The impact of social commerce on retail

High smartphone penetration rates in the GCC paired with a tech-savvy and growing younger generation has built the foundations to obtain a wider reach and increased visibility to retail's prime consumers. Retailers will continue to move away from traditional advertising channels towards mobile-commerce and social media platforms, offering a more seamless and portable shopping experience.

The concept of social commerce will continue gaining traction, interconnecting the worlds of e-commerce and social media. Social commerce is a broad term which encompasses any shopping activity done in a collaborative online environment. This is most obviously seen in the form of shopping integrated into social media through in-app features, such as direct links guiding users from a photo post directly to the retail website.

Physical vs. online

Many pureplay online retail stores are now moving towards opening physical stores for an alternative customer experience. Physical stores and in-store shopping provide customers with the chance to touch and try their products before purchasing, giving the customer a sense of instant gratification from their purchases - an element many times missing from the digital-native retailers.

The extent of this physical rollout differs across retailers. Some dicks-to-bricks retailers, such as Bonobos, are opening small showrooms with zero inventory, only offering samples of items for customers to see and feel before placing an order for their item. Other retailers, such as Everlane, have developed a strategy for expansion through physical stores (today operating 6 stores), driven by the belief that "basically no online-only companies are profitable" (Michael Preysman, Everlane CEO).

Social commerce has the potential to vastly benefit businesses and brands, by widening the reach of merchants and social sellers to a greater customer base and increasing access to previously hard-to-reach customers. The relatively low-cost nature of this advertising model also increases the exposure of smaller or niche businesses that were unable to compete in the traditional advertising space.

Social media as an advertising platform is extremely successful in the Middle East with widespread reach from high connectivity rates and social media penetration in the region. For example, Saudi Arabia currently boasts 130% mobile phone subscription, 99% smartphone usage and the 4th highest number of Twitter users worldwide (14.35 million users, equivalent to approximately 45% of the population).

The GCC has huge potential to build brands using social media as a primary advertising platform. One example is Huda Kaftan, an Iraqi-American businesswoman and founder of Huda Beauty, a cosmetics line founded in 2013 which is now worth US$ 1.2 billion. Kaftan’s success can be attributed to her strong positioning on social media platforms such as YouTube and Instagram, and the use of many other influencers to help market her brand.

Today, there are hundreds, if not thousands, of social media influencers in the Middle East. However, the impact of advertising through social media influencers is difficult to measure, leaving the ultimate return of these advertising dollars unclear. Ultimately, we see great potential for social media marketing in the region; however, its success can only truly be realized through the implementation of clear KPIs and quantitative impact measurement.