This article is part of Wellesley Hills Financial’s Market Movements series, found in our weekly newsletter.
From the late 1970s through the early 2000s, shopping malls were an oasis. More than a congregation of the most popular brands of the time, shopping malls were a beacon, a manifestation of the heights that capitalism could achieve. At their peak, shopping malls accounted for more than half of the nation’s retail sales. Today, the longevity of malls is tenuous at best, with more than a quarter of all malls anticipated to close over the next three to five years.
In retrospect, the collapse of the shopping mall was inevitable, with eCommerce giants such as Amazon making their way into the living room of the American consumer. Whereas for decades the apex of convenience was having all of the most desirable brands in one location, today it is being able to access any brand from any location. The rise of eCommerce has diminished the importance of physical location and has instead placed additional emphasis on the ubiquity of access.
At present, there are more than 4 billion people registered on social media, with the average user spending just under 2.5 hours per day on the various platforms. Simply put, social media dominates the attention of countless consumers. Historically, this attention has been monetized through paid ads – driving consumers from the social media platform to the advertiser’s website. But what happens when social media companies pivot to keeping the sales traffic on their own site, creating their own branded marketplace?
Over the past year, the push to integrate eCommerce into social media has gained considerable steam. Last year, Facebook launched Instagram and Facebook Shops, becoming two of the first social media apps to enable in-app purchases. By March 2021, Twitter began experimenting with embedding a ‘Shop Button‘ in tweets. Two weeks ago, TikTok announced it would begin testing in-app purchases in Europe. And, last week Facebook launched a new series called ‘Live Shopping Fridays’, which allows users to view, inquire about, and purchase goods all within a live stream on their platform.
Social media platforms have spent the better part of the last two decades perfecting their advertisement schemes, to the point that creator content is often indistinguishable from advertisements. If these tech giants are able to further integrate the shopping experience into their content, scrolling through social media and shopping may soon become indistinguishable. While social media apps may stick to facilitating sales for their advertisers in the near term, vertical integration and production of their product lines appear as an inevitability. Although Amazon may appear untouchable at the moment, other tech giants are clearly eyeing their market share.
