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Whitepaper: The Rise of Social Commerce

The Whitepaper is a working document which outlines why social commerce is seeing significant growth in the Malaysian economy. The final version will be released along with the public launch of our platform, and will be made available in a downloadable format.
Last updated:
26 June 2021

The Role of Social Resellers

As seen in the table above, s-commerce involves a great deal of communication and interaction between its stakeholders. This form of commerce becomes especially relevant when people begin looking for alternatives to “forced” consumerism - typical in today’s society where uninvited display ads are prevalent on the screen of most applications. Instead of being algorithmically optimised to follow through with a purchase, s-commerce allows consumers to have a more organic understanding of products beforehand. This interaction is best generated through social resellers, which are individuals that are within the social reach of potential customers i.e. friends, family members, influencers, neighbours, community groups, and office colleagues.

Terms of Engagement - specific setups or recruitment terms may vary depending on the business itself, but most commonly, social resellers are required to purchase products in bulk, upfront. This provides the resellers access to a discounted overall price and the ability to make profit once they successfully resell the products at the retail (end consumer) price, which is determined by the business.

Solving the virality factor - as resellers invest their capital in the form of inventory, they are hugely incentivised to extend their sales reach to as many potential customers as possible. While the brand may provide guidelines as to how communication/marketing should be approached, the reality is: not all brands are as prepared or effective in this aspect. Nevertheless, the expected impact is increased representation of the brand throughout many social circles, and in the best case, both online and offline.

Solving the logistics factor - while logistics services do exist to deliver products to end consumers, they tend to take time. In the end, the purchase becomes unattractive when the delivery cost is transferred over to the buyers. This problem is exacerbated when the end consumers live in rural areas, yet unserviced by last mile logistics. With social resellers holding inventory in specific locations, they can act as nodes for the brand, delivering the goods or providing pick-up services as needed. Consumers can then receive their desired products in a timely and efficient manner.

Although the rewards of being a social reseller are bountiful (some report earning upwards of $800 a month; same level as Malaysia’s median salary); not everyone manages to produce the same performance. Some sense of entrepreneurial skills is needed to excel in this field. Just like any skill however, it can be harnessed. Because the success of social resellers also determine the success of the s-commerce players themselves, the businesses that enjoy the largest market share often take it on themselves to commit to building up their team, both in quality and quantity.

The Industry Problem

The social commerce industry can still be considered new; challenges in this space are still plentiful. The economy as a whole stands to benefit from new systems that can better facilitate the different processes that take place within social commerce.

Recruiting social resellers is a demanding exercise - Acting as an infrastructure, social media platforms provide a good starting foundation for s-commerce players to begin promoting their brand. Replicating the same efforts to sell their products, these businesses also invest time and energy to advertise for reseller openings. But over time, many start to realise that it becomes rather resource-intensive to actively promote and manage their recruitments. Despite not being formally employed by the business, social resellers represent the entire brand, so brands are burdened with an extremely important responsibility to vet through reseller applications and choose only resellers that they can trust.

It’s a resource-intensive business - to run a successful social commerce venture, there are many different components that need to be executed well. On top of developing the brand and product, social resellers are another key aspect of the business that founders have to actively build and manage. To achieve this, businesses need to rely on multiple applications, systems and platforms for different purposes:

  1. Messaging - Whatsapp
  2. Content/bulletin/announcements - Telegram
  3. Live calls/chats - Zoom/google meets
  4. Transactions - banking applications
  5. Accounting/stock management
  6. Logistics management

After growing to a certain volume of sales or number of resellers, most founders realise that they face a time constraint due to having to manage the components above. Most will then resort to employing administrative staff to take over these tasks, which incurs high overheads and strains their bottom line. If this issue goes unresolved in the early stages, it will soon be impossible for the business to scale. 

Underwhelming performance of social resellers - this difficulty of this challenge is dependent two factors: (1) the leadership of the founders/management team and (2) the quality of their resellers. Nonetheless, it is still a difficult task that many struggle with. While there are plans to foster a strong sales force, most businesses (especially newer and smaller ones) actually lack the technical knowledge and communication skills to drive engagement with their resellers. This problem becomes even more apparent when in social commerce, upskilling resellers becomes a necessity to gain a competitive edge over competitors. 

Unserved Market?

Companies that could provide a sustainable solution to resolve these challenges faced by s-commerce players could stand to provide massive value-add and therefore benefit greatly. While there are applications and tools to digitalise business processes and management of resellers, these available solutions concentrate their focus on digitalising commerce, all while ignoring the social aspect of social commerce. Digitalisation is a given - but a one-stop solution which empowers communication, collaboration, and teamwork within s-commerce businesses is nowhere to be found. 

Introduction

Since the start of the COVID-19 pandemic in early 2020, many in Malaysia have been badly affected. Companies of all sizes (opportunistically or due to actual need) are seen implementing ‘rationalisation’ exercises i.e. pay cuts, unpaid leaves, and even retrenchment. Despite governmental efforts, the pandemic has exacerbated wealth gaps. Economic uncertainty is still strongly felt, especially by more vulnerable groups in society. This is an important premise as to why social commerce is growing in relevance.

To mitigate financial impacts caused by the pandemic, those with enough capital invested into building retail businesses, selling consumer goods across different industries - food and beverage, health, beauty, fitness, and fashion. Thanks to how accessible the internet is today, many of these retail businesses are built in a few simple steps:

  1. Finding a winning/trending product in a specific category
  2. Procure or manufacture said product
  3. Decide on a brand
  4. Design necessary collaterals
  5. Begin promoting - typically on social media

The establishment of these businesses is a growing trend here in Malaysia. Due to how widely marketed these brands are, and how popularised this model of business is, newer players have access to learn from preceding businesses. Three distinct factors are identified in winning businesses:

  • Brand: creating an appealing brand to package products
  • Virality: growing and scaling market demand
  • Logistics: means to distribute goods to end consumers, country-wide

So how does one solve all three at speed?

Enter: Social Commerce

In a scenario where all businesses begin with the same access to resources, one would say the Brand is the most important aspect. Branding relies on the creativity of the founders coupled with their understanding of the market, to produce the correct messaging and visual cues to successfully convert people into paying customers. That said, there is no shortcut to solving Brand.

Viscoff - 5 weeks old at time of writing


The solution for virality and logistics factors however, have been found and are now growing in practice amongst these retail businesses. By recruiting social resellers (known as stockists, agents, and dropship), founders can effectively rely on individuals to generate demand and manage the tail-end of product distribution. Defined as social commerce (“s-commerce”), this system is currently in practice by numerous businesses in Malaysia alone. 

Social resellers are not directly employed by the business; they are rewarded only when a sale occurs. To further understand the role of social resellers in s-commerce, it would greatly help to first look at the comparison between elements of s-commerce and e-commerce as we know it.

Segments/Elements
E-Commerce
Social Commerce
Example players
Consolidated Marketplaces - Amazon, Lazada, Shopee
Standalone brands - Frunchie, Mutyara, Beautyra, Viscoff
Organisational Goals
Increase efficiency - one-click purchasing, recommendations based on algorithms
Social goals - networking, cooperation, and information- sharing
Customer Relations
Customers communicate directly with e-commerce platforms, individually and independently
Public support of social relationships which improves customer interactions
System Interaction
One-way browsing
Social and interactive approach - customers provide feedback, information is shared with online community
Differences of E-Commerce and Social Commerce

The Role of Social Resellers

As seen in the table above, s-commerce involves a great deal of communication and interaction between its stakeholders. This form of commerce becomes especially relevant when people begin looking for alternatives to “forced” consumerism - typical in today’s society where uninvited display ads are prevalent on the screen of most applications. Instead of being algorithmically optimised to follow through with a purchase, s-commerce allows consumers to have a more organic understanding of products beforehand. This interaction is best generated through social resellers, which are individuals that are within the social reach of potential customers i.e. friends, family members, influencers, neighbours, community groups, and office colleagues.

Terms of Engagement - specific setups or recruitment terms may vary depending on the business itself, but most commonly, social resellers are required to purchase products in bulk, upfront. This provides the resellers access to a discounted overall price and the ability to make profit once they successfully resell the products at the retail (end consumer) price, which is determined by the business.

Solving the virality factor - as resellers invest their capital in the form of inventory, they are hugely incentivised to extend their sales reach to as many potential customers as possible. While the brand may provide guidelines as to how communication/marketing should be approached, the reality is: not all brands are as prepared or effective in this aspect. Nevertheless, the expected impact is increased representation of the brand throughout many social circles, and in the best case, both online and offline.

Solving the logistics factor - while logistics services do exist to deliver products to end consumers, they tend to take time. In the end, the purchase becomes unattractive when the delivery cost is transferred over to the buyers. This problem is exacerbated when the end consumers live in rural areas, yet unserviced by last mile logistics. With social resellers holding inventory in specific locations, they can act as nodes for the brand, delivering the goods or providing pick-up services as needed. Consumers can then receive their desired products in a timely and efficient manner.

Although the rewards of being a social reseller are bountiful (some report earning upwards of $800 a month; same level as Malaysia’s median salary); not everyone manages to produce the same performance. Some sense of entrepreneurial skills is needed to excel in this field. Just like any skill however, it can be harnessed. Because the success of social resellers also determine the success of the s-commerce players themselves, the businesses that enjoy the largest market share often take it on themselves to commit to building up their team, both in quality and quantity.

The Industry Problem

The social commerce industry can still be considered new; challenges in this space are still plentiful. The economy as a whole stands to benefit from new systems that can better facilitate the different processes that take place within social commerce.

Recruiting social resellers is a demanding exercise - Acting as an infrastructure, social media platforms provide a good starting foundation for s-commerce players to begin promoting their brand. Replicating the same efforts to sell their products, these businesses also invest time and energy to advertise for reseller openings. But over time, many start to realise that it becomes rather resource-intensive to actively promote and manage their recruitments. Despite not being formally employed by the business, social resellers represent the entire brand, so brands are burdened with an extremely important responsibility to vet through reseller applications and choose only resellers that they can trust.

It’s a resource-intensive business - to run a successful social commerce venture, there are many different components that need to be executed well. On top of developing the brand and product, social resellers are another key aspect of the business that founders have to actively build and manage. To achieve this, businesses need to rely on multiple applications, systems and platforms for different purposes:

  1. Messaging - Whatsapp
  2. Content/bulletin/announcements - Telegram
  3. Live calls/chats - Zoom/google meets
  4. Transactions - banking applications
  5. Accounting/stock management
  6. Logistics management

After growing to a certain volume of sales or number of resellers, most founders realise that they face a time constraint due to having to manage the components above. Most will then resort to employing administrative staff to take over these tasks, which incurs high overheads and strains their bottom line. If this issue goes unresolved in the early stages, it will soon be impossible for the business to scale. 

Underwhelming performance of social resellers - this difficulty of this challenge is dependent two factors: (1) the leadership of the founders/management team and (2) the quality of their resellers. Nonetheless, it is still a difficult task that many struggle with. While there are plans to foster a strong sales force, most businesses (especially newer and smaller ones) actually lack the technical knowledge and communication skills to drive engagement with their resellers. This problem becomes even more apparent when in social commerce, upskilling resellers becomes a necessity to gain a competitive edge over competitors. 

Unserved Market?

Companies that could provide a sustainable solution to resolve these challenges faced by s-commerce players could stand to provide massive value-add and therefore benefit greatly. While there are applications and tools to digitalise business processes and management of resellers, these available solutions concentrate their focus on digitalising commerce, all while ignoring the social aspect of social commerce. Digitalisation is a given - but a one-stop solution which empowers communication, collaboration, and teamwork within s-commerce businesses is nowhere to be found. 

Introduction

Since the start of the COVID-19 pandemic in early 2020, many in Malaysia have been badly affected. Companies of all sizes (opportunistically or due to actual need) are seen implementing ‘rationalisation’ exercises i.e. pay cuts, unpaid leaves, and even retrenchment. Despite governmental efforts, the pandemic has exacerbated wealth gaps. Economic uncertainty is still strongly felt, especially by more vulnerable groups in society. This is an important premise as to why social commerce is growing in relevance.

To mitigate financial impacts caused by the pandemic, those with enough capital invested into building retail businesses, selling consumer goods across different industries - food and beverage, health, beauty, fitness, and fashion. Thanks to how accessible the internet is today, many of these retail businesses are built in a few simple steps:

  1. Finding a winning/trending product in a specific category
  2. Procure or manufacture said product
  3. Decide on a brand
  4. Design necessary collaterals
  5. Begin promoting - typically on social media

The establishment of these businesses is a growing trend here in Malaysia. Due to how widely marketed these brands are, and how popularised this model of business is, newer players have access to learn from preceding businesses. Three distinct factors are identified in winning businesses:

  • Brand: creating an appealing brand to package products
  • Virality: growing and scaling market demand
  • Logistics: means to distribute goods to end consumers, country-wide

So how does one solve all three at speed?

Enter: Social Commerce

In a scenario where all businesses begin with the same access to resources, one would say the Brand is the most important aspect. Branding relies on the creativity of the founders coupled with their understanding of the market, to produce the correct messaging and visual cues to successfully convert people into paying customers. That said, there is no shortcut to solving Brand.

Viscoff - 5 weeks old at time of writing


The solution for virality and logistics factors however, have been found and are now growing in practice amongst these retail businesses. By recruiting social resellers (known as stockists, agents, and dropship), founders can effectively rely on individuals to generate demand and manage the tail-end of product distribution. Defined as social commerce (“s-commerce”), this system is currently in practice by numerous businesses in Malaysia alone. 

Social resellers are not directly employed by the business; they are rewarded only when a sale occurs. To further understand the role of social resellers in s-commerce, it would greatly help to first look at the comparison between elements of s-commerce and e-commerce as we know it.