Cathie Wood-led investment firm Ark Invest said on Monday it estimates social commerce is likely to grow to nearly $3 trillion during the next five years, from about $390 billion now and likely to put pressure on traditional e-commerce sites such as Amazon.com Inc (NASDAQ:AMZN).
What Happened: The popular investment firm’s analyst Nick Grous believes social commerce offers the convenience of online shopping with the network effects of social media, and is a rare “win-win-win” for consumers, platforms, and retailers alike, threatening the ‘convenience’ moat once linked to the likes of Amazon and rivals.
“What once defined Amazon’s moat – one-click checkout and fast shipping – now is ubiquitous thanks to third party solutions like Shopify,” Grous wrote in a note, saying Ark wonders if TikTok, Instagram, and similar social media platforms “will threaten the ‘Amazons’ of the world.”
“Moreover, like it or not, social media sites can use troves of data to personalize our shopping experiences.”
According to Grous, social platforms are likely to win either directly, through sales commissions, or indirectly, through advertising which in turn is likely to put pressure on traditional e-commerce sites.
The Ark Thesis: The forecast follows social media giant TikTok announcing a partnership with the Canadian e-commerce player Shopify Inc (NYSE:SHOP) to introduce in-app shopping and a host of other e-commerce features to its popular short-form video platform.
TikTok is not alone as a host of other social media companies have previously dipped their toes in e-commerce.
Facebook Inc (NASDAQ:FB), Instagram, TikTok, Snap Inc’s (NYSE:SNAP) Snapchat, and Pinterest, all have access to millions, potentially billions, of customers, a reach limited historically to the largest companies in the world.
Price Action: Amazon shares closed 2.15% higher at $3,421.57 on Monday.
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