Insights Article

What is Social Commerce and How is it Redefining the World of Retail?
14th September 2023
products flying out of a social media screen

Ulta Beauty generated $6m in sales and more than 30m product ‘try-ons’ using Snapchat’s AR-lenses. Luxsea utilised user generated content to triple their conversions. Charlotte Tilbury launched a 3D digital store using virtual reality to host live events and allow consumers to explore, shop and receive personalised recommendations from virtual assistants.

What do all of these have in common?

Social media has been instrumental in redefining the ways in which we learn, discover, consume and communicate with others. Now it’s redefining the ways we shop through a new world of social commerce.

What is Social Commerce?

Social commerce is the use of social media platforms to buy or sell products and services. It allows brands to reduce the amount of friction within the purchasing journey and create a more engaging experience for the consumer, that translates directly into conversions.

What Impact is Social Commerce Having on Retail?

In the UK, 45% of people who responded to our recent insights survey said they’ve made a purchase from an advertisement on social media. When analysing by age group, this stayed true for 36% of consumers over 40, and for 53% of consumers aged between 18 – 39.

The most favoured platforms for ad-click-through purchases with younger consumers were Instagram (54%) and TikTok (42%), whereas respondents over 40 were more likely to have purchased via Facebook ads (55%). Popular across all age groups, YouTube ads inspired a purchase for 33% of our respondents.

Accenture estimates social commerce will grow three times as fast as traditional ecommerce, to reach $1.2 trillion worldwide by 2025. As consumer values and preferences change over time, social commerce is able to successfully tap into some of the biggest influences that impact consumer buying behaviours – recommendations from friends and family, and trust.

Social media allows consumers to interact directly with influencers, offering behind-the-scenes glimpses into their real lives. These interactions help to cultivate a significant level of trust, which results in consumers forming parasocial relationships with influencers. Consumers then begin to look to influencers for honest and authentic product reviews and recommendations, granting influencers a sense of credibility and expertise within their chosen fields.

Brands borrow this credibility from influencers by partnering with them across social media platforms and allowing them to create content that is more engaging and feels less promotional. For example, instead of creating an ad for a new eye cream, brands might ask an influencer to create a video that details their everyday skincare routine, or they might ask influencers to host livestream shopping events, a tactic that reportedly generated $514bn in sales in China in 2022.

A substantial number of respondents to our survey have made a purchase after seeing a sponsored post from an influencer. Women under 40 were slightly more likely to have been positively influenced, compared to men in the same age category (45% to 39% respectively), but this falls to a modest 18% for consumers over 40. Interestingly, there was no difference for figures based on celebrity vs influencer recommendations, underlining the fact that the most important factors are trust, credibility, and expertise as opposed to fame.

Consumers are now discovering and purchasing products in one medium, turning social media into a sort-of digital shopping centre. 21% of Gen Z and Millennial respondents claim to have made a purchase either in the Metaverse or another virtual reality set-up.

With 45% of shoppers keen to buy directly from their favourite platforms, brands should embrace social commerce capabilities within social platforms to deliver personalised experiences to connect with consumers where they are. By leveraging the power of social commerce, brands can better meet expectations by engaging consumers throughout the purchase journey.

The popularity of social commerce proves that consumers have no qualms in engaging with sales-focused content, as long as it’s relevant and feels personalised to them. Knowing which platforms and methods to employ for your brand will depend heavily on the needs, motivations and expectations of your target consumer.

Support with Social Commerce Research For Your Brand

Clusters can help you to better understand your target audiences and their preferences through our market research and customer segmentation capabilities, supporting you in building an effective social commerce and consumer engagement strategy. Get in touch with our team to find out how we can help.

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