How Social Media Is Changing E-Commerce

GuruFocus.com

- By Nicholas Kitonyi

Whenever the subject of e-commerce comes up during a conversation, most people always think about online shopping. Many manufacture this thought by thinking about an online shop or store as a way of supplementing sales from their physical stores. A lot has changed over the last several years however.

While selling products online is still the perfecting definition of e-commerce, social media platforms and third-party websites are slowly bringing another view to the e-commerce marketplace. For instance, while most people still see Facebook (FB) as a platform where they can socialize with family and friends from various parts of the world, there are those who conceive Facebook as the perfect platform to drive sales for their businesses.


Interestingly, the social networking giant returns the favor by trying to convert as many users as it can into customers, yet it maintains it is a social network rather than a business network.

Other startups have taken advantage of Facebook and other social network's massive user bases by integrating their business models to tap the opportunities presented by these giant tech platforms. Some of the best examples include BigCommerce, which is one of the largest e-commerce marketplaces, and Shopify Inc. (SHOP), which I recently discussed in a previous article.

With the help of these platforms, businesses and individuals are able to join the e-commerce marketplace with ease, thereby boosting their sales. While most players sell their own products, there is an increasing number of players capitalizing on the rise of drop-shipping. Drop-shipping allows e-commerce players to sell other people's products without having to maintain an inventory.

Platforms like Oberlo enable businesses and individuals to easily access products to sell online from various producers and designers and directly list on their e-commerce stores as if they were their own.

This means an individual can easily open a virtual shop on Shopify, drop-ship products from Oberlo and list them on their Shopify store and then advertise on Facebook to generate sales. Therefore, anyone can become an e-commerce merchant, and the ability to succeed may actually rest on one's ability to market products on social media and other platforms rather than the ability to make their own products.

In addition, e-commerce merchants are now using social media influencers to promote their brands. This helps cut advertising costs, thereby increasing their bottom lines. With their products listed on online platforms, it is easy to track traffic and conversion rates generated by a social media channel, or even every single influencer contracted.

In return, these influencers use social media to turn fame into e-commerce businesses, which then augment the other aspects of social media influence on the e-commerce marketplace. The e-commerce marketplace is one of the fastest-growing business segments of the technology sector and given the current developments in its connection to social media, opportunities will continue to emerge in the foreseeable future.

Platforms like Twitter (TWTR), Microsoft's (MSFT) LinkedIn, Pinterest and Facebook also allow users to advertise to their connections and followers at no cost, which makes the whole point of having multiple followers important.

As such, users can also use their fame to market their own products in conjunction with influencer marketing. Some of these platforms also allow users to post their products directly, without having to link to their online shops, which again makes the process of online selling simpler and less expensive.

In return, this widens the scope of the e-commerce marketplace. Here, we are talking of social media groups that allow different users to sell or buy assorted products, effectively converting such groups into segments of the e-commerce universe.

This means that for anyone looking to play their part in the e-commerce market, the options are many and all that is required is to choose wisely depending on budget and social media influence.

Conclusion

In summary, the e-commerce marketplace has evolved. It has slowly been detaching its cord from the biased descriptions mused with the likes of Amazon (AMZN) and eBay (EBAY) into a more revolutionary marketplace driven by social media.

Currently, there are more people that know how to sell items on Facebook than there are those who know how to sell on Amazon. This is a clear illustration of the kind of influence social media is having on the transformation of the e-commerce marketplace.

Disclosure: I have no position in any stock mentioned in this article.

This article first appeared on GuruFocus.