One of the key things that the internet promised in its early days was getting rid of middlemen. E-commerce and social media enabled direct interactions between businesses and their consumers—easily and transparently. Marketplaces allowed any of us to become an entrepreneur by equipping us to sell our products or services.
When they promised the end of evil middlemen, telling us let no one come in between the supplier and customer, little did we realize that large e-commerce platforms or marketplaces are nothing but new-age middlemen. Their revenue comes from a share of transaction value that you conduct through their system. Sure, they invest in creating this large digital real estate and in algorithms that promote your products to relevant customers and logistics. They are the digital version of a supermarket, who charge you for shelf space plus a margin on the product sold.
Soon the affiliate programs followed. With simple widgets and plugins, anyone with influence in the digital space can become a part of the sales force on a revenue-sharing basis. Many thought of it as a source of easy passive income only to realize that affiliate marketing demands efforts proportionate to the returns expected. Once social media became mainstream, it multiplied our everyday network. Anyone we have known at any point in life is now connected no matter where they are. Their network in turn is separated by just one degree, multiplying our network further.
Many enterprising individuals spotted the early opportunity and started selling on social networks. This included a lot of talented women who ran home-based businesses through their FB pages and groups. Social media platforms observed that commerce happens better between people who know each other and started integrating it into their platforms. Parallelly, e-commerce moved to mobile apps, reaching out to a large population that joined the digital bandwagon directly on phone.
E-commerce platforms brought largely the organized sector online, both in terms of the brands they sold as well as the prime customers they served. Their model was primarily pull mode and hence all efforts were spent on getting the potential customers on to the website or mobile app. Once the customer is there, the sheer variety of products, sales and offers were there to make them spend.
E-commerce missed out on the reluctant customer who is not very confident of buying without seeing and without knowing who they are buying from. These are not the people who would engage in digital window shopping and must be approached with a push approach through people they trust. Most importantly, they prefer to deal in their own language rather than English, the preferred language of digital platforms.
The answer came in the form of social commerce that marries e-commerce and social media networks. It allows anyone to sell, anyone to resell and of course anyone can buy. B2B and B2C models seamlessly combined to become a B2B2C model, with the middle B being the platform. The latest in this series is O2O or Offline to Offline commerce, meaning both the seller and the buyer are offline, though the transaction is still enabled by online portals or apps.
Interestingly, women are at the forefront of the social commerce revolution; over 80% of registered resellers are women. As resellers, they become the virtual window shoppers for their friends and family. They share product details on social media and order on their behalf, after answering all the queries in their own language. Not to forget that with personalized sales comes the joy of haggling that is so much a part of shopping in India.
In terms of platforms, the Facebook ecosystem clearly dominates with WhatsApp in the lead with a huge margin, followed by Instagram and Facebook. In-app videos and chats are making inroads but they still leverage the same platforms for reselling. The largest categories of products sold are low-value vanity ones like fashion and mobile accessories, unbranded clothes, etc.—basically, small-ticket products that people buy on impulse and not really planned expenses.
These are mostly supplied by local vendors who produce in small quantities, including a lot of artists in their initial years. Some portals even include used products in their portfolio. Think of Janpath in Delhi or Fashion Street in Mumbai or Bangkok’s night market going online. It has some elements of multi-level marketing—remember Amway or Tupperware that was sold by a neighbour always on the lookout for the next customer.
So one may go to established e-commerce to buy the new mobile phone, but to buy accessories for the phone, there is social commerce. This also shows that there is complementary peaceful co-existence of both the e-commerce portals and social commerce economy. Thus, from what started as a promise of not having any middleman, things have come a full circle where everyone is a potential middleman. Practices that have stood the test of time must have had some merit in them. It took us less than a decade to revert to them with a vengeance. It is time to ponder over it when we plan our next innovation cycle.
Author and founder of IndiTales (Tweets @anuradhagoyal)