Social commerce, the newest way of selling, is a multi-billion-dollar market in China and contributes about 11 percent to the overall e-commerce sales in the country.
The Indian internet ecosystem has long been hopeful that social commerce would follow the same trajectory in India. Google-owned YouTube, with its acquisition of video commerce platform Simsim, is the latest company to bet on social commerce’s future in India.
Social commerce refers to purchases made out of the consumer’s social media experience. User review websites, group buying and daily deals and social network-driven sales are some examples.
Announcing its move through a blog post, YouTube hinted at creating synergies between its platform and Simsim. However, it did not clarify what it would entail.
“There will be no immediate changes to Simsim. The app will continue operating independently while we work on ways to showcase Simsim offers to YouTube viewers,” it said.
Industry analysts indicate that YouTube might try to replicate the Douyin-Taobao model in India, with its acquisition of the short-video platform. Douyin is known as TikTok in India.
“Several short-video platforms, over the years, have moved towards social commerce for monetisation and it is quite likely that YouTube would try to replicate the Douyin-Taobao model through synergies between Simsim and YouTube Shorts
in India,” said Mukesh Kumar, Engagement Manager, RedSeer Consulting.
Douyin had tied up with video commerce platforms such as Taobao in China to offer e-commerce on its platform. According to a February report by Chinese tech news site LatePost, the e-commerce transactions on Douyin tripled to 500 billion yuan in gross merchandise value (GMV) in 2020.
YouTube, this way, would be creating a monetisation channel for its short-video platform in India. But the synergy could work out in other ways, too.
According to experts, YouTube’s acquisition of Simsim makes sense on several levels.
“YouTube primarily has an English-language audience in India, and with this acquisition, it can get access to regional users,” said an analyst.
Simsim offers product videos in three languages — Hindi, Tamil and Bengali. Experts also opine that the synergy between the two platforms will help Simsim target YouTube’s audience and bring down its customer acquisition cost. Both the players, however, will be able to create better engagements on their platforms.
“Simsim has videos selling products but it does not offer much to the audience when it comes to entertainment. YouTube can help the company solve this problem,” said Kumar of RedSeer.
The rise of social commerce
According to a recent report by Bain & Co, social commerce companies in India currently have a collective GMV of $1.5-2 billion and are expected to clock $16-20 billion GMV in the next five years.
Small-town India has, particularly, taken an interest in social commerce and platforms such as Meesho, Bulbul, Simsim, Shop101 and DealShare indicate that a large share of their users are from Tier II towns and beyond.
A RedSeer Consulting report released last year estimated that about 55 percent of users on social commerce platforms were from Tier II towns and beyond, 25 percent from Tier I cities, and 20 percent from the metros.
While e-commerce has also been making strides into small towns of the country, most users in these regions find it difficult to navigate through these apps.
“Users want to replicate the traditional way of buying where a shopkeeper explains to them about the products and its features, and, hence, are more comfortable with social commerce,” said Ankur Pahwa, Partner and National Leader, E-commerce and Consumer Internet, EY India.
The Bain & Co report had revealed that a “lack of trust about finding the right product” is the main reason why small users are hesitant to shop online. As per the report, out of the 572 million internet users in India, only 160-190 million transact online.
Companies in the social commerce space, through their three different models — video commerce (Bulbul and Simsim), group buying (Dealshare), and reseller model (Meesho) — are trying to bridge this ‘trust deficit’ in small towns.