Connecting Brands and Generation Z – Social Commerce as a sales strategy to reach the customer group of the future

E-Commerce is an evolving sales channel with everchanging trends and challenges. An emerging E-Commerce trend is Social Commerce – the integration of shopping into social media. Social Commerce conveniently allows customers to instantly buy products they see within social media. Generation Z is the youngest generation currently gaining importance for the retail industry and values sustainability, ethicality and brand authenticity when making purchasing decisions. Social Commerce offers a way for businesses to directly connect to consumers and therefore a new way of reaching the Generation Z, but companies must work from inside-out to convince Generation Z shoppers and adapt to their values before trying to utilize Social Commerce.

Current trends in E-Commerce

The retail and commerce industry constantly evolves and adapts to ongoing global trends. The last major shift happened with the introduction of the internet and keeps its relevance with and an increasing proportion of online retail. The resulting global E-Commerce industry already accounts for around 20% of the overall retail industry (Statista, 2021). Over the next years this number will increase even further. E-Commerce itself also develops and changes according to the needs and desires of consumers. As a result, a variety of trends evolve and influence the overall landscape of E-Commerce. These trends include optimization and adaptation of existing processes, like the introduction of One-Day-Delivery in a variety of industries or further automated logistic processes. Further trends include new ways of doing business, like the so called Direct-to-Consumer sales approach, referring to brands having own web shops and targeting their customers directly instead of using marketplaces like Amazon or online and offline retailers as intermediaries for their sales process. Another example is the introduction of Quick Commerce and the resulting delivery of groceries directly to customers, which would not have been imaginable years ago. Another E-Commerce trend is the emergence of the so-called Social Commerce – shopping integrated into social media which directly impacts the way how brands and consumers interact.

Figure 1: Overview of selected E-Commerce trends

Social Commerce and its drivers

While Social Commerce is a timely and relevant E-Commerce trend, depending on the definition, the story of Social Commerce began a long time ago with the introduction of products and service reviews or digital recommendations in form of sharable shopping lists. These features fit a more traditional definition of Social Commerce based on social interaction of different shoppers. With rising popularity of social media, the perception of social activities shifted and a new stream of sharing media with others evolved. Brands began to advertise their products by creating organic posts on various channels and attract customers to make purchases on their websites.

Over the last years, social media platforms combined the process of online purchases with content generation and launched implemented shop systems. These systems allow shoppers to directly purchase a product they like within the platform itself. Instagram offers one of the most successful social purchasing systems. Another example is Facebook Shops an implemented shop solution to support smaller businesses during the COVID-19 pandemic. Through Social Commerce brands of all types and sizes can create media and directly connect with their fans and consumers, who in return can directly purchase products they find appealing in the posts. Over its existence, Social Commerce has developed into a well-functioning sales channel and shows an especially high popularity among the younger age groups due to changes in shopping behavior.

Understanding what drives the Social Commerce development helps to prepare for the next steps. The key driver of Social Commerce is the increasing popularity of social media and an increasing userbase. The already popular use of social media to find inspiration has been further amplified by the COVID-19 pandemic which limited the possibilities for offline shopping and required a new way of exploring products. Social media gives customers the opportunity to explore products by having access to a variety of media and experiences shared by people online. Traditionally, a socially influenced purchase required an additional step of purchase option research. Social Commerce conveniently allows customers to instantly buy products they see within social media, simplifying the overall purchasing process. In general, a prominent level of connectivity and social media use benefit the receptivity of people for Social Commerce. Especially younger generations are used to being connected with each other via a variety of different apps and websites. One of the generations having this type of access is Generation Z.

Expectations and desires of the Generation Z

Generation Z is the youngest generation currently gaining importance for the retail industry. With first Generation Z members now entering the workforce, the generation starts to gain higher access to capital and therefore develops into one of the most important consumers groups. Those who are not yet working full-time are still influencing their parents’ shopping behavior and therefore directly impact other generations. As they are a young generation, Generation Z will remain a relevant target group for a long time. To prepare for the increasing importance of Generation Z as a customer group, it is important to understand who the generation is and what expectations and desires are prevalent withing this group.

Generally, Generation Z refers to all people being born between 1995 and 2010 (depending on the source 1998 to 2013). This timeframe makes Generation Z a generation of digital natives, people who do not know a time without digital products such as computers, smartphones or even the internet. As a result, technology is intuitive and digital availability and connectivity are part of their identity. This digital normality explains the comparably prominent level of social media usage. Generation Z shoppers do not only use social media to connect with friends and family but interact with brands and research desired products online before making purchasing decisions Overall, 61% of Generation Z shoppers actively follow brands on social media according to a study of SurveyMonkey in 2021. Furthermore, shoppers are inspired by the posts of friends or professional influencers leading to further interest in products or services. Therefore, it might seem like social media is the go-to marketing channel to reach Generation Z.

However, one cannot just create a social media presence and create content to reach this demanding customer group efficiently. According to a study by SurveyMonkey, Generation Z is demanding in several ways when shopping online. Brands need clear strategies when planning to sell to Generation Z and aligning their identity with the values of the potential customers. Generation Z values sustainability, ethicality and brand authenticity when making purchasing decisions. Therefore, brands should find a way to implement suitable business practices when targeting Generation Z customers. Moreover, it is of high importance to not only follow these values, but to directly communicate them to potential customers. To do so, companies need to adapt their communication and implement authentic content.

Another interesting characteristic of Generation Z shoppers shows when looking at the choice of purchase channels. While especially millennials choose to shop on big platforms like Amazon, Generation Z is willing to make an additional step towards supporting the manufacturers of a product they like and purchase directly from them. Thus, brands should not only focus on selling their products on marketplaces and with established third-party retailers but find ways to follow direct sales connections with their customers, for example by selling their products in own web shops.

Social Commerce and Generation Z expectations

Besides traditional web shops, Social Commerce offers another and timely way for businesses to directly connect to their consumers and therefore a new way of reaching Generation Z with targeted measures. First, well designed content and collaborations with the right influencers can lead to a high engagement rate among Generation Z shoppers, a majority of which are looking for inspiration on social media. Thus, Brands can use their social media presence to create a high demand for products and services. Second, the active maintenance of different social media channels enables companies to communicate their values to customers and demonstrate how and why they act sustainable, ethical, and authentic. Especially the authenticity of a business is easier to proof in frequent posts than on a static brand website, where even established quality and trust seals are recognized by less than 10% of users (Tidio, 2021). In theory, both these arguments could already be fulfilled following a traditional social media strategy. However, due to the new developments in Social Commerce, the produced content for a company’s social media presence can now function as a shopfront without the need for an intermediary like Amazon or any other retailer. Doing so, it utilizes the created content more efficiently and can help to increase conversion rates by minimizing the effort of purchase. Looking back at Generation Z’s shopping behavior, Social Commerce allows companies of all sizes to meet the wish to purchase goods from manufacturers directly. This combination makes Social Commerce an overall promising opportunity for brands of all sizes.

Figure 1: Social Commerce as a link between Generation Z and brands

While Social Commerce offers multiple benefits, it also has one major drawback. With a direct linkage between social media performance and sales performance, minor brand identity mistakes can directly influence the success of Social Commerce businesses. Again, creating a detailed and well-planned social media and Social Commerce strategy is key to prevent this kind of image mistakes and guarantee success.

Implications for brands

To sum up, the increasing importance of Generation Z shoppers for the overall commerce industry increases the importance for brands to introduce and adapt new products, services, or processes to target young shoppers. Further implementation and adaptation of Social Commerce could be a step towards the satisfaction of Generation Z needs by allowing a direct interaction with shoppers, eliminating intermediaries, and utilizing the benefits social marketing. However, Social Commerce itself is nothing more than a sales channel and therefore only functions in combination with a suitable brand identity. Generation Z values sustainability, ethicality, and authenticity. Therefore, companies must work from inside-out to convince Generation Z shoppers and adapt to their values before trying to utilize Social Commerce. To maintain a successful position in the future of E-Commerce and Social Commerce, companies need to actively develop their social media image and implement quality assurance for their social media pages. Overall, it is likely that over the next years Social Commerce will become more important as the importance of Generation Z is rising and even the younger Generation Alpha is on their way to gain relevance for the retail industry.