Global ecommerce sales are forecasted to reach more than $4.1 trillion at the end of 2024. As we see consumers swap the high street for the hottest ecommerce stores on the web, it’s time for retailers to rethink their selling strategy.
According to Statista, the global ecommerce market is expected to grow at a 9.4 percent Compound Annual Growth Rate (CAGR) in the period from 2023 through 2029, and spending will top $6.4 trillion by the end of 2029.
Growth in this market has been rapid due to changes in consumer behavior and technological advancement.
Consumers are seeking convenience, affordability, and efficiency in their shopping experience. Meanwhile, brands are busy setting up online shops and creating ecommerce strategies to fulfill these consumer demands.
When it comes to fulfillment, we’re seeing stores opt for two major strategies in 2024. These include social ecommerce, which uses platforms like TikTok and Instagram to connect brands with customers. This market alone is expected to grow at a CAGR of 30%.
Then, we have dropshipping, which is a cost-effective startup option for entrepreneurs looking to send their small online store into a global market with little to no effort.
The question is, which fulfillment option takes the crown? Stick with us as we delve deeper into both ecommerce models, discuss their pros and cons, and unpack the emerging trends in both markets.
What is Social Ecommerce?
Social ecommerce is the process of discovering brands and products over social media platforms.
Examples of such platforms include Facebook, Instagram, YouTube, TikTok, Snapchat, and others.
The social ecommerce market has grown without a doubt in recent years. According to Hostinger, the global social ecommerce market is predicted to surpass $8.5 Trillion by 2030.
While traditional ecommerce is dependent on website traffic to drive conversions, social ecommerce allows for transactions natively within social media platforms.
Take this example from Facebook. Here, American brand Target has enabled Facebook browsers to simply click on a pop-up ad and head straight to the checkout within the Facebook platform. This speeds up the purchase and is more convenient for users who don’t want to leave the comfort of their social app.
How Social Ecommerce Works?
The main working principle of social e-commerce is the use of shopping features on platforms like Instagram, Facebook, TikTok, and so on.
These features make shopping as easy as scrolling through the newsfeed for users.
Brands set up digital shops signed with social media profiles. They either post regularly or set up periodic posting schedules to engage with customers.
What is Dropshipping?
What is dropshipping? This model is simpler than social ecommerce: you simply set up a storefront where you purchase items from a third party and have them shipped to customers directly. This takes away the need for inventory storage and warehousing.
How it Works
When setting up a dropshipping business, an entrepreneur typically sets up an online store to list products for sale. This doesn’t require the entrepreneur to keep a physical stock or inventory.
Once a customer places an order through a platform, the order is forwarded to the supplier. Then, the supplier ships the products directly to the customer.
You can either set up an online storefront with an integrated dropshipping option or add a dropshipping plugin to your Shopify or Woocommerce virtual store.
By utilizing a suitable dropshipping tool, you can save time and boost transaction effectiveness.
Social Ecommerce vs. Dropshipping – Understanding the Key Differences
While both are effective models for online shopping businesses and digital retailers, they do have unique differences.
1. Control Over Branding
In dropshipping, you have little to no control over branding because the products reach customers directly from the suppliers. However, social ecommerce lets you create a strong brand profile through direct interaction with customers.
2. Customer Interaction
Again, social ecommerce will allow you to communicate directly with customers. This typically means answering their queries and receiving feedback in real-time. However, in dropshipping, there could be communication delays because third-party suppliers are involved.
3. Operational Complexities
The best part about dropshipping is that you don’t need a heavy capital investment. In fact, it works well with minimal inventory management, but supplier reliability is a critical factor. On the other hand, social e-commerce involves continuous work to build a noticeable and visible online profile to reach customers.
4. Varying Use Case Scenarios
Social ecommerce would turn out better if you want to build a strong brand and related community. Conversely, dropshipping is best for entrepreneurs looking for a low-cost entry into the ecommerce industry with fewer responsibilities.
Social Ecommerce and Dropshipping Trends in 2024
These business models are changing the way brands operate in the ecommerce industry. The social ecommerce strategies incorporate advanced AI features and tools to personalize shopping experiences for customers.
Similarly, dropshipping is benefitting from streamlined shipping processes globally to speed up delivery. We have compiled the latest trends in both markets that we think deserve the most attention from entrepreneurs in 2024.
1. Micro-Influencers Marketing for Social Ecommerce
You might know about influencer marketing, which is where brands collaborate with internet personalities and celebrities to promote products or services. However, there is a niche in the influencer marketing segment as well.
It includes micro-influencers who typically have a fan following of around 1,000 to 10,000 followers. The main reason why brands are increasingly collaborating with micro-influencers is because they have high engagement rates. They’re also more authentic and might have an engagement rate of 8% based on Markerly.
2. AI-Driven Personalization in Dropshipping
Next, we have the formidable rise of artificial intelligence (AI) in the online shopping world. The use of AI not only enhances product recommendations but also allows brands to tailor their marketing efforts. AI tools help analyze customer behaviors to identify patterns and preferences. In turn, that gives brands knowledge about customers’ likes and dislikes.
Dropshipping means diversifying your portfolio with product varieties that have the highest chance of success and customer appeal. Simultaneously, AI in social ecommerce is helping brands offer personalized interactions to customers. McKinsey, in a report, confirmed that nearly 71% of customers want brands to do that.
3. AR/VR Integration in Social Ecommerce
So, we found that the global ecommerce landscape is evolving rapidly with AR and VR technologies and changing the way social ecommerce markets work.
For instance, brands like IKEA use AR to offer personalized shopping experiences to customers.
The use of AR and VR technologies allows brands to deliver interactive appearances. Another great example is Snapchat, which allows users to “virtually” try on items like shoes, clothes, and jewelry for a better shopping experience.
4. Consumer Preferences for Eco-Friendly Products
We also found that the global sustainability drive is also influencing the growth of social ecommerce and dropshipping markets. First Insight published a report that revealed that nearly 62% of Gen Z shoppers prefer sustainable brands.
Moreover, the report stated that 73% of shoppers were willing to pay more for sustainable products. This affects both the social ecommerce and dropshipping markets. As consumers prefer eco-friendly practices and products, brands need to meet these changing demands to cultivate a loyal customer base.
How to Choose the Right Model for Your Business?
You will come across a number of ways to find the right model for your business. However, the numerous strategies will typically boil down to a few important factors, out of which we have picked the two most important ones.
You should consider your business goals, i.e., what you aim to achieve as a short and long-term objective. Moreover, you will also have to conduct market research to identify your customers’ preferences and shopping behaviors.
1. Assess Your Short and Long-Term Business Goals
What are your business goals? Do you plan to build a brand that thrives on direct customer relations and social engagement?
Then social ecommerce might be a suitable fulfillment model for your business. However, dropshipping might be a better fit if you prefer a low-investment startup that focuses on product variety and expanding market reach globally.
2. Conduct Market Research
Another factor that may guide you in choosing the right model is customer preference. What do customers prefer, especially in e-commerce? According to a 2023 HubSpot report, 53% of global consumers are planning to shop more through social platforms. Depending on customer preferences, you could either choose dropshipping for efficient delivery and shipping or social commerce for direct engagement.
3. Consider Budget and Resource Availability
The next most important factor to consider is the budget and resource availability. Do you have enough capital available in the business to invest in social ecommerce?
It requires a relatively bigger investment because of influencer marketing, engagement campaigns, other digital marketing expenses, etc. At the same time, because the upfront costs involved are minimal, dropshipping is often considered to be low risk.
Wrapping Up
Both social ecommerce and dropshipping have various advantages and disadvantages.
If you want direct customer engagement with low overhead costs, social ecommerce is the way to go.
Meanwhile, dropshipping offers a low-risk entry into the ecommerce industry and online markets. With growing trends like influencer marketing and innovative logistics, both ecommerce models will bring new opportunities for entrepreneurs.
