--- title: "Social Commerce Business Model Canvas" url: "https://lumosbusiness.com/analyses/social-commerce-business-model-canvas/" date_published: "2023-07-30T18:46:09" date_modified: "2024-02-11T05:00:54" domain: "Commerce, retail & social selling" format: "canvas" author: "Joel Finningley" source: "https://lumosbusiness.com/social-commerce-business-model-canvas/" thesis: "Social commerce is not social media, it is the next iteration of the eCommerce market due to demand for more immersive online experiences, along with the fusion between video technology and payments." --- # Social Commerce Business Model Canvas **Thesis.** Social commerce is not social media, it is the next iteration of the eCommerce market due to demand for more immersive online experiences, along with the fusion between video technology and payments. ## Key claims - At the core of social commerce is commerce and not ads. - Social commerce is a transactional business model. - WhatNot charges an 8% Take Rate on the seller side of the transaction - BuyWith charges a monthly SAAS subscription fee to sellers (ie. like Shopify) + affiliate commission - live shopping has much higher conversion rates and much lower return rates --- In an earlier post we asked, is [social commerce the next eCommerce](https://lumosbusiness.com/social-commerce-next-ecommerce/ "social commerce the next eCommerce")? The answer is probably and potentially a resounding yes. > **Social commerce is not social media,** it is the next iteration of the eCommerce market due to demand for more immersive online experiences, along with the fusion between video technology and payments. # Social Commerce Business Model [![Introduction to Social Commerce](/assets/2023/08/SocialCommerceDefinition-1024x341.webp)](https://lumosbusiness.com/introduction-to-social-commerce/) The next question is, what is the business model of the emerging live shopping platforms and the associated social commerce companies? - [Social Commerce Intro & Market Size](#aioseo-social-commerce-intro-market-size) - [Social Commerce Market Players](#aioseo-social-commerce-market-players) - [Social Media Backbone](#aioseo-social-media-backbone) - [TikTok – Creator Marketplace + Live Shopping](#aioseo-tiktok-creator-marketplace-live-shopping) - [Twitter – Creator Ad Payments + Subscriptions](#aioseo-twitter-creator-ad-payments-subscriptions) - [BlueSky – Decentralized Marketplace](#aioseo-bluesky-decentralized-marketplace) - [Spotify – Token-Enabled Playlists + NFTs](#aioseo-spotify-token-enabled-playlists-nfts) - [Live Shopping Backbone](#aioseo-live-shopping-backbone) - [WhatNot – Retail Products](#aioseo-whatnot-live-shopping) - [BuyWith – Fashion, Beauty, Cosmetics](#aioseo-buywith-live-shopping) - [NTWRK – Collectibles, Art, Exclusive Co-Creations](#aioseo-ntwrk-live-shopping) - [Social Commerce Business Model](#aioseo-social-commerce-business-model) - [Social Commerce is not about Advertising](#aioseo-social-commerce-is-not-about-advertising) - [Home Shopping Network (HSN) + The Shopping Channel (TSC) Proxy and Business Model](#aioseo-home-shopping-network-hsn-the-shopping-channel-tsc-proxy-and-business-model) - [Live Shopping – Transactional Business Model](#aioseo-live-shopping-transactional-business-model) - [Social Commerce Business Model Canvas](#aioseo-social-commerce-business-model-canvas) - [Learn More about Social Commerce](#aioseo-learn-more-about-social-commerce) ## Social Commerce Intro & Market Size Right now, the majority of the market is based around retail goods and collectibles, as could be expected in a market that is the derivative of the [eCommerce market](https://lumosbusiness.com/business-model-canvas-ecommerce-dtc/ "Business Model Canvas – eCommerce DTC"). ![social commerce the next eCommerce](/assets/2023/06/SocialCommerce-1024x573.webp) The majority of the early market growth has been in the Asian market on the back of platforms like WeChat and Tiktok; however, the market growth has recently spread into the North American and Western markets in recent years and is expected to see exponential growth across all global markets over the next 5 – 7 years. ![social commerce market growth projection (Statista)](/assets/2023/06/social_commerce_growth.webp) > US livestream shopping revenue [is expected to grow](https://coresight.com/research/coresight-bites-livestreaming-e-commerce-gains-ground-in-the-us/) from $20B in 2022 to over $60B by 2025, when it will account for over 5% of total US retail eCommerce sales. > > [Contrary Research](https://research.contrary.com/reports/whatnot "Contrary Research") There are multiple layers to the market, including: - a social media backbone in the cases of platforms like Tiktok and Twitter - a live shopping backbone in the cases of platforms like WhatNot, BuyWith, and NTWRK - a focus on commerce and conversion vs. likes and clicks - a payments layer that allows for spending and transfer between creators and consumers **Social commerce is not social media,** it is the next iteration of the [eCommerce market](https://lumosbusiness.com/business-model-canvas-ecommerce-dtc/ "Business Model Canvas – eCommerce DTC") due to demand for more immersive online experiences, along with the fusion between video technology and payments. ![trust in purchasing decisions](/assets/2023/06/ProximityOfTrust-1024x655.webp) In relation to customer acquisition and retention of users, social commerce is defined by ‘trust’ relative to other marketing channels in the traditional eCommerce model. Whether it is family and friends referring products/services to each other, or prominent influencers who have built large and loyal followings around specific topics, trust is built through social channels and converted into commerce. This is quite different than a traditional [Paid Ads model](https://lumosbusiness.com/business-model-analytics-channels-marketing/ "Business Model Analytics – Channels") connected to a website or eCommerce platform. [Word-of-mouth](https://lumosbusiness.com/business-model-analytics-retention-customers/ "Business Model Analytics – Retention") is the most powerful form of marketing. ![word of mouth marketing power](/assets/2022/06/BusinessModelAnalytics_Referral.webp) Thus the big opportunity in the social commerce market space – beyond the platforms hosting the commerce – is for those creators who are able to monetize their skills and audiences, whether in live or asynchronous video. **[Social selling](https://lumosbusiness.com/what-is-social-selling/ "What Is Social Selling?") may become the big skill in the years ahead.** ## Social Commerce Market Players There is an ‘undefined’ relationship beneath the ‘social commerce’ banner between [social media 3.0 apps](https://lumosbusiness.com/social-apps-business-model-trends/ "Business Model Trends – Social Apps 3.0") and the newer, dedicated, live-shopping platforms. As we can see in the diagram below (from late 2022), platforms like Twitter and now BlueSky (by former Twitter CEO) are emerging to become pureplay social commerce platforms much like WeChat in China due to the integration of a payments backbone. While Twitter is centralized and Bluesky is designed to be decentralized (thus offering more privacy), both focus on monetizing the creators who drive attention on the platform. Video-based Tiktok is innovating on its model in a similar way. Even audio-based Spotify may move its model in this direction in the years ahead. [![social web 3.0](/assets/2022/11/Social_Web_Diagram-2.webp)](https://lumosbusiness.com/social-apps-business-model-trends/) ### Social Media Backbone #### [TikTok](https://lumosbusiness.com/video-ads-business-model-vision/ "Video Ads Business Model") – Creator Marketplace + Live Shopping TikTok has a [creator marketplace](https://creatormarketplace.tiktok.com/ "creator marketplace") for brands to connect directly with influencers/creators in order to produce branded [UGC content](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping"). More recently, they have started to promote a lot more [live shopping](https://www.tiktok.com/discover/live-shopping? "live shopping") content to their audience, a trend we will explore more below relative to the pureplay [live-shopping platforms](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping"). #### [Twitter](https://lumosbusiness.com/twitter-business-model-vision/ "Twitter Business Model") – Creator Ad Payments + Subscriptions Under Elon Musk, Twitter began innovating their business model by rolling out [Twitter Blue](https://lumosbusiness.com/business-model-innovation-twitter/ "Business Model Innovation – Twitter Blue") to enable writers, content creators, and generally interesting people to build an audience and monetize it via Subscriptions. They have more recently began actually paying some of their top creators with ‘Ad Share’ payments for those who have a large reach on the platform. #### [BlueSky](https://lumosbusiness.com/bluesky-social-internet-business-model-vision/ "Bluesky Business Model") – Decentralized Marketplace BlueSky incorporates a lot more technological innovation around [decentralized ID](https://lumosbusiness.com/bluesky-social-internet-business-model-vision/ "Bluesky Business Model") and [blockchain payments,](https://lumosbusiness.com/new-tech-blockchain/ "New Tech: Blockchain") yet it still angles to do what Twitter it currently doing without the ‘corporate spin.’ It will likely emerge as a competitor to Twitter and promote commerce between users as the way to do it, since it is slated to start off as Twitter did (free); however, the privacy approach means it likely will not go down Twitter’s road as a new-fangled Ads platform for big brands. #### [Spotify](https://lumosbusiness.com/business-model-canvas-spotify/ "Business Model Canvas – Spotify") – Token-Enabled Playlists + [NFTs](https://lumosbusiness.com/new-tech-nfts-non-fungible-tokens/ "New Tech – NFTs (Non-Fungible Tokens)") Spotify is often maligned for its [core business model – subscriptions](https://lumosbusiness.com/business-model-innovation-spotify-audio-ads/ "Business Model Innovation – Spotify Audio Ads") – due to what many artists articulate as an unfair split of revenue. They have recently moved into [Audio Ads](https://lumosbusiness.com/business-model-innovation-spotify-audio-ads/ "Business Model Innovation – Spotify Audio Ads"), but that really does nothing to change the equation for the artists. Recently, however, they have begun testing token-enabled playlists + NFts with a select group of artists, and this could, in fact, become a model that becomes much more *artist-friendly.* But this is only one side of the market. While other major social media platforms move more in the direction of community and focus on enabling creators/hosts to build the strength and engagement among members, there is a rapidly-growing demand for live shopping where a brand can sell it’s goods. > While [Coresight Research](https://www.linkedin.com/company/coresight-research/) suggests 45% of US consumers in 2023 are on livestream shopping to find a good deal, a ballooning plethora still are on it to watch something new, just pass time, or discover new products. > > [BuyWith CEO](https://www.linkedin.com/pulse/why-live-commerce-succeeds-over-scrolls-swipes-adi-ronen/ "BuyWith CEO") Across generations, consumers are getting sick of scrolling, liking, commenting, and generally being ‘consumed’ by social media. While not completely different per se, [live shopping](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping") is a more social experience and doesn’t require the same ‘mindset’ as social media. It is exploding in popularity for a number of reasons on a host of major platforms. ### Live Shopping Backbone #### WhatNot – Retail Products [![WhatNot Live Shopping homepage - 2023](/assets/2023/07/whatnot_liveshopping_homepage-1024x643.webp)](https://www.whatnot.com/) [WhatNot homepage](https://www.whatnot.com/ "WhatNot homepage") (2023) > LA-based company Whatnot is a livestream shopping marketplace for collectibles that launched in December 2019 > > [WhatNot](https://research.contrary.com/reports/whatnot "WhatNot") WhatNot started off in the collectibles space, but now focused a lot more on retail goods, with fashion being one of their fastest-growing categories. Sellers must be approved ([~50% are](https://www.modernretail.co/technology/whatnot-co-founder-grant-lafontaine-on-the-livestream-shopping-platforms-plans-for-2023/ "~50% are")) and buyers create an account and login through the dedicated app. **WhatNot brands itself as a “social marketplace.”** #### BuyWith – Fashion, Beauty, Cosmetics [![BuyWith Live Shopping homepage - 2023](/assets/2023/07/buywith_liveshopping_homepage-1024x583.webp)](https://www.buywith.com/) [BuyWith homepage](https://www.buywith.com/ "BuyWith homepage") (2023) BuyWith was founded in 2018 and initially focused a lot on fashion. More recently, they have gone deeper into the beauty sector through a partnership with [Ulta Beauty](https://chainstoreage.com/ulta-beauty-opens-livestream-events-cosmetics-brands "Ulta Beauty"). Unlike other platforms, BuyWith’s technology enables brands to bundle it into their core eCommerce technology (Shopify, etc.) and setup clickable links that brands can share across their social/email marketing channels. It is not an all-in app. > With the ability to host 1-to-1 and 1-to-many live stream sessions with a brand and a creator, directly on the e-commerce platform, it enables much higher engagement on site versus online shopping, which has shown a 11X reduction in return rate, 70% higher average order value (AOV) and 10X sales conversion rates. > > [BuyWith CEO LinkedIn](https://www.linkedin.com/pulse/why-live-commerce-succeeds-over-scrolls-swipes-adi-ronen/ "BuyWith CEO LinkedIn") **BuyWith brands itself as a “live ecommerce” platform.** #### NTWRK – Collectibles, Art, Exclusive Co-Creations [![NTWRK Live Shopping homepage - 2023](/assets/2023/07/ntwrk_liveshopping_homepage-1-1024x455.webp)](https://thentwrk.com/) [NTWRK homepage (2023)](https://thentwrk.com/ "NTWRK homepage (2023)") NTWRK was founded in 2018 and has a distinctive feel relative to all the other live-shopping platforms with a more ‘niche/collectibles’ type appeal. It’s founder forged the company’s path relative to Gen Z and a history in the ‘streetwear’ space. > A self-described graffiti kid, Levant’s early passions for streetwear, sneakers and graffiti still resonate. Levant started his first company, streetwear trade show Agenda Show, in 2003 as a trade show with an emphasis on style, art and music.He later created and managed fashion festival events and used his savvy to co-found the NTWRK agency for retail brands from 2011-16. > > [Entrepreneur.com](https://www.entrepreneur.com/leadership/how-success-happened-for-aaron-levant-ceo-of-ntwrk/380269 "Entrepreneur.com") Similar to WhatNot, buyers and sellers access the product through a dedicated mobile app. **NTWRK brands itself as a “curated live shopping experience.”** — The common foundation between *social media* and *live shopping* is, of course, video; however, the route from ‘video’ to full-fledged ‘social marketplace’ is entirely non-linear and could encapsulate any number of the companies above. ## Social Commerce Business Model As analyzed in the [Video Ads business model](https://lumosbusiness.com/video-ads-business-model-vision/ "Video Ads Business Model"), platforms like TikTok, Instagram, YouTube and others will take a % (typical model is 50/50) based on Ads served during creator videos. This type of ‘social commerce’ is really just an iteration of the Advertising business model, and is not pureplay social commerce. Twitter’s new focus under Elon Musk has been on using [Twitter Blue](https://lumosbusiness.com/business-model-innovation-twitter/ "Business Model Innovation – Twitter Blue") to boost subscriber bases and ultimately share revenue with top content creators. But the recently-rebranded X.com promises to push towards an all-encompassing commerce platform similar to WeChat. This is much more likely the image that comes to mind when we think of ‘social commerce.’ ### Social Commerce is not about Advertising At the core of social commerce is commerce and not ads. The most obvious metaphor would be thinking about it relative to TV in the 70s, 80s and 90s and their impact on the retail business model. Retail did not suddenly shift their operations to become TV-centric, they simply used TV as a new medium for advertising. Similarly, many brands are using [UGC Video and Live Shopping](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping") as a very efficient marketing channel to reach their desired audience(s). But these brands pay for advertising performance, they don’t pay per transaction. **Social commerce is a transactional business model.** ### [Home Shopping Network (HSN)](https://lumosbusiness.com/home-shopping-network-hsn-business-model-case-study/ "Home Shopping Network (HSN) – Business Model Case Study") + The Shopping Channel (TSC) Proxy and Business Model [![](/assets/2023/08/HSN_CanOpenersStory-1024x341.webp)](https://lumosbusiness.com/home-shopping-network-hsn-business-model-case-study/) In the USA, the original ‘Home Shopping Network’ (HSN) [started in 1982](https://en.wikipedia.org/wiki/HSN "started in 1982") and went national for the first time in 1985. > It expanded into the first national shopping network three years later on July 1, 1985, changing its name to the **Home Shopping Network**, and pioneering the concept of a televised sales pitch for consumer goods and services. > > [Wikipedia](https://en.wikipedia.org/wiki/HSN "Wikipedia") In Canada, the original ‘The Shopping Channel’ went on air for the first time in 1987 as [the ‘Canadian Home Shopping Club](https://www.quora.com/How-does-a-shopping-channel-work "the 'Canadian Home Shopping Club")‘ (CHSC) and was affiliated with HSN. **The model at the time was purely ‘live,’** as “members” could only purchase goods for the windows of time that they were on the screen. > As viewers could only purchase items for as long as the products appeared on their screens, anywhere from two to ten minutes, the typical member would watch the program for several hours each day in an effort to find the best deals on products they wanted. > > [Reference For Business](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Reference For Business") The HSN model was based on moving product much in the same way as the [traditional retailer](https://lumosbusiness.com/retail-business-model-outlook/ "Retail Business Model – 2023 Outlook"), and also coming up with their custom-branded product line. > A new product could be introduced to the nation on the network and within minutes, thousands of items could be sold > > [Reference For Business](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "Reference For Business") The company grew rapidly and became publicly-listed on the back of this business model, passing [$1 Billion in sales by 1990.](https://www.referenceforbusiness.com/history2/90/Home-Shopping-Network-Inc.html "$1 Billion in sales by 1990.") ### Live Shopping – **Transactional Business Model** Going through the above-reference [live shopping platforms](https://lumosbusiness.com/ugc-videos-live-shopping/ "UGC Videos + Live Shopping"): - **WhatNot charges an 8% Take Rate on the seller side** of the transaction + [payment processing](https://lumosbusiness.com/business-model-canvas-payments/ "Business Model Canvas – Payments") fees > According to their website, Whatnot has an 8% take rate from every item sold on their marketplace and an additional 2.9% + $0.30 “payment processing fee” for the entire transaction from the seller. Buyers on the platform are responsible for paying taxes and any local custom fees charged for products they order. > > [Contrary Research](https://research.contrary.com/reports/whatnot "Contrary Research") - **BuyWith charges a monthly SAAS subscription fee to sellers** (ie. like Shopify) + affiliate commission [on sales](https://www.alleywatch.com/2022/05/buywith-live-shopping-infrastructure-platform-adi-ronen-almagor/ "on sales") - **NTWRK has a model similar to the Home Shopping Channel** cited above, where it ‘drops’ either exclusive content from partner brands or launches its own custom-branded products and takes an unknown (but likely high) cut of the revenue > The conversion rate between viewership and purchases is 10% to 15% on the low end and up to 70% at the high end. > > [Modern Retail](https://www.modernretail.co/retailers/ntwrk-is-taking-a-pricey-gamble-on-original-livestream-shopping-shows/ "Modern Retail") — We can see through looking at these 3 distinct ‘live shopping platforms’ that their core business models all diverge, yet converge around taking a % of the transaction volume to some extent. That’s because live shopping has much higher conversion rates and much lower return rates when [compared to eCommerce](https://lumosbusiness.com/business-model-canvas-ecommerce-dtc/ "Business Model Canvas – eCommerce DTC"). [![Social Commerce Components](/assets/2023/06/SocialCommerce-1024x573.webp)](https://lumosbusiness.com/social-commerce-next-ecommerce/) ## Social Commerce Business Model Canvas The business model around ‘social commerce’ is evolving because of the relative infancy of the market (especially in North America) and the rapidly-increasing competition. The model will evolve as the market changes and consolidation (eventually) occurs ([based on Rule of 3s](https://lumosbusiness.com/strategy-big-ideas-win/ "Strategy – Big Ideas Win")), but at its core it will be transactional whereby platforms are incentivized to sell products at scale, either on behalf of brands or via their own exclusive lines. [![](/assets/2023/07/Social-Commerce_Business_Model_Canvas.webp)](/assets/2023/07/Social-Commerce_Business_Model_Canvas.pdf) [View Full PDF](/assets/2023/07/Social-Commerce_Business_Model_Canvas.pdf "View Full PDF") ### Learn More about Social Commerce [Brands, Digital Ads & Social Commerce](https://lumosbusiness.com/brands-digital-ads-social-commerce/ "Brands, Digital Ads & Social Commerce") [Is Social Commerce the Next eCommerce?](https://lumosbusiness.com/social-commerce-next-ecommerce/ "Is Social Commerce the next eCommerce?") [**HSN (Home Shopping Network) Business Model Case Study**](https://lumosbusiness.com/home-shopping-network-hsn-business-model-case-study/ "HSN (Home Shopping Network) Business Model Case Study")