eCommerce Trends: Social Commerce
Social Commerce Analysis: More Than Half of U.S. Consumers Distrust Shopping on Social Media
People don't trust social commerce due to fears of being scammed. However, the social commerce market is still projected to generate global revenue exceeding $6 trillion by 2030. Here is why.November 20, 2023
Social Commerce Hesitancy: Key Insights
More than half of U.S. consumers do not trust products sold on social media, with the most common reasons for distrust being illegitimacy of merchants and product offers (63%), discomfort with sharing sensitive information (57%), and counterfeit and/or low quality of products (55%).
The U.S. Federal Trade Commission (FTC) confirms these concerns by showing that since January 2021, US$2.7 billion has been reported lost due to social media fraud. Another US$2 billion was reported lost through websites or apps.
Grand View Research has published a forecast of global social commerce revenues, which are expected to exceed US$6 trillion by 2030. The only way to sustain this development is to improve the technological integration of payment and security mechanisms.
Social commerce – or buying products via social media – is a growing global trend that has been embraced by some consumers and shunned by others.
With the recent launch of TikTok Shop in the U.S., social commerce is becoming increasingly more common in the West: A region where adoption tends to be lower, compared to other global regions. The launch of this new in-store shopping feature encounters various challenges, several of which are explored in our analysis.
Most U.S. Consumers Are Worried About Illegitimate Merchants and Fraud
A recent AiBUY survey revealed that over half of U.S. consumers (53%) do not trust products sold on social media platforms. This level of distrust is similar among Millennial and Gen Z users, at around 52%.
AiBuy also asked participants about the reasons behind their distrust in purchasing products through social media, allowing for multiple responses.
The majority, 63% to be exact, is worried about fake sellers and scams. Potential customers fear paying for items they won't get, or falling victim to other dishonest tactics.
Following this, 57% of participants indicated they are hesitant to share sensitive information on social media platforms, while 56% are worried about receiving counterfeit or low-quality products. This concern stems from the minimal regulation and easy access, which can make it challenging to verify the authenticity and quality of products.
Additionally, 47% of respondents are deterred from making purchases via social commerce due to insufficient privacy and data security measures. Another 46% are discouraged by unclear return and refund policies.
On the lower end of concerns, 38% of consumers are dissatisfied with customer reviews and the lack of trustworthy ratings. Furthermore, 25% are reluctant to order homemade products that are not regulated.
Social Media Is the Leading Channel for Fraud in the U.S.
The prevalence of social media fraud proves that consumers are right to be concerned. Research by the FTC found that since the beginning of 2021, US$2.7 billion has been reported lost due to fraudulent practices on social media. This does not mean that social commerce is responsible for all of the lost funds. Social media scams can also include hacked accounts that ask for payments in the friends network and other scams.
But what’s important to note is that the anonymity of social media and the added impossibility of regulating this vast space of internet interactions provides fertile ground for illegitimate practices, aimed at obtaining money from unsuspecting users.
This is further reinforced by the fact that the second most common channel through which U.S. consumers lost money is also online, namely websites and apps. A total of US$2 billion was reportedly lost to website or app scams.
Online ads and pop-ups are less prevalent, however, with US$400 million reported lost to fraud. Keep in mind that the dark figure made up of unreported cases will be much higher than the FTC’s published figures, as many consumers avoid reporting scams, either because they do not expect tangible results from reporting the case, or for personal reasons such as shame at having been duped.
Despite these apparent pitfalls of social commerce, the market is forecast to grow globally throughout the decade. Check out the data published by Grand View Research below.
Social Commerce Could Reach US$6 Trillion in Global Revenue by 2030
Market research firm Grand View Research has released its forecast for global social commerce revenues through 2030. With an expected CAGR (2022-2030) of 31%, this could result in an astounding US$6.2 trillion in revenue by 2030.
While it is important to remember that forecasts are not definitive and thus should always be taken with a grain of salt, the assumptions behind these figures are reasonable: As social media and digital payments become more intertwined, as security around authorization methods increases, and as brands find ways to adapt their offerings and product marketing to Western tastes, it is not impossible that social commerce will gain significant traction by 2027.
Buying items through social media is easy and can be fun when coupled with consumer preferences and personal interests, so this segment of eCommerce may become more commonplace and natural to users over time.
Social Commerce Problems – Closing Thoughts
TikTok Shop's launch in the West faces hurdles with over half of U.S. consumers distrusting social commerce due to fears of scams and privacy breaches, a concern underscored by the FTC's findings on the prevalence of social media fraud. Despite these challenges, social commerce is forecast to see global revenues of US$6.2 trillion by 2030. A major shift like this could be driven by enhanced security, regulatory improvements, and adaptations to Western consumer preferences.