai Siriudomset, a spokesperson for Thailand’s Revenue Department.

Proyrungtong expects social commerce to become even more popular with her shop’s customers. “All of them are on social media, making it absolutely essential to have social media presence,” she said. “It has become a part of mainstream culture.”