Logos of online social media and social networking sites are displayed on a smartphone screen on August 1, 2023 in Bath, England.
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Gen Z, typically born between 1997 and 2012, is ahead of other generations in discovering, evaluating and buying online, with 45% doing so via social media, the report shows.
Many social media sites have introduced e-commerce features on their platforms, offering an alternative to popular online shopping sites such as Lazada and Shopee. For example, users can make purchases directly from the TikTok Shop or Facebook Marketplace without leaving the application.
Shopping on social media contributes to the social commerce industry, which is expected to grow significantly in Singapore over the next five years and is estimated to reach $6.99 billion by 2028, according to a report published last year by Research and Markets.
A 2023 survey by British analytics firm YouGov found that Generation Zers prefer shopping on TikTok and Instagram rather than Facebook, which is more popular among older generations.
In Southeast Asia, more than 15 million companies use TikTok to showcase their work to an audience of 325 million monthly users, according to a press release from the content platform.
According to a 2022 report from TikTok, videos that use entertainment and informational value to drive online purchases, also known as “shoppertainment,” have now created a $500 billion market on the platform.
Such a strategy allows companies to attract buyers by creating entertaining, credible and inspiring content that meets customers' emotional needs, according to TikTok.
The emotional engagement of “shoppertainment” appeals to Generation Z as they prefer to buy from content creators who add a dimension of authenticity to the product, said Lawrence Loh, a professor of strategy and policy at the National University of Singapore Business School ( NUS).
“Compared to other generations, they value being honest about what they buy,” he said.
Creatives promoting products can also appeal to Generation Z's credibility preference by leveraging livestreaming features on social media platforms.
Unlike the static shopping experience of e-commerce sites like Lazada or China's Taobao, TikTok's livestreamers chat with their audience for three to four hours at a time, said Tracy Loh, a lecturer in communications management at Singapore Management University (SMU).
It's like getting a recommendation from a friend, she said, and it helps the buyer gain more trust from users than they would with a brand. “You want someone whose trust factor is high, especially when it comes to more personal or intimate products like cosmetics or health,” she said.
Wu Zu An, a frequent online shopper, said she created her first social media Purchased on TikTok after watching a YouTuber test a specific cosmetic product during a live stream.
“I could see that the product was actually working when she applied it to her face,” said the 22-year-old Singaporean.
Wu said she plans to use TikTok to shop for cosmetics from now on.
According to Statista's e-commerce database, influencers with 1,000 to 10,000 followers who create content, also called nano-influencers, make up the largest share of accounts on TikTok and Instagram.
Such small influencers attract Gen Z shoppers because they offer niche recommendations that cater to Gen Z's selective preferences, NUS's Loh said.
Because Gen Zers are digitally savvy, they rely heavily on social media nano-influencers to make their purchasing decisions, he said. “They want to find something that fits their attitudes and preferences.”
In contrast, Millennials born between 1981 and 1996 prefer big brand names or macro-influencers such as celebrities or athletes, he said.
Generation Z is articulate and acts as opinion leaders. Many influence the shopping habits and lifestyles of their parents or grandparents
Lawrence Loh
Professor of Strategy and Policy at the National University of Singapore Business School
Traditional e-commerce sites have begun emulating social media by expanding their influencer spectrum and using smaller influencers to drive local campaigns and attract Gen Zers, SMU's Loh said.
“Shopee is relying on younger, local artists rather than the likes of Cristiano Ronaldo for more of its Singapore campaigns,” she said.
Social media commerce also makes it easier for Gen Z to follow influencer recommendations by combining information discovery tools with the ability to purchase directly.
For example, Instagram's Shoppable Posts feature allows businesses to tag products directly in their photo or video posts, directing users to the checkout page with just a few taps.
“It's a one-stop shop for Gen Z as they don't have to switch to additional platforms,” she told CNBC. “The fewer hurdles the person has to overcome, the more likely they are to close the sale.”
Generation Z is an increasingly important consumer segment as their purchasing power has steadily increased over the last decade. According to Meta's digital consumer report, the median graduate salary in Singapore was S$4,200 (US$3,181) in 2022, up from S$3,700 in 2020.
Young shoppers have increasingly more disposable income and have “no qualms” about spending it on certain items, SMU’s Loh said.
“Although it's not fully exploited yet, there's a lot of potential there… Give the company a few more years to grow its income,” she said.
Generation Z not only has money, but also social influence. “It is young people who have the power to influence the purchasing decisions of other generations,” said Loh of NUS.
“Gen Z are articulate and act as opinion leaders. Many influence the shopping habits and lifestyles of their parents or grandparents,” he added, pointing out that some older Singaporeans have even started using the same platforms that Generation Z use to shop.