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The Evolving Commerce Stack: Social Commerce, Recommerce, and Beyond

Women in fintech

2023 was AI’s coming out party nearly 75 years in the making. ChatGPT became the fastest application to 100M+ users ever, becoming a verb in record time. From building co-pilots for your finances, to your fitness goals, to various vertical specific work tasks, AI is seemingly permeating every business. AI enables customization at scale previously unfeasible. One area where we believe customization matters most? Commerce. Imagine shopping in SoHo in New York, the Champs Élysées in Paris or at Oxford Street in London, wearing your new Ray-Ban Meta Smart Glasses with an integrated shopping “co-pilot” presenting options specifically targeted at you based on what’s in your closet, your Google searches, Instagram views, & TikTok followers, with the environmental impact of each item from traditional fast fashion like H&M and Zara to luxury fashion houses like Chanel and Prada to environmentally conscious brands like Patagonia and Another Tomorrow displayed as you shop. While this might have sounded like a sci-fi future just three years ago, it feels incredibly close to becoming reality today. 

Social Commerce

Companies like Meta, TikTok, Temu, Amazon, Shopify, & Pinterest, are experimenting at the intersection of AI and commerce, with tangible impacts on their products for consumers, and merchants alike. If ChatGPT was the fastest consumer app to 100M+ active users, social commerce platforms such as TikTok & Temu are quickly becoming the fastest marketplaces to $10B+ in annual GMV. 

In September 2023, TikTok launched TikTok Shop in the US, which lets creators tag products to allow users to buy directly from in-feed videos and live videos. TikTok Shop allows users to search for items, discover product recommendations, and manage their orders. During Black Friday & Cyber Monday, 5mn+ new U.S. customers purchased something on TikTok Shop, and TikTok is projecting they will grow their US business nearly ten-fold in 2024 to $17.5 billion in GMV. If you watched the Super Bowl, it was hard to miss the $21 million spent on commercials from Temu, a popular shopping marketplace with discounted products, advertising the platform where customers can “shop like a billionaire.” Founded in 2022 as part of Chinese parent company Pinduoduo, Temu is projecting GMV of $30 billion in 2024. With the momentum from the Super Bowl, the platform launched to the top of the Apple free downloads. Temu is leading the way in what many are referring to as “discovery based shopping” rather than “search based shopping” from platforms such as Amazon. Shoppers open up Temu, with the desire to buy something, but without having a firm idea on the what, which is a valuable unbranded search for merchants. These types of platforms & shopping experiences are appealing to a wide range of consumers with goods at an even wider range of price points, from those historically purchased at dollar stores to high-end luxury and everything in between. In November 2023 Temu had an estimated 17% market share in the US within the discount stores categories according to Earnest Analytics, compared to 8% for Five Below, 43% for Dollar General, and 28% for Dollar Tree. 

This focus on discovery is permeating other types of marketplaces and goes hand in hand with some of the trends we’re seeing in AI. During a September Investor Day, Pinterest provided a sneak peek into the way they are thinking about AI, customization and its impact on social commerce. Sabrina Ellis, Chief Product Officer, spoke to their focus on AI and using, “intent signals to deliver customized recommendations” with users telling them “that they know what they like, when they see it, but they struggle to put it into words.” Pinterest intends to help them by allowing users to search by theme as opposed to requiring explicit key-words. Through their Shop Similar & Shop The Look features, Pinterest can gather a tremendous amount of data, and receive billions of “intent signals” to give them the “ability to see trends in real time and predict consumer trends for the upcoming year. Similar to the discovery-based shopping that Temu is offering, platforms like Pinterest are top of the funnel of the shopping experience, looking to utilize these intent based signals to bring customized results to users at the right time in their shopping journey. 

Recommerce

Concurrent with the rise of social commerce retailers, we have seen increased concerns around sustainable commerce. Shein accounts for 1/5 of the global fast-fashion market, coupled with Temu, Alibaba & TikTok, they ship more than 6,000 tons every single day, resulting in 100+ Boeing 777 freighters. To put that in perspective, air freighters generate 47x more greenhouse gases than ocean shipping. With concerns around sustainable commerce and the next generation interested in purchasing from brands with more sustainable practices, we are seeing the rise of recommerce i.e. reverse commerce which “takes a circular approach to manufacturing and consumption, where products and materials are reintroduced back into the economy rather than dumped in landfills, ultimately helping to reduce waste and pollution.”

Historically there’s been a negative connotation associated with recommerce but this is starting to shift. In 2022, 52% of consumers shopped secondhand apparel with online resale expecting to reach $38 billion by 2027 & the global second hard market expected to reach $350 billion by 2027. In surveys, 2 in 5 items in Gen Z closets are secondhand, while secondhand is growing faster than any other channel of commerce. Why is this important? Brands risk falling behind in serving the next wave of sustainability-driven Gen Z consumers, forecasted to comprise 40% of global consumers by 2025, succumbing to rising marketing costs and low retention, if they don’t adopt a solution able to serve a circular experience for customers. 

Women in finetch

We are also seeing fintech companies stepping up to the plate to adopt more sustainable commerce practices, in part being pushed by the need to address increased competition, rising CAC, inefficient retargeting spend, constrained LTV and weak access to third-party and secondary customers. Visa recently created a digital Recommerce space to work with individuals & businesses to learn more about how to adopt the six R’s of Recommerce – resale, repair, rental, refill, return and redistribution – and said, “we believe that the payments industry has the power to enable a positive shift towards more sustainable behaviors.”

This focus across industries has driven regulators and brands to step up to the plate to address the environmental impacts of social commerce. The EU is pushing digitalization and transparency across the product lifecycle with the Digital Product Passport and companies are being forced to reckon with their contribution of 10% of all greenhouse gas emissions each year by making decisions to drive down their emissions. 

This focus on integrating sustainable practices has also led brands to look at innovative solutions in the recommerce industry, specifically digital identity. In April 2021, LVMH, Prada, Richemont, Mercedes-Benz, and Cartier unveiled the Aura Blockchain Consortium, marking a pivotal shift in the luxury market’s approach to sustainability and authenticity. This initiative represents the first worldwide luxury blockchain, designed to offer unparalleled transparency and traceability across a product’s lifecycle. The Consortium aligns a product’s ID with a client’s ID, creating a robust infrastructure that allows consumers to trace a product’s journey and verify its authenticity from production to purchase, eliminating the need for third-party verification. The Aura Blockchain Consortium empowers consumers to monitor a product’s entire lifecycle through reliable data, enhancing transparency in the luxury sector and supporting the broader adoption of sustainable practices. With the adoption of the Aura Blockchain Consortium, we are seeing brands integrate greater sustainability initiatives into the core fabric of their business (no pun intended).

Conclusion

Commerce is constantly evolving, but with the integration of artificial intelligence, the rise of social commerce, and the increased focus on recommerce, as we sit here today the next decade feels ripe for equal or greater disruption than what we saw during 2010-2020 with eCommerce. AI enables unprecedented personalization and curation at scale, offering consumers a tailored discovery-based commerce journey. This has changed where eCommerce is conducted. No longer restricted to marketplaces such as Amazon, merchants can meet consumers where they are already spending time; on their social media apps, or in purpose built de novo applications. The rise of social commerce platforms has made shopping more interactive, and reintroduced social elements from the offline world. 

This hasn’t come without its drawbacks, most notably related to the carbon emissions of shipping millions of low priced items around the world on a daily basis. Fortunately, we’re seeing a growth in recommerce, reflective of the societal shift towards sustainability and the embrace of circular economic models, reducing waste. While these trends haven’t been directly linked in the past, recommerce is certainly receiving tailwinds from those concerned about a world with 24×7, same or next-day shipping alternatives for the most convenient goods to the highest end, and everything in between. 

Within this backdrop we believe the potential for innovation is immense. We envision a future where commerce is not just a transaction, but a curated, eco-conscious journey, driven by these various innovations. Businesses across the board will need to think about how they build more personalized, but also efficient and environmentally responsible consumer experiences into their product offerings, as consumers come to expect it. 

If you are building in the social commerce x fintech space, we would love to talk with you! Reach out to us at femaleinnovatorslab@anthemis.com.