Social commerce – exploring a changed landscape
Dynamism is a characteristic feature of the Information technology sector that facilitates E-commerce. When consumers and businesses were just getting comfortable with traditional e-commerce, a new business model evolved owing to the demand for sustainability and profitability. This business model, which is a sub-set of E-commerce, is driven by the upsurge in the usage of social media platforms. The Covid-19 Pandemic served as a facilitator for the reported “double-digit annual growth” in social media users to 4.62 billion, close to 60% of the total world population.Indian users account for a sizable share of global social media platforms’ users, reportedly growing at the rate of 467 million users in 2022. The successful adoption of social media makes India an important target market for the expansion of social media platforms and the business models enabled by them. ‘Social Commerce’ is one of these e-commerce models. The social commerce market is expected to become a $1.2 trillion market by 2025, with the overall growth rate being three times that of traditional e-commerce over this period. Reportedly, the developing Indian market will witness the fastest growth during this period to $17 Billion in gross merchandise value. Therefore, it becomes an interesting and important study subject for the concerned stakeholders.
While the terms e-commerce and social commerce are used interchangeably, there exists a considerable difference. E-commerce involves shopping through a designated and dedicated website like myntra.com or amazon.in. On the other hand, Social commerce is a business model that allows buyer-seller interaction through social media before purchase. It is essentially a business model which brings e-commerce to the masses through social media applications. It entails curating, advertising, and purchasing products and services online via social networking platforms. Some social media platforms combine payment and logistics, allowing the user to directly purchase from the social media platform. Other platforms connect users and their products to buyers, through third-party payment and logistics services.
The stakeholders include the social media platform, users, influencers, creators, resellers, small and big brands, third-party commerce enablers, and retailers. The traditional social media platforms which provide a space for social commerce are Whatsapp, Facebook, Instagram, Snapchat, and Pinterest. These platforms have started giving out specialized features to such marketplaces and handles on the platform. Social commerce is a viable option for unorganized small and medium-sized businesses as it offers an efficient and feasible way of establishing an online presence. Further, Reselling platforms make it easier for the previously invisible small sellers to utilize social commerce to gain visibility by offering the right tools and services.
The activities enabled by the Social Commerce applications include:
- Uploading of products and product information
- Curating and customizing the sellers’ product catalogue
- Selling directly from the sellers’ social media page
- Managing orders
- Advertisements to promote the products
- Gaining insights to ascertain the reach of the business
- Mechanisms for receiving feedback and reviews
- Reselling, wherein resellers buy from large merchants and sell on social networks.
There are certain pros and cons associated with Social Commerce that help determine its market potential on the anvil of sustainability and profitability for users, businesses, and regulators.
This new business model has made e-commerce accessible to people of all ages and income levels across the country as people spend more time online. E-commerce is being brought to the masses by social commerce. While traditional e-commerce will continue to thrive, social commerce is gaining traction among both sellers and consumers, owing to several characteristics such as convenience, user-friendly interface, trust, engagement, reduced customer acquisition costs, familiarity, etc. The purchasing experience is becoming infused with a sense of community, connection, and trust thanks to social commerce. The identified pros of Social commerce are:
- Easy accessibility allows the customer to shop according to his/her convenience
- Interactive shopping facilitated by social media enables users to easily consult with their friends on purchases.
- Limited investment as less infrastructure and less manpower is required.
- Increased customer interaction with most small business owners directly interacting with the customers.
- Algorithms of Social commerce applications are built to make the business noticeable by showing the customers related products
- To the rural people, social commerce potentially provides financial independence, accessibility, and inclusion. This is in line with the government’s goal of making the rural market more inclusive, with access no longer being a barrier to productivity and prosperity.
The above positives are balanced by a slew of problems associated with consumer protection concerns and regulatory patches associated with Social Commerce. The cons include:
- Theft or misappropriation of personal data: Most social commerce platforms are reservoirs of sensitive customer information like address, phone number, payment details, etc. Despite the two-way authentication requirements of social media platforms, the accounts of these small businesses are susceptible to hacking. This may lead to theft or misappropriation of sensitive data.
- Confidentiality: There exists uncertainty regarding the treatment of the customer data and sales data as the confidential information of the retail or of the platform hosting the online store.
- Misrepresentation & authenticity of brands: Most social media platforms don’t require identity verifications, thus allowing the sellers to misrepresent themselves and sell counterfeit products or commit fraud. On platforms such as Facebook, and Instagram counterfeiters have the means to establish a private network through closed groups where they can carry out the sale and distribution of counterfeit products. The India Platform Meesho is based on the social commerce business model. It allows the seller to set up on the platform. The company has had several FIR filed against it for counterfeit products. Recently, FDA Maharashtra also filed an FIR against Meesho due to the alleged sale of abortion pills without prescription/pharmacy bills. A PIL was also filed in the Delhi High Court due to the absence of manufacturer details, MRP, and origin on the products which enabled counterfeiting. It was said to be violating the requirement under the Consumer Protection (Ecommerce) Rules and the Legal Metrology (Packaged Commodities) Rules, 2011.
- Intermediary Liability: Intermediary liability is one of the contentious issues in the information technology legal framework. The jurisprudence on the extent of protection to the e-commerce platforms is not completely evolved. Nevertheless, e-commerce platforms are precluded from taking shadow under the safe-harbour protection afforded under Section 79 of the IT Act by merely posing as an intermediary. Especially in cases involving trademark infringements, due diligence is required on part of the e-commerce platforms. However, the law is unclear on the aspect of whether social commerce applications will be considered as an intermediary for the sake of social commerce.
- Comparative advertising: Although India hasn’t witnessed any case of trademark infringement by using the hashtag of other brands however in more developed jurisdictions there is an ongoing debate with regards to laws on comparative advertising by social media influencers.
- Consumer Protection Law: The Indian Law on Consumer Protection is still not clear whether it shall include social media applications. Also, the fact that applications like – Whatsapp and Telegram use high-security encryption features makes them difficult to track.
- Defamation: Social media could be a medium for defamation through ‘liking’ or ‘sharing’ of defamatory content, exposing a new and broader audience to the content.
Considering the above legal land mines, certain diligent steps can be taken to prevent legal action:
- Customers shall be given easy access to general terms and conditions of purchase.
- Customers shall be given ample opportunity to review their orders.
- Customers should be made aware of the various types of payment options provided by the seller and ancillary obligations to be kept in mind.
- Customers shall be given an email or text confirmation of their order.
- Customers shall be made clearly aware of the return or exchange policies.
- Customers shall be provided with e-receipts.
- Customers shall be given a surety that their details will not be shared with any other third party.
Social media has “democratized” the e-commerce sector and led the evolution of Social commerce. The development of e-commerce led to the first influx of online customers. Taking the baton forward, the “discovery-driven” shopping through social commerce is likely to bring in the next wave. The trust reposed by consumers in user-generated content is expectedly more than that vested in traditional marketing. Hence social commerce will see growing adoption of user-generated content-driven marketing. The growth in social e-commerce would also facilitate growth in the associated industries such as warehouse & logistics, Agri-tech, and Omni channel sales.
Voice-enabled services and vernacular language will play a key role in achieving deeper penetration in this market. The flagship ‘Aatmanirbhar Bharat’ initiative also envisages the empowerment of the domestic producers through their social commerce base to maximize gains. The implementation of the Omnichannel models by retailers and wholesalers is also witnessed to meet the rising consumer demand.
However, these positives must not foreshadow the requirement of stringent regulatory controls for social commerce applications. Due diligence must be taken by the regulators and platforms to avoid counterfeiting and fraud to ensure that consumer protection is not compromised.