TikTok and Instagram

In the ever-evolving online retail landscape, two social media giants, TikTok and Instagram, are at the forefront of a transformative wave. Beyond being platforms for content creation and social interaction, TikTok and Instagram have successfully integrated shopping functionalities, reshaping the way consumers (including myself) typically engage with brands and make purchasing decisions. This seamless blending of social media and e-commerce, or “social commerce”, is not just an evolution but a revolution in the online retail experience, predicted to have achieved $1tn in sales in 2023 driven by over two billion people shopping on social platforms (Source: Deloitte Global).

But just how exactly are these platforms emerging as “game-changers”?

In-app Shopping Integration

Perhaps one of the key features that sets TikTok and Instagram Shop apart from the crowd is the integration of shopping functionalities directly within their apps. As users scroll through their “For You” page, they can now stumble upon enticing product videos, turning their passive scrolling into an interactive shopping experience. Product videos are also shown in a short-form video format – a perfect medium for showcasing products in a concise and engaging manner. This clever blend of content and commerce allows TikTok and Instagram to keep users moving through their entire funnel, from inspiration to transaction, without having left their apps to place orders somewhere else. 

Algorithmic Advantage – Enhancing Consumer Connections

The algorithm-driven nature of both Instagram and TikTok’s content distribution has played a pivotal role in driving the growth of their respective shops. By leveraging their deep understanding of user preferences to curate personalised shopping recommendations, Instagram and TikTok have not only enhanced the shopper experience but have provided brands with a powerful tool to connect with their target audience more effectively.

Empowering the Creator Economy

TikTok and Instagram can credit the success of their shops to their dynamic creator communities. Through engaging content, content creators on both TikTok and Instagram have been able to effectively promote products in a creative and authentic way, reaching millions of followers and influencing purchase decisions. Through collaborations with established influencers, brands are now able to bypass traditional barriers to entry and gain instant exposure to their target demographic.  

What does this mean for M&A?

The rise of TikTok and Instagram Shop underscores the growing influence of social commerce and how established e-commerce giants will need to shift their mindset towards incorporating social elements into their own platforms and developing better social commerce integrations to stay competitive in the space.

One notable move reflecting this shift is Amazon’s strategic acquisition of GlowRoad, a social commerce platform that enables individuals to start their own online businesses by selling products directly from their social networks.

The influencer-driven nature of TikTok and Instagram social commerce model has emphasised how much power the creator community has on consumer shopper behaviour, which may also prompt companies to explore acquisitions within the creator economy. For example, Havas’s recent acquisition of Wilderness, advised by WY Partners, illustrates the value placed on expertise in social creative and campaign strategy.

An interesting development to keep an eye on as 2024 progresses is TikTok’s potential ban across the US. While uncertainty grows on whether TikTok’s ban may stifle innovation in social commerce, the ban could also stimulate M&A activity as companies seek to capitalise on the void left by TikTok’s absence.

Forward Outlook

“Social commerce has long been an aspiration of brands and marketers who have ploughed vast sums of investment into advertising on social platforms. Now the platforms are providing greater opportunities for consumers to spend with one-touch mobile commerce set to unlock huge value for brands in 2024 and beyond,” says Tom Jarvis, Founder & CEO of Wilderness Agency (now part of Havas – WY advised).

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