Social Media's Impact on Online Shopping for Small Businesses

In the 90s, online shopping was just a side business to sell brick-and-mortar products. But decades of marketing, social media adoption, and a global pandemic have catapulted online shopping to the forefront of retail. As more retailers adopt online stores and startups favor online-only models, people are finding less incentive to leave the comfort of their couches.

According to data from the U.S. Census Bureau, online shopping sales are now over $1.12 trillion. Additionally, online sales will account for 15.4% of total sales in 2023, up 2.1% from 2022.

The rise of online sales has allowed businesses to sell with minimal overhead. However, this shift in focus has made online spaces like social media the perfect place to capture customer attention. According to a recent Bankrate Social Media Survey, 48% of users make impulse purchases based on something they see on social media.

Now more than ever, the survival of small businesses depends on digital marketing, online shopping, and the use of social media. Let's take a closer look at how social media impacts small businesses and how to use it effectively.

How Social Media Impacts Small Businesses

Traditionally, marketing for small businesses required investing money into formal advertising to take their business to the next level and reach more customers. Instead, small businesses can now prioritize both traditional and social media advertising in targeted campaigns.

Despite the need for marketing, businesses have deprioritized it over the past year. According to the CMO Survey, the budgets businesses allocated to marketing have decreased from 13.8% in 2022 to 10.6% in 2023. Digital marketing has declined significantly, from 15% to 7.9%. These trends may reflect pressure on businesses from inflation. Still, 87.4% of businesses are prioritizing social media in their marketing budgets, and within the next five years, businesses are expected to continue to increase their spending on social media, increasing from 16% to 24.3%.

Social media platforms have transformed marketing efforts in many ways, including:

• Offers low-cost marketing. Small businesses can promote themselves for almost free if they put in the time and effort, and many small business owners are willing to make these sacrifices to make their business a success.
• Increased brand awareness. Small businesses can get the marketing buzz about their brand out to a wider audience, reaching more customers than they could by engaging them through local or traditional advertising.
• Understand the problem. Social media allows you to connect directly with your customers, so you can hear their issues and concerns about your products and services. This allows you to modify your products to directly meet their needs when they interact with your business' accounts.
• Drive traffic and sales to your business. Businesses can use their social media accounts to promote new products and services and get better results because their followers are already engaged with the brand.

How social media influences consumer behavior

According to DataReportal's latest Social Media Usage Report, approximately 62% of the world's population has a social media account. Major social media platforms include Facebook, YouTube, WhatsApp, Instagram, and TikTok.

The report also showed that users spend an average of two hours and 23 minutes scrolling across social platforms per day, making social media the perfect place for small businesses to reach customers.

According to HubSpot's 2024 U.S. Consumer Trends Report, Gen Z, Millennials, and Gen X prefer to use social media to discover new products. One in four social media users has actually purchased a product from social media in the past three months. Learn how social media influences consumer behavior.

Social proof

One of the main reasons consumers use social media is to find out what others think about a company. Whether it's likes, shares, online reviews or influencers, social proof shows consumers whether a product or service is worth their money.

Influencers and online reviews are two of the most common forms of social proof, and according to a report by Matter, 69 percent of people trust recommendations from friends, family, or social media influencers more than brand marketing.

According to BrightlLocal's local consumer survey, local reviews influence 91% of people's perceptions of a business. 36% of people surveyed used two sites when researching online reviews, and 25% used three sites. The most commonly used social media sites for business reviews include Facebook, Yelp, Instagram, and YouTube.

A Power Reviews study found that 43 percent of consumers believe a company's products should have more than 100 reviews. Additionally, 64 percent of those surveyed would be more likely to purchase a product with over 1,000 reviews than one with only 100 reviews. Additionally, 54 percent would be more likely to purchase a product with over 10,000 reviews than one with only 1,000 reviews.

Beyond reviews, Americans are also turning to social media for financial advice, according to the Bankrate Financial Advice Survey: Of American adults who sought financial advice in 2023, 30% got the advice from social media.

customer service

Brands can leverage social media for their businesses to provide customer service: According to the 2023 Sprout Social Index™, 76% of consumers appreciate that brands prioritize customer service, and another 76% appreciate brands that respond quickly to their needs.

Some brands even have customer service agents dedicated to answering customer questions and feedback on social media. A dedicated social media person can help answer customer questions in real time.

shopping

Users don’t just scroll through social media, they buy from it too: According to Mintel’s 2023 U.S. Social Commerce Market Report, 47% of consumers have made a purchase on social media.

Social media also encourages people to make impulse purchases. According to data from Bankrate, impulse purchases on social media cost an average person $754 per year, and 57% of social media users who made an impulse purchase in the past year said they regretted the purchase.

Your main goal as a small business shopping online is to create and promote products that are truly useful to your customers, at a price that won’t strain their finances.

“Social commerce strategies are a great way to extend the reach of your small business far beyond your local community. Engaging with influencers and leveraging physical and digital events are some of the ways small business owners can capitalize on these trends.”

Ted RothmanSenior Industry Analyst, Bankrate

Leveraging social media for small business success

A social media marketing strategy is a constantly evolving process, but when used correctly, social media can help your business engage with customers and get sales and products straight to their digital doorstep.

Ways to use social media:

• Create posts that put your customers first. Customers see through sales tactics and want to know that your business or product puts them first. Creating social media posts that address your audience's pain points and truly meet their needs is likely to resonate more than a constant stream of sales and build a more lasting brand.
• Stay engaged with your customers. Customers value original content and direct engagement with your business, so post new content that's relevant to them, ask for feedback, and respond quickly to any issues.
• Collaborate with social media influencers. Social media users trust products that their favorite influencers recommend. Influencers may recommend products voluntarily or as part of a paid strategy with a business. Make sure that influencers give honest reviews of your products, as this will build trust in your brand with their audience.
• We will display high quality products. Use social media to showcase the quality products and services your business offers. You should do your best to prevent customers who buy products on social media from wanting to return them.

Issues and considerations for small businesses using social media

Using social media for your small business takes time. You have to continually create social media posts and stay engaged with your customers. If you don't have the time, you may need to hire someone to help you manage your social media strategy. So, you need to decide if the opportunity cost of social media is greater than the effort you're willing to put in.

You also need to earn your customers' trust. Customers don't revere a small brand the same way they do a big-name product or store franchise. You can build that trust by adopting business practices that sow the seeds of trust, like quality control and a customer-first return policy.

It's also a good idea to think about what you'll do if your business suddenly goes viral. This is an especially common scenario for TikTok shops, where sellers often run out of stock as users discover and share their products. Do you make custom or handmade products, or do you have limited inventory? Going viral could result in an influx of orders that your small business can't handle with its normal resources.

But you might be able to get away with this until sales settle into a new normal. In the short term, you could consider a working capital loan to cover your inventory and product costs. You could also hire new employees immediately or extend your shipping dates so that customers can expect a longer window of time when buying from your company.

Conclusion

The rise in online shopping and social media use can work together to increase awareness of your small business. Social media helps potential customers find your business and engage with your brand until they're ready to buy.

Regular engagement and connection with your brand goes a long way in your small business' social media strategy. To strengthen your strategy, consider taking out various business loans, such as term loans or lines of credit, to increase the funds you have available for social media marketing. Along with leveraging business financing, small businesses need to stay on top of their customers' pain points and provide products that truly address their needs.