A lot can change in ten years...

Just ten years ago, Instagram was in beta, Snap was in the womb, Vine (remember them?) and TikTok didn’t exist, your mom and dad weren’t “regulars” on Facebook, the iPhone 4S was about to be released, and sitting down to shop online at your desktop computer was an experience.

That’s a lot. The pace at which technology can move in a single decade is staggering.

Aside from all the new apps and tools we learned how to use, there’s one thing that fundamentally shifted how we interact with technology: discovery. There’s no doubt that Instagram has played a key role in teaching us how to discover stuff. The old means of discovery was finding something by flipping through a magazine, newspaper, or passing a billboard. If you liked it, you’d visit a store, either in person or on your desktop. Apple and Instagram destroyed that by placing the search power in your hands (literally). 

All of a sudden, we could discover content faster, it became easier, and it felt more interesting. Over the last decade, we've gone from having to walk in-store or place orders over a phone, to a seamless checkout in 5 seconds, with all our personal information pre-saved.

We’re now conditioned both to want more content, and to want the thing we see as soon as we see it.

This is called social commerce.

The great shift

We’re all influenced by someone, somewhere, and by something. That’s what social commerce is about. It’s meeting a customer where they are, where they’re consuming content, and compelling them to make a purchase decision what they see. Brands leverage social commerce leverages the algorithm to win someone over. And while the incumbent apps aggressively press forward for our attention, we're seeing all sorts of evolution in eCommerce with startups, tools, and social apps focused on transaction-based experiences like:

- Live stream shopping apps

- Group buying widgets

- Perks, points, and rewards programs

And all of this sounds great if it weren’t for one small problem: trying to cultivate consumer habits (a feature) without solving the core problem (the product).

It’s innovation in a market that's terribly fragmented.

Let’s be like China! // why can't we be like China?

In another world, social commerce in China is booming! In 2020, WeChat (we’ll get to them in a minute) alone was responsible for $250 billion in eCommerce sales, and eMarketer’s social commerce sales forecast expects it will reach $363.26 billion, a 35.5% year-over-year (also triple what it was in 2018). On top of that, BEFORE a pandemic, 37% of China’s online shoppers made Livestream purchases.

See? It’s working in China, so it can work here! Right? Not so fast.

Why not?

In China, mobile consumption and interaction are bundled by a little company known as WeChat.

WeChat (owned by tech giant, Tencent Holdings) is a messaging tool disguised as a super app. Inside this super app, you’ve got "Mini Programs", an idea that WeChat’s founder invented for Chinese consumers to simplify daily life by interacting with anything social under the same roof.

The idea was introduced in 2016. It quickly got popular when they gamified adoption for it in 2018 with a game called JumpJump. JumpJump gained over 400 million users.

...which is more than the entire population of the United States.

WeChat has fundamentally changed commerce In China over the last few years, from messaging and discovery to entertainment and transactions. Everything you need and want happens in one place.

Jerry Lu, an investor at Maveron unpacks why social commerce works so well in China. 

"WeChat is already integrated into people's daily lives; there's no need to download anything. Context switching doesn't exist. In the west, though, you're constantly switching between apps and tasks."

Context switching.

In China, customer adoption is no problem, which is a massive deal for an app that boasts over 1.2 billion users). In the west, it's a different story. Messaging, a core product, is fragmented across different apps, such as G-Chat, Apple's iMessage, and Facebook's Messenger, and WhatsApp, as well as Snapchat. So already, the core product by which you interact is fragmented, and this creates a cascading effect all the way down.

Beyond that, every tool requires a new download, along with its own user onboarding and adoption. But driving user adoption is hard. We're tired of adopting new tools.

Again, the problem is fragmentation and the fundamentally different consumer habits. So can the WeChat model work in the west?

No.

Unless someone bundles it.

Here’s where we insert the famous Jim Barksdale quote, that there are “only two ways to make money in business: One is to bundle; the other is unbundle.”

If a Chinese-esque social commerce model is going to work over here, the bundler must leverage discovery as the foundation for adoption, then expand from it. Lu’s wisely points out how this came to be in China: "The successful social commerce plays in China began as marketplace businesses that introduced live stream and social as a modality for which consumers can purchase something. But in the west, live streaming tools are being treated as the core product in a market where you're competing for everyone's attention and time across separate apps."

Features can’t be treated the same as core products.

The bundler doing the bundling

So, we know that bundling takes an existing software company that’s got built-in distribution and customer adoption on a core product. We can think of plenty of companies who share certain qualities around distribution and adoption, like Google, Netflix, and Square. But to truly bundle, that’s another issue entirely.

Here’s what I believe is a necessary tech stack for bundling to work in the west. We’ll call these layers:

• Social layer: is it easy to discover? // Instagram’s discovery page, Pinterest
• Communications layer: how do I share this with friends? // WhatsApp, iMessage, etc
• Commerce layer: can I buy it? // ShopPay, ApplePay
• Distribution layer: how and when will it get to me? // UPS, FedEx, Amazon
• Logistics layer: Where is it coming from? // Warehousing, packing, supply chain, etc
• Brand adoption layer: Who’s selling what? // Allbirds, Kylie Cosmetics, Noah NY
• Customer adoption layer: Have I formed a habit? // being so loyal you’re a repeat customer
  

Who has these layers? Here are three companies who do (sorta).

First up, Amazon is an obvious competitor. They’re a company that’s as loved as much as it is hated. They're the King of Convenience, the destination where you buy cheap stuff you need (or don't need). Amazon understands commerce & logistics. Their ability to execute on warehousing, packing, delivery is remarkable. And they have pretty solid discoverability and customer adoption, boasting 300 Million active users globally and over 2.5 Billion website visits per month. It’s safe to say that people like using Amazon.

But they don’t exactly have a great reputation, although many consumers are willing to overlook that because of the convenience Amazon offers. Their employees often complain about the grueling hours and lack of breaks, whether you're packing in a warehouse or driving all day. 

Then there’s a company that seems less obvious, but also remains competitive in this conversation. That company would be Shopify.

"But aren't they a B2B software company?"

Yes, they are.

But there's more to being a software company than meets the eye. Shopify has shown tremendous growth over the decade (much less during the last 18 months in a pandemic that’s forced everyone to be at home 24/7), and they may be better positioned to do something like this than one realizes. Here’s why:

They've already built commerce infrastructure required to enable any brand to sell anything, anywhere. Brand adoption. Check.

- They launched Shop Pay on their merchant stores, a payment tool that enables any customer to checkout crazy fast with all their information already pre-saved across every Shopify-powered. (Growing) customer adoption. Check.

- They launched a mobile app called Shop, which is a low-key marketplace and destination for tracking your orders. Discoverability. Check.

- And unlike Facebook and Amazon, Shopify has maintained a relatively good reputation as a business.

Knowing all of this, Shopify is still 100% dependant on their merchants using apps like Facebook, Instagram, Pinterest, Google, and TikTok for driving discoverability (which leads to conversion). That’s something Shopify won’t be able to resolve unless they create their own social app, or acquire one (that would be too expensive).

Here’s what Shopify can do to make up for that gap...

1. Double-down on Shop, its order-tracking, marketplace app, and further brand it as a destination for finding great brands and products.
2. THEN, they can use that app as the foundation for driving customer adoption and discovery, building new features like live streaming, rewards + points accrual for customers that they can track, group buying post-purchase, and so on.
   

They’ll still lack the messaging and communications layer that’s got built-in adoption, but it’s better than nothin’.

And of course, everyone's (not-so) favorite media conglomerate: Facebook!

Let's be real. They've always been well-positioned for this, even though Mark Zuckerberg has been vocal about how they’ve moved “too slowly” as a company over the years. They've got the social infrastructure for it, easily the best brand and consumer adoption out of any app in the world, and all the first-party data you could ever want.

Discoverability on Facebook and Instagram is second to none. Zuck & Co also have communication built into our consumption habits, WhatsApp and Messenger. As eCommerce shifted to the the forefront, they’ve invested in Instagram Shopping, live streaming, Facebook Pay, and the infamous Facebook Marketplace.

Oh, and they have a cool 1.9 billion daily active users. These factors position Facebook nicely to replicate the WeChat model, or at least own its own version.

Philip Jackson, founder of Future Commerce (podcast and newsletter focused on media and commerce) backs this notion.

“Facebook’s unified messaging model across three distinct platforms (WhatsApp, Instagram, Messenger) give them a distinct advantage to own social commerce at a time when the West when it has yet to have its “breakout moment,” despite IG pushing commerce for over 2 years with top global brands. The challenge isn't FB encouraging adoption, it'll be giving first-movers the leeway needed to innovate that will spur organic adoption.”

All of this is great, except, like Amazon, Facebook’s public perception is no bueno. Between the privacy breaches, negligence around the handling of political ads during the last few election cycles in the US, and their reputation for being a big fat copycat (*cough* Snapchat *cough*), getting mainstream buy-in isn't as easy as one might think.

So, what?

We can talk all day about the “nuts and bolts” of what it takes for a company like Facebook or Amazon to bundle these products into one offering, but perhaps the most understated obstacle in all of this is a psychological one.

Maybe western consumers just aren’t (and never will be) conditioned to using one Super App by which they live their lives. Maybe it’s that, or maybe we’re not conditioned to because it hasn’t been done yet.

In an interview with Practical eCommerce, tech entrepreneur Gary Vaynderchuk seems to believe it’s the latter: “I’m shocked that nobody has bought Target yet,” said Vaynerchuk. “I’m convinced that Facebook or TikTok or a content company will buy Target…It’s what Amazon has over everybody...”

And maybe that’s the difference for Facebook; perhaps that’s what they need to win social commerce, and thereby win with commerce et al.

But until someone solves the problem at its core (not by adding another feature), social commerce will never catch up with China.