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Behind the Numbers: an EMARKETER Podcast
How Social Commerce Became a Real Retail Channel as AI Shapes How People Buy | Reimagining Retail
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- [00:01]
A
Ever seen an ad that just fits perfectly? That's ctag. Their neurocontextual technology combines AI and neuroscience principles to place brands exactly where they belong. It's privacy first, advertising that taps into the user's interests, emotions and intentions, making every interaction feel natural and relevant. Ctag, where context becomes intelligence. Hi, everyone. Today is Wednesday. Wednesday, February 11th. Welcome to eMarketer's weekly retail show, Reimagining Retail, an E marketer podcast made possible by ctac. This is where we talk about how retail collides with every part of our lives. And I'm your host, Susie Deva Kenyon. On today's episode, we're digging into social commerce, how it became a real retail channel, and why it matters even more as AI and agentic commerce start to shape how people buy. Joining me today are two of our senior analysts. Karina Lam joining us from the south coast of England. Hey, Karina.
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B
Hi, Susie.
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A
Not to be confused with near London, I mean nearish. And we also have, for the first time, Minda Smiley joining us from New York City. Hey, Minda.
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C
Hey. Excited to be here.
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A
We're so excited to have you. So this week we're going to talk about social commerce, not as a trend or an experiment, but as a real part of how people are shopping today. What started as discovery and inspiration has now become shoppable, immediate, and increasingly transactional, often in a single sitting. And while social commerce is still a small slice of overall retail, it's become much more important as brands try to figure out how to connect, convert, and build trust in a more mediated buying journey. So with that, I'm going to start with a very easy one. What is the last thing you guys bought through a social platform? Minda, you got to go first.
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C
I honestly can't even remember. I, if I had to guess though, probably like baby clothes.
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A
Have you made a purchase? I've clicked on many links, but I haven't actually made a real purchase. And we were even talking about are you purchasing in the app or are you purchasing through the website?
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C
Exactly. I feel like there's been many times where I've clicked on, like ads for toddler and baby clothes, but I couldn't remember like when I actually. If I actually.
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A
If you made a purchase.
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C
Purchase. I don't really shop on social media that much. To be honest.
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B
I'm the opposite.
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A
Karina, tell us more.
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B
I'm a terrible social shopper. I'm very influenced by my algorithm and I bought something yesterday. In fact, I'm training for a half marathon at the moment. And I ended up buying a hydration vest that has a nice little pocket for my phone and some water and snacks. Snacks were the important bit and it's reflective so I can be seen at night and it's arriving later today, hopefully. So I can tell you how it went.
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A
That fast.
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B
Yeah, but I bought it on a website. Right. So it sent me to the brand website.
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A
Yes, but this is the point, right? Social commerce isn't really massive yet, but it's definitely crossed that line into a real retail channel. When did that shift actually happen?
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B
Yeah, sure. And I mean, I see it from a very UK perspective, which is probably a little bit different from the us. So I think the UK has kind of lagged on social commerce because we never really had native checkout here and it just wasn't a normal thing. So there were people, you were kind of sent back to websites and that worked to a point. But I think it was really the inflection point was the launch of TikTok shop in 2021 and that kind of finally brought native checkout, integrated logistics and kind of creator led settling into one place. Although I would say it was when TikTok launched, fulfilled by TikTok in 2023 and kind of really took that logistics piece and improved delivery and consistency and things that we saw it really take off and it was like double digigit growth in 2024. And I think now we're starting to see some bigger brands get on board, bigger retailers.
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A
Onto TikTok shop.
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B
Onto TikTok shop. Yeah. Initially it was just a lot of kind of SMEs and smaller brands, but I think now we're starting to see bigger brands and retailers start to see the sort of benefit of it as an additional sales channel.
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A
Minda, for me, it feels like in the US it was with livestream shopping. It's like QVC on steroids.
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B
Right.
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A
It all of a sudden everybody, all the brands were like, wait a second, we can actually sell through social commerce. It's not just, you know, a place for people to be entertained and it' not a place for people to communicate. Is that what. What's your sense around what's actually shifted in the US in terms of social.
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C
Commerce in general or lifestyle?
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A
Yeah. Like how did a social platform end up being such an important touch point? And maybe all the digitally native brands that needed this direct to consumer access?
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C
Yeah, I don't think it was one specific thing. I mean, I do think Covid probably played a role. I mean, that's something that we Talk about a lot in terms of like a lot of digital habits and I think that probably did play a part in why we, we did see like some, some growth booms around that time. But I than like 2017, 2018, 2019, TikTok was gaining momentum at that point. People were starting to spend more time on social year over year. Like I really think it's, you know, kind of to Karina's point, like I think a lot of factors have really led to where we're at now. A lot of it's just social media has become so much more popular. We're spending more time there.
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A
Yeah, it's big on its own.
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B
Yeah. And I do think as well it's like the friction in that kind of sales point has really reduced. So brands are getting better at handoffs when it kind of a link comes in from social to their websites. You're getting kind of payment preferences which are saved and remembered and it's all just getting a bit faster. I think that kind of one click checkout. So it's really seamless experience now whether you're checking out natively or whether you're going to a brand website. And I think that's what kind of really encourages that sale sometimes.
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C
Yeah. And I do think it's important to note in our social commerce forecast at least like we do consider native checkout and you know, checking, checking out via a retail, you know, click to a retailer's platform. That's all in our numbers. Which I feel like is important because I think even the term social commerce can cause confusion for people. Like what exactly does that mean?
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A
So that's a great point because it's more than just an inspiration piece even though the sales are lower than other digital channels. But for me it also felt like there was a time where it was more. It wasn't shoppable yet. Right. It was more like a glossy digital magazine. It was really great for inspiration. It's not necessarily something that you were ever thinking about buying in that moment, but now you're buying it all in one shot. Is that because consumers are more open to it or is that really just TikTok?
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B
I think it's a bit of both. I mean you have things like sort of shoppable ads, shoppable videos, and then also creator marketing's come on a long way in the way that brands are using creators and the way that creators are then kind of helping sell products on social platforms. So I think it's a combination of that and then also consumers just becoming a bit more used to it as a sales channel. It's kind of a slow thing to build momentum, but it is now starting to get there.
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A
And Karina, you know you were talking about just before and I want to dig in a little bit more this idea that it's a little bit more seamless. Like we know in retail, right, if you do things that have friction, you're less likely to convert. And so it seems like social platforms have figured out a way to sync up inventory, figure out fulfillment returns, even payment. You're saying native or not native. How important do you think all of that work that happened on the back end makes this feel like the moment where it's really going to take off?
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B
Yeah, I mean, I think that's completely critical. Like you said, without kind of reliable stock visibility, without clear delivery timelines, straightforward returns, people just wouldn't use it. Like it's just the basics of retail, isn't it? And so like I said in the uk, I think social commerce became a lot more tangible when TikTok shop introduced options like fulfilled by TikTok because consumers then had that kind of same day fulfillment, next day working delivery. And it's that consistency that then builds trust. And I really think that that's, like you said, it's the kind of infrastructure behind it now which is building the trust with consumers. And for them, an experience buying via social is not radically different to an experience buying via more traditional E commerce.
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C
And I think it's worth noting that like, yeah, the actual ads themselves have gotten savvier, whether it's like the format or even with creator marketing. I mean, something I, we talk a lot about when it comes to influencer marketing is we're seeing this huge like boom really of, of of advertisers putting paid media behind their influencer investments to really turn these organic placements, sponsored placements into ads that are showing up on, on your feed.
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A
And I'm throwing in that consumers don't know the difference. Right. Like they're shopping on Instagram but they're, they're not paying enough attention to know if it's Ralph Lauren that they're purchasing from or if it, you know, like Ralph Lauren the website or Ralph Lauren through the shop on Instag. Instagram, though technically it's not really called the Instagram Shop anymore. And so that even shows us that not only are consumers sort of blended between all the different channels, but Meta is still trying to figure out exactly how to lean into social commerce. So the evolution of how it's going to work is There, right. Whether it's live streaming or shop in shops or not on TikTok or on Instagram. We even had this whole conversation around can you actually purchase within Instagram? We know on TikTok you can, but within Instagram or on Facebook, we said, oh, it's probably more Marketplace place. Is that a signal that there's still more to come?
- [09:38]
C
I think so. I mean, it's interesting. Like, yeah, obviously Tik Tok shop and Tik Tok in general, H has done a really good job of sort of leaning into shopping. It's clearly a big priority for them. They're seeing a lot of momentum. You, you know, you can see it in the numbers. Instagram has had its challenges, as you said. They haven't really leaned into the, to, to shopping in the same way, but Instagram also, you know, and other ways they, they are seeing success in their own way. They also are, you know, the way Instagram works. There's more to offer, I guess you could say, because there's stories, there's, there's the feed, there's reels like there, there's kind of more going on and maybe that could, you know, that can create both challenges and opportunities. But I think the bigger point I'm trying to make is like they both are seeing success in, in this realm for sure. Even though TikTok, I think, has more kind of explicitly leaned into shopping.
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A
You know, I also find it interesting that we talk about social commerce and don't mention Pinterest as much. Right. And I doing so many different things. Their CEO had once said they want to be the mall, the digital mall. It, it doesn't come up a lot in conversations.
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C
Do you know why? I actually just looked into this as part of our, our US Forecasts at least, and we actually recently increased our figures around Pinterest in terms of social buyers and revenue. They're, they're making, you know, social commerce. So they actually are seeing some momentum. But the reality is that like, they're, they're still really small when you compare them to TikTok, to Instagram, even, even Facebook. I, when you look at Pinterest by itself, it actually is seeing some momentum and they're clearly pushing into shopping. But I just think because they're just one of the smaller platforms, they are going to, you know, inevitably face some challenges and, and marketers are, you know, also going to maybe bucket them in a more experimental budget, which can have implications for how they're viewed in, through a shopping lens as well.
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A
Karina, what is it like in the uk.
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B
Yeah, it's the same here, really. I mean, I think what is kind of really distinct in the UK is how big TikTok is here now. And I know it's starting to reach that point in the U.S. now that you've got shop. But for a long time when we were seeing global consumer surveys, we were seeing that kind of Instagram, Facebook were the top destinations for people in a kind of shopping mindset everywhere in the world except for the UK and TikTok was top in the UK. But it is TikTok, Instagram, Facebook, like Pinterest comes pretty low down the list. So I would agree with Minda. I think it's kind of a similar situation here, really.
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A
It's interesting because they worked so hard on those shoppable pins, right. To make it so efficient and they're doing all kinds of things like shoppable recipes. They're really trying so hard. They're trying, yeah, they're trying so hard to lean into that moment. And I think they're, they're working through. And maybe this is what you also were sort of alluding to on the Instagram side in terms of creators. They're moving, I think Pinterest to Obviously TikTok is moving from creators as a marketing angle for brands more to a storefront and thinking about creators really equaling a sales associate in some ways. But in a more human way, is that going to change how brands think about their own brand voice and how their trust is sort of disseminated to people and even just how to scale?
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B
Yeah, I mean, I think it kind of fundamentally changes the power dynamic between brands and creators because brands aren't just outsourcing marketing, they're kind of handing over a little bit of that retail experience then. And I think that's quite uncomfortable for a lot of brands that are really used to controlling everything. So they're going to have to shift their mindset a little bit. And to be honest, the bigger the scale, the more you have to hand over control. So it's a kind of scary thing. So I think really we're going to see brands perhaps kind of using fewer creators, but creating deeper, longer term relationships. I think that kind of trust is going to be really important there because these creators aren't just influencers anymore, they're kind of part of, they're like a retail partner really now.
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C
Yeah, for sure. And even like within influencer marketing, I'm sure you both know, like measurement is a huge conversation. Even though we are seeing so much momentum and Growth like that is something that I think is a challenge is figuring out. Like, a lot of marketers are still kind of wondering, well, you know, what is the ultimate roi? How exactly are these creators, what are they actually helping us do? And so that's kind of a whole different conversation. But I do think, you know, brands want them to drive conversions. They want them to ultimately, you know, drive sales. And so that's probably why we're seeing this rise of affiliate marketing and whatnot and really just trying to connect them to the, the shopping journey a bit more.
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A
It's interesting because it does feel a little bit like a slow burn. I mean, we talked about it in terms of what were some of the inflection points up top. But when I was at Macy's, I don't know I'm going to call it 10 years ago, they tried to pilot this program. So it's that long ago where sales associates and corporate staff were able to build up their own stores and have like affiliate tags and would get like a very small commission. So like really, retailers have been trying to figure out how to lean into these cultural moments. And maybe among all the things we've talked about, TikTok is probably like, I still think about that Dr. Pepper ad. Like, I feel like that really is a testament to how far we've come in terms of leaning in.
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C
Yeah, and it's crazy. Like, yeah, it's funny how things kind of come full circle in this industry. Like, yeah, now there, there is kind of this rise of like employ employee advocacy programs, like essentially turning your employees into creators. And I know some brands are seeing a lot of success there.
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A
And one of the things you talk a lot about, Minda, are the AI creators, like creators that are digital, not real human people. Tell us more about that. How is that scaling?
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C
It's a super interesting area. It's one that I've admittedly been a little, a little bit skeptical of in terms of like what kind of traction I think that they're going to have. In a lot of ways it makes sense, right? Like you can maybe have more control over depending on what the partnership like, looks looks like, you know, how, how it kind of plays out. There's also the, this idea of like big name creators, like kind of using virtual avatars, like, you know, kind of get like licensing their, their likeness to a brand if they, you know, maybe can't commit in real life, so to speak. But they say, hey, you can use XYZ using via AI. So I think there are some opportunities there. Again, I'm like, I remain generally skeptical about like, to what extent it'll become a big thing and to what extent a lot of brands are even interested. But, but I've seen some early signs of like, some, some traction. I don't know. Karina, what about you? What have you seen?
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B
Yeah, I mean, it's kind of been similar here. I've seen some surveys saying that brands are quite keen on it and looking at investing more in not necessarily completely AI generated, but kind of AI assisted content creator content. But we do see here that consumers are still pretty skeptical about it and actually their desire for that kind of content is going down. And I think that's probably down to the fact that, that there is a lot of kind of AI slop now on social media that's not necessarily ads, but it kind of puts people off AI in general. So I definitely think it's an interesting thing for brands to be thinking about, but I do think they need to be a little bit careful with, with how they're then taking that to the consumer.
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A
I do think we probably need to spend a whole different episode talking about AI created ads.
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B
Yeah.
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A
And what that looks like. But from an AI virtual influencer, that too is not new. I feel like maybe before COVID like a couple years before COVID there was a virtual influencer from Asia who was like a really big deal at the time, but she is not coming up on my feet anymore. So maybe she's retired.
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B
No, I think it can be quite market specific. Right. Like, I think in the west generally we're a little bit more skeptical towards that sort of thing. Certainly in, in England and the uk that's true.
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A
So speaking of specs, not just that the UK is skeptical, but just in general. Let's do a reality check. We are seeing that there's a lot of momentum, but it doesn't obviously work for everything or every category. So how does it fall apart? Social commerce? Like, how should brands be thinking about what's working, what's not working, where they can mitigate risk?
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C
It's funny, like, this is just like a random thing that happened a few days ago. But it got me thinking, like, so my husband does not work in marketing or anything at all. He works in a different field. So whenever he like makes comments about things related to social, I'm always like, ooh, like a little focus group. But he made a comment about how like, he was like, you know, I saw like an ad for a sweater or something on Instagram and he was like, but I'm like skeptical of buying it. He was like, I feel like with these brands, a lot of these brands that you see ads for, he's like, I've never heard of these brands. Like, I don't know if it's going to be good quality or if I even want to like, you know, just directly make a purchase for, for a company I've never like really heard of. And I do think that that's a real, a real issue and it stands to affect both like those brands that maybe just have trust issues, but also like bigger brands who maybe like, they don't maybe want to be affiliated with like a channel that some people are sort of like. Like there's all these kind of like random small brands and it feels like impulse buying. I mean, I, I mean even I could run into that too. Like I was saying earlier, like, there's so many ads for like baby and toddler clothes that I get and a lot of these brands I'm like, well, I don't even like, do I really want to buy this like random onesie from this company I've never heard of. I do think the trust thing is like still an issue to an extent that, that brands need to work through.
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A
And probably around the categories.
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B
Right.
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A
You for a child, you want to make sure that.
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C
Exactly.
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A
Safe versus a pet.
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B
Yeah.
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A
Versus other categories.
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C
Yes.
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B
I don't think social is great at kind of high consideration categories. I think those kind of categories are actually better suited to something like an, you know, AI chat bot where you compare specs and things like that. I think social is all about building that kind of desire and that cultural relevance. I think it works really well for categories like beauty we see really strong in TikTok shop at the moment in the UK fashion. It's that kind of like, oh, I never knew that I wanted that, but I want it now. But not when it's a kind of super high consideration or sensitive purchase. Right.
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A
And it's not. You can't just focus on this. Right. Brands need to focus on all the different touch points. And to your point, there is a distinction between AI assisted shopping and social shopping. So if social is much more about discovery and impulse and gen AI type of assistants are much more about. This is exactly what I want. Help me find the best thing for me. How should brands think about optimizing for both?
- [19:47]
B
So I think you need to kind of accept that you're designing two slightly different mindsets. So for AI agents, you want to be kind of really findable and comparable. So that means like clean Data, clear product specifications, structured attributes, similar to SEO. Whereas social commerce is much more about, like we said, kind of stories, emotion, aspiration, building that relationship with the consumer and building that social proof. So I think both channels are kind of important. Which one is more important will depend on the category that you're in. But I really think that brands need to be trying to operate across both.
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C
Yeah, I mean, I think in some ways that they are kind of, you know, bleeding together. Like with the rise of social search and social media platforms being used to search in the same way you might search on an AI platform. Like there are some similarities, but I think generally, I mean, I agree with Karina, there are still some major distinctions. The way you're going to talk to an AI agent is probably different than like what you would type into Instagram. And they're also just like, you know, social tends to be like much more visual. Whereas I feel like with the AI agents it's still primarily text based for a lot of people. And so. So yeah, I really think it's just a matter of knowing these are kind of, you have to kind of take two different approaches, even though there is some overlap because we obviously know like these AI platforms cite social platforms quite a bit. They're citing YouTube content, they're citing Reddit content. But your marketing strategy doesn't mean, you know, it should not be the same because of that.
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B
And from a retailer perspective, I think the one thing that both have in common is that like quite a lot of those sales are going to take place off platform. So, you know, most sales that begin on an AI platform, we're going to end up being completed on the brand website. And similarly with social commerce, I mean, I don't think we have a split, but we know that while you can buy through kind of TikTok shop natively, like we said, it's more limited now or not possible, we're not sure on Instagram. So like a lot of those purchases are going to happen on your website. So really thinking about that hand off off and thinking about reducing the friction at point of conversion when it arrives back on your own site is kind of really important for both channels, really.
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A
So well said. And the truth is that you were talking, you were comparing sort of the rise of AI when we were talking about this before of folks getting onto ChatGPT and other platforms with folks joining different social platforms and it's so much faster. So it's something brands can't ignore.
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C
Right.
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A
You need to be everywhere all the time to meet your consumer where they are.
- [22:21]
B
Yeah, 100%. I think our forecast for AI platform driven E commerce sales show that it's going to be around 1.5% of e commerce this year. In 2026, 2029, it's going to be about 8.8% and that's a much bigger leap than we saw social commerce get a kind of much bigger percentage share. I think even in 2029, social commerce is only going to be around the 9% mark. So it's still not a massive lead now, despite the fact it's been around for much longer. So for sure AI is important, but I think think that brands need to be thinking across all channels, you know, not just one or the other.
- [22:57]
A
Unfortunately, that's all the time we have for today. Thanks so much for joining us, Karina.
- [23:02]
B
Thanks for having me back, Suzy.
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A
And thanks, Minda.
- [23:04]
C
Yes, thank you.
- [23:04]
A
This was fun. And thank you listeners. And to our team that edits the podcast, please leave a rating or review and remember to subscribe. I'll see you for more Reimagining retail next Wednesday. And on Friday, join Marcus for another episode about behind the Numbers, an E marketer podcast made possible by CTAG.