Social Commerce

While we have already seen the impact of Uber, Airbnb, UpWork, and others, we are only at the tip of the iceberg in terms of the potential for peer to peer platforms to disrupt industries, particularly in the consumer-facing space.  The rise of the internet, social media, smart-phones and app stores have created the ability for consumers to procure the goods and services they need and want from other consumers rather than from established companies.  But the real behavioral shift that has occurred is a complete change in the basis of trust which facilitates these transactions.  In previous generations, trust was institutionalized – we trusted institutions, both because of the consistency of institutions and the ability for recourse should things not turn out as promised.  Now however, we are trusting individuals that we have no direct past history with.  While we grew up with the notion of not getting into cars with strangers, if we request that car through an app, and it shows up with a “U” sticker on it, we happily get in. We previously relied on reviews from trusted sources before making major purchases.  Now we rely on the views of strangers.  At the same time as the rise in our trust of other individuals through electronic ratings, our trust in institutions has declined. A glance at the Gallup polls across various types of institutions over recent decades shows a dramatic fall in the public’s trust in institutions such as Congress and the Presidency, banks, big business, newspapers, television news, public schools, and the church.  This dramatic fall in the public trust in institutions that were the pillars of society, and the shift to trust in individuals through peer to peer exchanges represents a remarkable shift which has huge implications in most consumer-facing industries.

The rise of peer to peer platforms, and the shift in trust that has developed along side it has prompted a range of differing responses from incumbent companies in those industries.  Some have tried to resist through direct action, such as striking taxi drivers in cities such as London and Paris in response to the disruption of Uber.  Some have sought to influence changes in laws to protect their turf, such as hotel industry lobbying to restrict the scope of airbnb.  Still others have sought to embrace the sharing economy notions of peer-to-peer platforms by introducing or acquiring sharing platforms and infrastructure, such as BMW’s ReachNow car-sharing initiative, or car-rental company Avis’s acquisition of Zipcar.  With the force and momentum of megatrends, while some companies may be effective at prolonging their decline through various resistance tactics, generally the exploration and embracing of business strategies that align with the direction of the megatrend are more likely to be successful over the long term.  But how, to what extent, and at what speed you make this transition are key factors in future success.

The number of people online, on mobile and on social has increased year-on-year. For companies who are optimizing their digital experiences across multiple channels, such as social media and e-commerce, are establishing a strong competitive advantage. Moreover, companies looking to move into social commerce should look at ways to build trust and create an online experience that demonstrates a clear value in browsing and buying online.