A Shopatainment Analysis: The Social Science Behind Why the Next Big Players will Develop from Social Marketplaces, not Social Media
Shopatainment is a term coined by Andreesen Horotwitz’s Connie Chan in her recent article, Shopatainment: Video Shopping as Entertainment. It refers to the relatively new (unless you’re from China) phenomenon of turning the shopping experience into a full-blown video production. Chan describes it as “when sellers leverage video over photos to sell products, and where buyers browse seller videos as if they’re switching TV stations, looking for entertainment.”
As the trend migrates west I believe existing marketplaces that can infuse a social experience stand to benefit more than the reverse — social media companies implementing marketplace-like features. This belief is rooted in the history of human behavior in marketplaces.
A Quick History Lesson
The ancient greeks had a word for their markets that were set up in territories outside of Greece. They were called emporiums — a combination of the words ‘journey’ and ‘merchant’. These settlements were put in place specifically so that foreign nations could trade with one another.
They were first and foremost markets, but they were also social places with a foundation in social proof, the psychological and social phenomenon wherein people copy the actions and behavior of others in a given situation.
Marketplaces first, social spaces second.
Fast Forward a Couple Thousand Years
Marketplaces now exist online, and they are China’s bread and butter.
The largest online retailer in the world is TaoBao. The site and app serve as Alibaba’s consumer to consumer marketplace only serving mainland china. Only serving mainland china, and it’s the largest in the world.
Just behind TaoBao is TMall. This is Alibaba’s business to consumer offering that spun out of the success of TaoBao. The two together in 2017 generated $428 billion and $340 billion in gross merchandising volume respectively.
An Amazon Comparison
Now if you compare these two to Amazon, the largest online retailer in the United States, they dwarf it in comparison (Amazon had $238 billion in gross merchandising volume in 2017). What’s more, their hold on China is so strong that Amazon threw in the towel on Chinese market penetration in 2019.
So why have TaoBao and Tmall exploded in growth when Amazon had a 9 year head start on them? And remember, that’s 9 years of Amazon still focusing on e-commerce as it’s core business (as opposed to Amazon Web Services, Amazon’s cloud computing revenue engine that, surprising to your average consumer, generates most of the company’s revenue).
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Taobao and TMall both have a built-in social platform called Weitao. This is the secret sauce. Weitao allows for buyers to see a feed of sellers and their products similar to that of Facebook and Instagram. They can interact with them, pose questions, and more. Sellers can even go live on the platform to demonstrate products to buyers. And more of these engagement mechanics are being developed and rolled out onto the site and mobile app every week.
Ecommerce aside, TMall is the 3rd most visited website in the world behind Google and YouTube and Taobao is 9th. The login page alone for Tmall is ranked 8th. And remember, these are only Chinese consumers.
These platforms are hardly alone in terms of e-commerce and social integration in China. Tencent’s QQ takes a similar approach.
Amazon currently does not have this level of social integration and engagement. It’s simply an online marketplace without any real social mechanics outside of a starred rating and review system. Although, that’s slowly starting to change with things like Amazon Live.
Facebook and Instagram
Now for the sake of the conversation let’s talk about the social markets that may be more familiar to us: Facebook and Instagram.
In 2016 Facebook launched Marketplace, a section of the site and app where users can sell to one another. Now, this works more like Craigslist, and Facebook doesn’t take a cut of sales. Two years after its launch and continued promotion and placement on the site, Facebook has begun to monetize the service with paid ads by users and local businesses.
Instagram is where the real marketplace sits under the Facebook umbrella. And, for the sake of this conversation, I argue that it exists in two ways. The first is the selling of physical products through posts. As of 2018 business users can tag their products in posts. Clicking on one of these posts shows a product’s price tag similar to how we can see tagged friends in photos. Clicking further on one of these product tags takes users to a virtual cart to buy them. Similar to selling through 3rd party middlemen, Instagram makes a cut of every sale made on its platform.
The other marketplace on Instagram is less tangible and much harder to track. It’s the sale of digital products by individual users, typically with large followings. These users, after amassing a following, package and sell a digital product through a separate 3rd party platform. These are in most* cases informational products — ebooks, video programs, access to private communities and subscriptions through referral programs or otherwise. As of right now, there is no way to directly sell these digital products through the app.
The Fatal Flaw of Social Media Marketplaces
However, what I see as fundamentally flawed in the selling on Facebook and Instagram is that they were innately social spaces first. Facebook is trying to infuse a market into a social setting and not the other way around. That’s like going to a party and having one of your friends show up to try to sell you something. It’s nice if maybe you were, by some coincidence, looking for what they were selling, but pretty intrusive otherwise.
I believe that in order for e-commerce markets to realize their full potential, they must first be set up as markets and then allow for social engagement - exactly how markets have functioned since their ancient origins and exactly how TaoBao and TMall have fostered unprecedented growth.
As consumers we go to marketplaces with the intent to buy, and we are delighted if the experience is social. We do not log onto our favorite social media apps to be delighted by a buying experience.
Now, will social media companies be able to compete? Of course. But you will never see revenues made from marketplaces on Facebook or Instagram match that of TaoBao, TMall or any other forthcoming marketplace that successfully integrates social.
A Final Thought
I think a sleeper in this space is Shopify — a company that, if looked at as one giant retailer, would be the second largest in North America behind Amazon. The e-commerce company has already produced an original series with a major cable network and has the in-house studio to take on a new integration like this. If Shopify had a video platform that allowed me browse stores of its top entrepreneurs, I think I would have done my holiday shopping a bit differently this year.
