Social commerce, a double-edged sword. (Midterm Writing)

<SOCIAL COMMERCE>

Social commerce is a new word used in electric business which means ‘social network + commerce’. Social commerce is an internet site that sells products or services at a very cheap price with the concept of daily deals and group buying through social networks. These days, social networking service (SNS) is widespread through almost every people. Many people rely on social networks to guide their purchase decisions and share their purchases on social networks. Because of this trend, social commerce is rising up and influencing the way we spend for online shopping. It has many good points and bad points both for buyers and sellers.

^ A front page of ‘Coupang’, a famous social commerce site in Korea.

We can think about good points of social commerce in the aspect of consumers. There are three good points for consumers. The first point is that they can buy products or services at extremely cheap prices. Because people buy products through group buying, they can get a huge discount. When you go to the sites, you can easily see words saying ‘50% off’ or even bigger discounts.  

Also, the range of products or services they offer is very large. Especially, consumers can buy coupons for services such as restaurants, nail shops, hair shops, resorts, airplane tickets, travel package, etc. It is very good for consumers because original online shops do not sell coupons for restaurants or hair shops.

Finally, buyers can easily get information they need through SNS. As I said, many people rely on social network when they make purchase decisions. Through SNS, people can get reliable information from their friends. Not being misled by exaggerating advertisements, people can get real facts from their friends’ posts about their purchases.

There are also three good points of social commercial for sellers. First, social commerce can make them get profits in short time through their low-price high-volume policy. Because of group buying, the price is very low, and those daily deals of low-price make them more appealing and time-limited.  

Next, social commerce can be a start point for new enterprises to enter the market. Originally, market entry is very difficult for new enterprises because early promoting costs a lot and it is very hard to make people interested about new brand or new product. Social commerce makes these things easier for starters. Because of the cheap price, they can draw people’s attention.

Lastly, marketing price is very low because consumers themselves promote the products or services they have bought through SNS. With minimum marketing expense, the effects of viral marketing through social network can be very powerful.

From these good points, you might think that social commercial is perfectly good for us. However, there are also several bad points. The bad points of social commercial for consumers are like these.

Firstly, some products or services offered by social commerce have low quality. Especially, some services shops discriminate ordinary consumers and consumers who bought coupons through social commerce. Also, some restaurants lower the prime costs of their foods for coupon users.

^ Result of a survey conducted by one TV program

Secondly, social commerce can promote impulsive purchase. Because of daily deals, consumers tend to buy products in a hurry even though they don’t need them.

The last point is that there are many restrictions for consumers. The time able to get a refund or exchange is too short for consumers. Also the restrictions for coupon use are too inconvenient. Many coupons have very short term of validity or have too many conditions for the use.

In another aspect, there are three bad points for sellers who do their businesses in social commercials. First, it is becoming too competitive. There are too many competitors at social commerce sites. Making differences between those sellers is very difficult. Because of this, many sellers cannot survive.

Also, for service industry, except for big franchise enterprises, most of small service shops can earn loss. Selling products can earn profit because they can sell as many products as possible at low price. However, small service shops cannot have too many people in their shops because they have limited space.

Third, the commission fee for entrance in social commerce site and the exceptionally low price seller have to offer can be a burden for them. Although they can earn profit once they draw consumers’ attention, it is not easy.

Well, how do you think about social commercials? In my opinion, social commercial can be very helpful for both buyers and sellers only if it is used well. Special cautions for this are mandatory for both buyers and sellers who use social commerce.

The caution for buyers is that they have to be really smart consumers. They should check if the discount rates of daily deals are exaggerated. The discount might be bigger or similar at other kinds of shopping malls. They should also check the conditions for using coupons or the refund policies of products. Plus, consumers should think over whether they really need that product or service.

The suggestion for sellers is that to be a successful seller in social commerce, they should be different, trustworthy, and continuous. The low-price can be a good weapon when compared with other shopping malls, but when compared with other sellers in the same social commerce, it is not a good weapon. This is because all sellers offer their products or services at very low price. To be successful, they should be different, not only in the aspect of price, but also in other aspects such as qualities or services. Also, they have to be trustworthy to their customers. Once consumers begin to trust one seller in social commerce, they will post them in their SNS, and the marketing effect will be powerful. The sellers who earned credit should continuously keep the quality of their products or services.

In conclusion, because social commerce can be a double-edged sword, consumers and sellers both should be aware of the cautions that I stated above.

Three images : above

Two videos :

-        http://www.youtube.com/watch?v=6qo1vqQgzmQ

(A discussion about social commerce’s good and bad points)

-       http://www.youtube.com/watch?feature=player_detailpage&v=eAO0iSHa4AU

(Three tips for social commerce success.)

One Link for more information : http://startups.fm/2013/09/20/rise-of-social-commerce-influencing-how-people-spend-for-shopping-online.html