Why Messaging & E-Commerce Platforms are Converging in Strategies?

There is a parallel trend where the new wave of social networks which are gaining popularity (e.g. Whatsapp, Line, WeChat, Kakao Talk) share a common trait -i.e. they are inherently private or limited within groups of close acquainted which chimes really well for social based “shareable” & ‘trustable’ communication which offers a huge opportunity for personalized or private mutual group decision based commerce.

We have highlighted this trend earlier in our earlier post where “Messaging Apps Are Becoming Ecosystems” with growing user base are expanding capabilities facilitating digital transactions and commerce. WeChat, for example, is already allowing verified sellers to create shops within their platform in China, and, Kakao, Line and other similar players are already heading in the same direction. In India, Kavin Bharti Mittal, CEO Hike Messenger, an Indian messaging app with more than 17 million active users, announced that they are looking to transform into a full-fledged commerce platform.

These platforms are, firstly, taking a lion share of consumer’s digital lives and now want to extend that to capture share of consumer’s digital wallets. They are trying to high the cusp of Social Communication & Commerce which we define as “Social commerce”

Social Commerce

All social media platforms are trying to grab the opportunity by converting from a social communication platform into a social commerce platform. To build on this trend, even broader public social networks such as Twitter, Pinterest and others are experimenting by integrating buy button in their platform, however, a publicly facing social platform can be powerful but inherently noisy and looks weaker on buying UX scale.

Social Media

On the other hand, the companies such as Flipkart, Amazon, Snapdeal, Rakuten, Alibaba, PayTM(One97) which started as e-commerce platforms have acquired millions of users but are feeling the heat from the likes of WeChat, Line and are realizing the importance of “Social Commerce“.

At the moment, social messaging apps instantly are helping bridge the gap between customer preferences and building trust leveraging the social communication system. Below are some of the key elements driving social commerce.

  • Reviews: Which is very powerful for any  buying behavior – leads to authentication and if its comes from know trustworthy person that increases the authenticity of the product.
  • Recommendations: Automated algorithm base recommendation system is useful for generic purpose but not the best solution for matching personal test or preferences. Rather, Sharing, Liking, recommending to friends inside or outside the platform which is more relevant in personal level contextual purpose.
  • B2C Communication: Connect sellers and buyers on P2P communication basis increase loyalty and easy grievance handling.

 eCommerce integrating Messaging:

Flipkart Ping

 Image: Flipkart’s Ping

The first step for these eCommerce platforms was to spend on ATL & BTL marketing to acquire users which worked well for some- but not a good long-term strategy. However, the second and the important step is “retention” of customers. By adding a communication link into the platform which makes it more sticky, social and trustworthy. In India, particularly QuikrNxt was the one of the early movers which connected sellers and buyers on its classified platform Quikr using the messaging functionality. Flipkart is adding Ping, Paytm also wants to add a messenger functionality. However, these ‘to be social commerce’ companies have their work cut-out with converging strategies for their platforms. The “Survival of the Fittest” will kick in soon and these platforms will need to excel on the following fronts:

  1. Loyalty schemes: Next steps would be focusing on increases in transaction value per users through loyalty schemes.
  2. Rotation of Money: Stronger balance sheet > cash in hand > stronger R&D >stronger investment in platform UX
  3. Post Purchase Recommendation: Aligning recommendations post-purchases, which is very weak now,
  4. Partnerships: Usability of the platform will be directly proportionate to numbers of relevant partners, who can provide meet users expectation.
  5. Number and quality of offline resellers: Only looking at numbers of partners won’t be a good parameter but  quality of them will be key. Alibaba has lot counterfeit goods in their platform which is ruining the trust factor, therefore to combat counterfeiting and protect Unilever’s brands by stepping up the company’s participation in Alibaba’s Blue Stars program, in which each product is tagged with a unique QR code that allows the consumer to verify its authenticity and origin.

So in a few years down the line Flipkart and others will all look for more integrated solutions rather than a stand-alone eCommerce app. Players such as Amazon will need to up their game to compete with these local giants.

Please feel free to reach out to us for press or research-related questions at: analyst (at) counterpointresearch.com