The battle for Generation Z social customers

Shopping habits have not changed since the Covid pandemic and subsequent lockdowns.

For many, especially younger shoppers, the line between social media and e-commerce has become blurred.

The inability to shop in person and as TikTok downloads grew, it started a trend that would later be described as a cultural phenomenon: #TikTokMadeMeBuyIt.

The hashtag, where users post information about what they have purchased through the app’s product recommendations, has been reposted more than seven billion times.

For Lilia Souri and AJ Pulvirenti, who co-host the marketing podcast “Gen Z on Gen Z,” TikTok is winning with their generation.

“It became one of the biggest because of its advanced algorithm and because even before TikTok Shop was created, we were observing purchasing behavior on TikTok as a whole,” says 27-year-old Lilia Souri.

“You can buy a product directly on the platform and then continue scrolling in a watch, shop, repeat cycle,” adds her co-host, 25-year-old AJ Pulvirenti.

Social shopping is a large and rapidly growing market. It was worth $570 billion (£446 billion) globally in 2023, and Statista estimates it will be worth over $1 trillion by 2028.

Although TikTok is one of the big players, its position seems precarious. TikTok could be banned in the US unless it is sold by its Chinese parent company ByteDance.

So where would social shopping be left?

Looking at the number of buyers, Facebook still has the most presence in the social shopping market, according to Jasmine Enberg, principal social media analyst at E Marketer.

Most transactions take place on Facebook Marketplace, “one of the few places where Gen Z and young people still go on Facebook,” he adds.

But if you look at the percentage of users who actually buy something, TikTok has the edge, Ms. Enberg says.

Data from an American e-marketer suggests that 40% of TikTok users in the US will make at least one purchase on the platform this year, both on Facebook and Instagram.

“This is a very important step in the app, especially for its users,” says Ms. Enberg.

Not wanting to be left out, Amazon added a “Consult a Friend” feature last year, which allows customers to ask friends for advice while browsing the app.

Gen Z podcaster AJ Pulvirenti is skeptical of these new features.

“When a platform is simply trying to replicate something from another platform and doesn’t offer anything new or intriguing on that platform, it’s not going to make people feel inclined to change something they’re used to,” he says.

A recent study by research firm Data.ai found that Gen Z spends about two hours a day on TikTok, compared to just under 10 minutes on Amazon.

Perhaps the TikTok experience in Indonesia can provide some useful lessons.

In 2021, it was the first country to pilot an e-commerce service in the app and became one of the largest markets for TikTok Shop.

But with local trade suffering in the wake of the pandemic, the government introduced regulations last October to protect local retailers, forcing TikTok Shop to close.

For 26-year-old entrepreneur Evo Syah, it was a serious blow.

“It’s hard for me, but what can I do?” – he says, recalling the difficult decisions he had to make.

“I start my business for a year and then they close me down,” he says.

However, two months after the shutdown, TikTok agreed to invest $1.5 billion in Indonesia’s largest e-commerce platform Tokopedia, meaning sellers like Evo Syah and millions of others will be able to return to the app.

The 26-year-old said he has “never felt happier.” However, not everything returned to normal.

“Before the closure of the TikTok store, I could make sales of 20 million rupees (£966) a day. But when we reopened, it dropped to 10 million rupees (£483),” he says.

Syah sells most of her products via live streaming. It is a sales method that has gained huge popularity in Asia but, according to Ms Enberg, has not caught on in the UK and US.

“Indonesia is a completely different trade landscape than the US,” he says.

However, in both Indonesia and the US, TikTok Shop has been crucial for many small and local sellers, he adds.

“A lot of them don’t really have anywhere else as powerful as TikTok.”

Looking ahead to a potential ban in the US, Ms Enberg says it will make waves in the world of social shopping.

“Instagram Reels is the most natural solution for many displaced TikTok users. But we will also likely see an increase in new applications.”

Gen Z podcast hosts AJ Pulvirenti and Lilia Souri agree: “In a world where maybe TikTok is banned. These behaviors will continue to occur and develop,” says Lilia.

“In a world where it can happen. I think the next big thing hasn’t happened yet,” adds AJ.