The pandemic transformed the retail landscape and shattered the last vestiges of legacy thinking that dictated where and how beauty brands should be sold. Distribution channels have radically shifted to accommodate the rapid acceleration of digital innovation and shifts in consumer behavior that demand considered and coherent omnichannel strategies with the ability to flex. Retail needs to be considered beyond the four walls of a physical store, and e-commerce needs to think beyond the two-dimensional experience of a transactional website.
The online and offline retail landscape has fundamentally changed, and there is no going back. Permanent shifts in global consumer behavior prioritize convenience and seamless shopping experiences from product discovery to checkout, creating fertile ground for livestreaming social commerce to finally get traction in Western markets.
Social commerce in China is already a mature distribution channel that consists of an integrated ecosystem that ranges from in-app checkouts on social media platforms to sales transactions on livestreams. According to McKinsey & Co, sales from social commerce across all sectors in China are set to top $363 billion in 2021, up 35.5% from the previous year and approximately 10 times higher than social commerce sales in the US.
The US may have been slow on the uptake, but the rise of social shopping is finally upon us. Facebook research published in September shows that 55% of Gen Zers and 62% of millennials say they would purchase during a livestream event. According to Coresight Research, the US livestream shopping market is expected to be worth $25 billion by 2023. We knew it was not a matter of if, but when and how social commerce would gain traction in Western markets—the time is finally here, and the land grab has begun. Early adopters are testing platforms to gain a competitive edge and capture market share while the channel is in the nascent stage, building strategies that can scale fast.
Social platforms like Instagram and Facebook have been trying to unlock social shopping by providing creators a way to monetize their following. Retailers have been dabbling with shoppable livestream events to understand the opportunity. Livestreaming in China is seamlessly integrated into social media and e-commerce platforms, creating a frictionless shopping experience. In Western markets, the experience to date has been more transactional than social, with a fragmented experience that feels contrived. Western markets cannot simply replicate what's been created in China. We can be inspired by the growth of livestreaming in China, but ultimately, it needs to be culturally relevant for social selling to succeed.
The pandemic accelerated the adoption of new technologies and functionality, spurring innovation and unlocking the potential of seamless social shopping. Brands, consumers, and investors alike are diving into the immersive shopping experience. An emerging group of venture-backed start-ups are competing with tech giants and incumbents for supremacy in the quickly evolving channel that merges entertainment, authenticity, and the instant gratification of shopping.
One venture-backed start-up leading the beauty pack is Flip. Imagine if TikTok and Amazon had a baby. This is how Flip founder Noor Agha describes the new app taking beauty by storm, fueled by a recently closed $28 million Series A funding round and a team of heavy-hitting beauty veterans that have onboarded 400 brands. Flip has used the infusion of capital to scale its brand offering and creator ecosystem and deepen its end-to-end logistics platform.
The path to purchase for consumers is fragmented, often starting with discovery on social media and research on video platforms, concluding with checkout on e-commerce destinations. Flip streamlines the fragmented shopper journey in a cohesive app experience, merging social discovery through entertaining, interactive user-generated reviews and live shopping shows with same-day shipping, sophisticated back-end logistics, and best-in-class e-commerce.
Consumer shopping behavior has witnessed a dramatic evolution, with discovery and learning happening on social media and eventually migrating to e-commerce destinations to find the products. This behavioral shift laid the groundwork for making social and live commerce a reality. China is proof of concept. Livestreaming emerged as a niche tool used by Chinese gaming and e-commerce industries in 2015, becoming a $125 billion distribution channel in 2020, up from $63 billion in 2019, according to Coresight.
Flip built and patented an experience from the ground up that serves new consumer behaviors by merging the worlds of social and commerce where brands, products, and users are at the center of the platform. Users can discover new products from other shoppers sharing their reviews, or brands connecting with them live to share their stories. All products are instantly shoppable through a one-click checkout experience, combining the best of the social world with a seamless experience from the commerce world. Flip has introduced a model that feeds the desire for shoppers and brands searching for new innovative models to discover, learn, and connect, bringing brands and customers closer together.
Hana Ben-Shabat, founder of research firm Gen Z Planet, shared data that indicates that 19% of Gen Zers said celebrities influence their purchasing decisions, compared with 66% who cited their friends as the most influential.
Flip has leaned into Gen Z shopping behavior and democratized the idea of influence with the release of its new creator dashboard. At Flip, everyone has influence and the ability to monetize content. The new feature allows all users, regardless of their social following, to monetize their video reviews based on engagement and purchases completed through their reviews. Flip's creator tools mark a seismic shift towards a decentralized model.
Most social media companies were built around sharing content and were not set up for creators to develop their businesses and monetize organically. As a result, most creator revenues are generated indirectly through sponsored brand deals with less than 5% spurred from direct revenue sharing, vastly limiting the upside opportunity for most creators. Creators are at the core of Flip, and this focus enables them to monetize and grow alongside the platform, without the need for third-party deals or sponsorships. This approach aligns Flip's incentives with creators, democratizing access across the platform.
“Until now, social media companies created avenues for users to build an audience, and that's where the opportunity ended," said Noor Agha, co-founder and CEO of Flip. "By building a platform around creators and introducing dedicated monetization tools, we've leveled the playing field. We're setting up the platform for all users to be able to share their voice, skill, or expertise and monetize their creation instantly, without needing an elite following or acceptance into a creator fund.”
Powered by creators, Flip was designed to be a shopping platform grounded in authenticity and built to counter the lack of credibility associated with social platforms. Flip creators are incentivized to choose the products they purchase and review and to express unfiltered opinions, drawing real value for users and brands across the platform. Its creator dashboard allows users to manage content and offers in-depth engagement statistics on each video. With these embedded in-app features, creators can shift their time and attention to sharing their experiences, while the platform handles everything else on their behalf.
“The beauty and personal care industry has undergone a dramatic shift, with shoppers' research and discovery starting on social media. But when influencers praise every product they review, how do you know who to believe?" continued Noor Agha. "When the success of a creator becomes dependent on the value of what they share instead of pristine images, you end up with a platform rooted in authenticity and radical honesty. We're building a platform to become your first destination to search for authentic reviews of products that are instantly shoppable with a one-click checkout.”
According to eMarketer, the number of US consumers who bought something on a social platform grew by 25% to 80 million in 2020 and is expected to reach 90 million in 2021. US social commerce sales are expected to grow by 35% to $36 billion in 2021, representing more than 4% of e-commerce sales. The Harris Poll reported from a survey in April 2021 that 38% of US adults said they had watched a livestream of someone talking about a product they considered buying. A 2021 Klarna survey found that 71% of Gen Z and 69% of millennials in the US say that they're interested in watching livestream shopping events.
The opportunity of social selling in Western markets is nascent but growing fast, with funding flooding into the start-ups creating fierce competition. Flip is not the only platform gaining traction. Its competitors all closed funding rounds in 2021. Supergreat recently closed a $20 million Series B, ex-Twitch employees launched Newness with $3.5 million in seed funding, Talkshoplive has raised $10.5 million to date, and Shop LIT Live closed $6 million in seed funding.
While all slightly different in format, these apps deliver highly immersive and radically honest, always-on beauty content to an audience looking to learn about brands and products. These platforms shorten the sales funnel by reducing the time and friction between discovery and purchase, promising a meaningful route to sales for brands.
Navigating these platforms requires nuanced considerations for brands to stay on top of trends and innovations. While it's too soon to tell who will become the dominant livestream beauty player, Flip has made it clear they have their sights set beyond social selling and intend on becoming as ubiquitous as Ulta and Sephora as a destination for beauty.
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