[00:00:00] Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age. Hey everyone, Peter Crosby here from the Digital Shelf Institute. When it comes to the promise of social commerce, we have the social part down, but the commerce part is still very much a work in progress. We have news on that front.
[00:00:29] Andrew Criezis, President at NIQ, recently returned from a trip to China with insights, data, and experiences that foretell new social commerce experiences and formats that might just make the leap across the pond this time. And yes, of course, it involves AI. Welcome back to the podcast, Andrew. We are so delighted to have you back. Thanks for having me. Excited to be here.
[00:00:52] So today, we are going to be diving into the world of KOLs, or key opinion leaders, and social commerce, but specifically in China, and understanding how they are shaping sort of the next round of commerce there. And we know that China's seen, you know, dramatically in some ways, more widespread adoption of social commerce. But what are the trends that we are seeing there now? And what can our audience learn from that?
[00:01:19] Yeah, definitely spot on. We're seeing a huge growth in social commerce within China. In fact, this past year growing 56%, which is just, again, massive numbers for a market the size of China. One of the things that we look at is from a total omni-channel, you know, what amount of sales is taking place in China. And now social is accounting for 8% of that market.
[00:01:44] So you've got a market like China, which is one of the largest in the world. 8% of that is coming from social. So apps- Okay, that'll hit the balance sheet. That'll, that'll, that makes, that's more than just a dent, right? That's a bunch of big dents. So Douyin is, is one in China. So I think when you think TikTok, right, big across the rest of the world, Douyin is the, is the brand of that under Bike Dancer in China. So that's just a pure example of them growing really fast, being hyper-competitive and kind of transforming social.
[00:02:15] And it's really a, a, a cultural experience there. I mean, it's sort of how they connect with shopping, right? And, and do you have a, you know, sort of a, a sense of, of why that is? And, and we'll get to this in detail later, but sort of why not us and all that, but just, just initially really just a sense of, of why that is.
[00:02:39] Yeah. I think there was a, there, there's been a big trend historically around community, purchasing community, buying, trusting others around you to give you advice or even to do shopping for you. And so I think as digital has become bigger and bigger and social apps have now just gone beyond just pure social, but have shops, you know, deeply embedded.
[00:03:00] It almost was a natural cultural fit for then, you know, China and other markets around in APAC to begin to have more and more, you know, key online opinion leaders or opinion leaders, you know, left and right kind of pop up in CPG as well as tech and durables. And begin to start to showcase, Hey, I'm the person who loves coming up with new recipes and always talks about, you know, organic something here, or I'm the person who loves telling you about the latest gadgets and doing live streams.
[00:03:30] And I think that has grown massively, but it's also starting to come West. So that shift from East to West, I think you're going to start to see that we already do have in a couple of platforms, but it's certainly going to continue to grow. That group buying, I had heard like a, this is probably a few years back and it's probably been going on for a while that in China, they were actually using WhatsApp to purchase as apartment buildings.
[00:03:55] So someone would say, Hey, I'm going to the grocery store. Like who needs this? Who needs that? And they group buy to actually discount the cost for everyone in the apartment building. And I just can't imagine that happening in the U S. Oh my God. But so I actually think, I think it is a trend that's going to come here. It's going to be different though. I don't think it's necessarily going to be, you know, your neighbor who's going around and kind of aggregating.
[00:04:22] Cause just our communities are so different here in the U S than, than in China and how that's structured. Um, but I already know of companies in the U S that have started to look at that model and are developing apps where you have think of like, instead of Instacart, where you have just a random person who's going to the store and grabbing, you know, different things for you. But maybe it's the same person, right? Maybe it's always Lauren. Who's our community person assigned through the app, who's doing the shopping.
[00:04:49] And so Lauren starts to really know me, you interact with me. I begin to trust you. You pick out better produce for me or whatever the products are. Um, so I do think that there, there is going to, we're just on the cusp, right? When you look at this like true social channel selling in China, we're at least five years behind, if not more community buying. We're probably even further behind, but if you think about what are the benefits, you know, cost efficiency, right?
[00:05:18] Typically from group buying trusted buying and time, right. You're getting time back. Um, so potential. Hmm. Yeah. I didn't know any of my neighbors when I lived in a massive building. So I just, but I like the concept. I like the concept. Yeah. Uh, so when we're talking about KOLs, Andrew, talk to us about what a KOL actually is and then why it's important from a social commerce experience perspective. Yeah, for sure. Um, so KOL's a key opinion leader,
[00:05:47] or typically you'll hear them as like online influencers. These are individuals who either part-time or full-time their job is to showcase various products, um, demo the products on a live stream, right? So for us here in the U S that could be Tik TOK, um, could be any other social platforms, even Amazon, right. Had those live buying. If you remember when that came out. Um, and that person is
[00:06:12] there, they're incented to help demonstrate products, uh, sell products, and they get a percentage, uh, from a sales commission standpoint. And so the concept there is that when you're being sold to buy an individual who's demonstrating the product, potentially showing you the cleaning power, or they're saying like, you can trust me. I've used this product. I know this cleaning product works or this food tastes great. And my kids love it. Um, you're more likely to trust someone in that
[00:06:39] scenario because there's this person to person interaction than it is just reading, you know, a standard PDP that says kids love this, right? There's a difference when you're reading that PDP on a page and you're reading all the bullet points. Sure. Good points. But if I see someone interacting with it, just like when you go into reviews, you know, on Amazon and you think through the reviews and those are, you know, quote unquote people, you trust it a bit more. It's the same idea.
[00:07:04] It's just that you have individuals who, um, as KOLs tend to become almost specialists in certain domains, maybe they're a technology specialist, maybe you're the food expert, maybe you're the grandma. And so everyone loves to shop or like watch the grandma cook and then buy those recipes and those products. Um, and, and so that, you know, role is, is a job. It's either a part-time job or a full-time job. Um, and what it does from an e-commerce standpoint, digital and the way it's being
[00:07:32] used is it's driving traffic. It's driving traffic to the PDP pages. It's driving conversions. Um, and ultimately, right. That conversions in dollars for brands. And so brands are very interested to know, um, who are the right key opinion leaders to engage with? Um, should I go with people who are a little bit more famous? Maybe they were a star in the past and then are also branching out into like protein bars or
[00:07:58] something like that and are showcasing how to live a healthy life. Or are you better off going with the grandma who's got that like homie mentality and, and people, you know, she's probably further down on the totem pole as far as fame and followers, but has really high conversion. Um, so brands are definitely paying attention. Brands are innovating, um, and they're seeing the ROI. And can I ask, uh, in China, are they transparent that, that the KOL is getting a percentage of the action?
[00:08:27] Like, do people know when they're watching that? I think it's a, it's a, it's well known. Yeah. At this point there's millions who, you know, it's kind of not a niche anymore of where maybe there's, you know, some stars and you kind of know, like in the U S when someone is posting something on Instagram and they have a following of a million people, okay, they're probably getting paid for it or they'll state it there. There's actually millions of people who do this. Um, and it is pretty well known that that's, that's their job, that that's how they provide for themselves.
[00:08:56] And how do you think about a KOL differently than an influencer or is it the same thing? Because I feel like we would say we have influencers here in the U S but I don't know if I could confidently say I could point to a KOL unless they are a celebrity who was an athlete or X, Y, Z or a doctor. Right? Yeah, no, it's a good point. I think in the, in the Western world, the idea of the influencer is typically, like you said,
[00:09:20] an athlete, someone famous from TV shows someone that's in media, uh, and traditional media, I'll say that's typically what they're known, known for. Um, uh, key opinion leader is someone who's, you know, not necessarily that. So it could just be your average Joe, right? It could be me talking about, you know, what I like to wear or what I like to do. And I am not famous for anything,
[00:09:47] right? I don't have a massive following on Instagram because I was on a TV show or because I do, you know, uh, makeup, you know, in a special way. And so it's like this huge expansion of people who have a perspective or opinion about certain products and want to show that. And then that leads to a sales cycle or a sales process. Um, and typically they're demonstrating products. So the slight
[00:10:13] nuance there in the Eastern world is that it's not just a picture of someone on Instagram who happens to be, happens to have makeup and says, this is from, you know, here, but oftentimes in China, they are holding the product. They're demoing the product. They're explaining the product to you. So it's way more direct, I guess it's probably the right way. It's not indirectly showcasing a product. You are directly demonstrating a product for the purpose of driving, you know, conversion or interest. So it's QVC is what you're saying.
[00:10:42] Think of it as a digital, yeah. Our modern social QVC in a nutshell in a like TikTok world. Yeah. Yeah. So if I'm a brand in the U S and I want to hire a KOL in China to break into the market, or maybe I sell there and I want someone to do something for me, how do you find them? Like, is there like a marketplace for them or is it really just like identifying the person that makes the most sense?
[00:11:11] Yeah. There's multiple ways, but, but Doyin as an, the app that you'd probably be using, you can find a KOLs and you can, you know, search and try to do research. Now, what you won't have is something that tells you what, what we ended up doing in an IQ, which was to measure conversions. So what you'll see is like number of followers. So, okay. You can rank and see that this person has the most followers and is super famous or has a lot of followers on, on this specific app,
[00:11:40] but we don't really know. Is that also a high conversion? Um, and so one of the things that we provide brands with is to look at what we call ROI or sales ratio, which is how expensive are they relative to their amount of followers? What you find is you might have a more efficient KOL who's maybe in the middle, like they're not super high up in the number of followers, but they have a lot of engagements. So relative to what you might need to spend, that's actually the person that you
[00:12:08] should be engaging for your, for your brand. So you're actually, um, adding an additional layer of intelligence on top of that, that page. Are you, and tell me if this is proprietary or something, but are you, are you essentially scraping the data out of there? There are some proprietary elements, but yes, they're, they're scraping is a very big piece of what, you know, a lot of businesses in China do to gain intelligence, but there's also partnerships that we have that are really
[00:12:37] important that give us access to unique sets of data. Um, so between those different aspects, we can piece together a really strong story. That's fascinating. And so with all of this data and how are you seeing brands use KOL successfully? Yeah. Um, I think maybe two points to it. One, the bigger brands I think are moving the furthest, um, ahead from they were behind and then are really
[00:13:04] pushing to catch up. So what you find on these social selling sites is that, um, early, you know, startup brands, disruptor brands could make a huge impact on doing, um, the same way that a startup brand here in the U S and Tik TOK can make a really big impact by having a huge splash launch, you know, a new, uh, beauty makeup and overnight sell out, you know, and be completely out of stock. And even if
[00:13:28] they have in-store, um, drive a ton of traffic to target or wherever else, um, in China. So small brands have been very successful because small budgets, but you get a huge amount of eyeballs, big brands are really trying to better articulate, like what's their story that they can tell on social. How do you pivot that messaging and how are you different than the thousands and thousands of other brands? Because in that social selling experience, it's very different than an in-store
[00:13:56] in-store you kind of control the set, right? You can kind of control the assortment. You've got a certain number of facings on social. There are millions of configurations and different ways that you could be showing up. And so therefore your competition is much higher. So the brands that are successful are coming across one, um, going after, um, a big impact ROI, but they're also ones that are
[00:14:22] doing it with a more authentic story. So they're connecting that social selling to again, an opinion or a theme that's resonating with consumers. So whether it's health, health oriented, or it's, um, something that's going to give you an advantage in life or is better at there, there's something there that they're demonstrating to consumers, um, and doing it a little more edgy way in a social way. And so sometimes you'll see creators get really, um, thoughtful of how they might create a video.
[00:14:52] It's not just me showcasing, um, a product and holding it, but they'll have, um, brands will partner with them to say, do something special. We want to create a big splash. They'll literally create dance moves based on a product and like, you know, get really, really creative with these videos, but like micro movies almost right. But in a 12 or 30 second burst. So that that's how brands are creating a unique space for themselves and can stand out from the thousands that they now have
[00:15:21] to compete with. Wow. The, the, the amount of sort of effort in each engagement and then scaling that seems, uh, seems a bit daunting to me. I don't know. Yeah. Okay. And then that's where, you know, another interesting that I saw. So I was in, uh, China at the beginning of Q4 last year, um, we were running a digital advisory council with some of the, you know, e-commerce and digital leaders from
[00:15:48] call it about 10 or 15 major brands. And one of the brands, uh, showcased a video that they've launched. Um, and it was actually, it's, it's about Pampers. Uh, and what they've done is they've actually leveraged AI to create, uh, generative KOLs. So these are synthetic artificial people who on doing in, in that social, you know, TikTok app are demonstrating Pampers diapers. So the same way
[00:16:18] that I would, you know, buy diapers for my, my girls, my babies, um, they are selling diapers and they're interacting with the product they're talking about. They're talking about the discounts, the, you know, why you should buy now, but it's completely generated. It's not a real person. And so that idea of AI coming into the world of KOL gives you potential for massive scaling, right? So when you get to scale, like, yes, to create that unique video is very hard in a manual
[00:16:47] world, but if we can get really good with generative AI, then you can start to have artificial people demonstrating, showcasing products in a whole new way. And it was mind blowing to see this once, once I saw that a couple of months ago, I just saw this like pathway of where the industry is going. And it was shocking. But that's a whole new dynamic, right? Because it's not a real person.
[00:17:11] It's AI. So is there the same level of trust as there would be from a KOL? Does it say that it's an AI generated person? Like what is the reaction? Does it convert? Yeah. Well, it was in Chinese, so I couldn't tell you what it said, but the Chinese team was telling me what it was saying in English. And it's actually online. I can drop a link that we can share with you. Oh yeah, we'll
[00:17:36] share that. That'd be great. So I, I, I would say two things. One, we're all skeptical of when you know something after the fact is, is artificial, but even in the U S and you may have seen this news, there are already artificial people on Instagram and Facebook. Like that's already a real thing. And you just won't know it, right? You're not going to go meet that this person, but they exist digitally. So I think the, the blurring will get really hard to know, right? I don't,
[00:18:04] if I'm an advertiser, I'm not going to say artificial at the top in big bold letters, right? Like you don't really have to declare that the, the other right now, you don't have to declare that right now. You don't have to declare it. In the U S you don't, I'm sure other countries will soon, but yeah. But on the flip side, I think one of the benefits of this is think about it this way. Maybe you like to be sold to in a specific way, right? And when someone's,
[00:18:31] um, presenting products or a lifestyle to you, you know, Lauren, you prefer to be sold to by a female, you know, ages 35 to 45 who are sporty, whatever it might be. And that's, and you want someone to be very short to the point on the benefits. You don't want someone who's going to talk right to the point you're, you know, business woman need to get, you know, onto the next thing. And so you want that short micro social selling experience that might be best for you
[00:18:59] versus maybe I want someone who's going to go into all the facts and really convince me. And so in a generative AI world, think about personal custom KOLs, right? Who are dynamically optimized to sell you the optimal product or the, the, the, the correct product in the right way. And that from a consumer buying standpoint is better than just a bunch of junkie, you know, ads or KOLs that are just like, what is this? I don't know who this person is.
[00:19:27] And so maybe over time you do start to trust it because it's gotten so smart about what you care about. But if, so I'm going to get a little deep into the weeds here. So the, the, when, cause when I think about the data and the data that's available to drive that knowledge of Lauren, like there's, cause I, I, I understand predictive and behavioral analytics. No, I don't,
[00:19:56] but I know that they exist. Conceptually. Yes. Concept. I understand what that means. And I understand, you know, the sort of the product content that could also help drive those conversations, but no, how, where in sort of predictive or behavioral analytics, are we able to classify a Lauren or you as those two different kinds of people? Cause to me, that's, I was just, I, I, and I don't know if you know the answer to that, but that to me is what's
[00:20:25] fascinating. Cause that's a new dimension. I haven't thought of like, this is how I want to be talk to, or this is, you know what I mean? Is that possible? Well, I think about it as just another, even if you think about today's world of advertising, right. With AB testing of, you know, nuance, does this per, does blue react better than red? Yeah. The same way that you could be getting two different, you know, TikTok feeds one day or two, you know, as you're scrolling through one is showcasing a person who's, you know, really detailed
[00:20:53] and maybe it's a female, another one's a male. You're talking about a product. You can start to do a lot of AB testing on the fly and start to say, Oh, well, Peter clicked on this one, you know, maybe he didn't buy, but Peter clicks on this one more than he clicks on that one. Right. And so you can imagine you start, start to develop. The other reality is that brands have an incredible amount of consumer data. And so, you know, Lauren is an individual. We already know a lot about Lauren. We know her sweet diggers, you know, what sports she cares about. We know even
[00:21:22] maybe what, what games she went to, if she wants to sport games. So from a consumer receipt standpoint or e-receipts that even we have an NIQ, I could tell you if she's a Patriots fan or not a Patriots fan. There's a lot we could tell you about Lauren today. And there's a lot more we can talk about, you know, from a model standpoint that you could try to predict, you know, what Lauren would want to interact with. And then once you have that, then it's about testing. And if you think
[00:21:48] about as a marketer at a brand, you are trying to hone in of how to position your product on the digital shelf, right. To consumers right now, it's about getting it, you know, at the best optimal position to sell more generically. But if that digital shelf in the future could become a personalized digital shelf, like that I think is the future of the digital shelf, you know, for a lot of these retailers and social channels. Yeah. I've been using the football analogy lately that football
[00:22:16] is a game of inches and this future of dynamic commerce that you're talking about is a game of niches and, and that getting really good. And it's going to take the whole ecosystem to be able to support that. You know, when we think of the, the collaboration between brands and retailers, knowledge and information is going to live on two different sides and somehow they need to meet.
[00:22:41] Yeah. And the requirements of these are the, the retailer might know, well, and also the brand would, but they might have their own idea of what the personas are that should be going after and what sort of behavioral sets, but sort of merging that so that it lifts all the tide lifts all boats, I think is the sort of the challenge of the future, which is giving me pathetically goosebumps as I talk about it. Because it's exciting. The good, the good news, a lot of it today is being done, you know, in clean rooms,
[00:23:10] right from there being anonymized afterwards. So it was kind of respecting privacy and doing the right way, but that's starting that, that, that alignment in clean rooms has been going on and it's just going to continue to grow. And then it's really, how do you scale it and automate it and then drive it in a generative AI to then drive the digital shelf experience. So as we talked about earlier on the podcast, Andrew, we've seen slower social commerce adoption in North America, but do you feel like what you've
[00:23:39] been seeing is going, and sort of the general way we've talked about commerce becoming more dynamic is likely to shift that. Do you see those changes happening culturally as well as in the data? I think so. I think it's been, as I was mentioning before, you know, maybe we're five years behind, say China from a social commerce standpoint. But when you look at the penetration of TikTok, when you look at how Amazon is evolving and is testing out, you know, more social capabilities,
[00:24:08] I think is a natural progression as consumers look to peers and look to others to influence their buying. You always say that, you know, you trust your, your friend or colleague or someone who recommends a product. This is just becoming that digital format of it. And so the beautiful world of social media is going to continue to intertwine with the world of retail. And so it's, it's still
[00:24:33] taking time, but part of it's also the apps evolving and getting smarter, coming out with more capabilities, more avenues to measure analytics, measure ROI so that you can prove the value. And then I think there's also a big shift in the industry, which is as you drive social commerce, even if you didn't convert on say a TikTok or another social app, maybe there's a halo effect.
[00:24:59] And so being able to measure properly that halo effect, which is something that, that we do at NIQ and also a lot of other companies out there are starting to kind of come up with ways to measure the, the halo. It'll showcase actually, there's a lot more value than just the purchase on that social app. And that's very meaningful to driving shoppers even in store. So the social side is actually very influential for, for driving those purchases. And if you take that step back, I think we could
[00:25:27] already say today that social is a big player in, in CPG and tech and durables. It's just the reporting and the analytics hasn't yet followed up with it. And then it's going to continue to grow as adoption grows. Wow. Well, it's a, it's a fascinating future to consider. And I love that you were able to bring us your experience from your, your councils in China and also hint at what's happening
[00:25:53] in the clean rooms, which maybe we can get you to talk about that another day. Happy to. Legal. And thank you so much, Andrew. I think we were, you know, we've done a number of podcasts on live commerce and social shopping over the years. We're almost to 300 episodes. And I don't know how many of those were on that, but I feel like this does feel like a moment where it might
[00:26:18] become more possible. Lauren, you're nodding. You. Yeah, I think this is a pivot. I do. And with AI too. I mean, it provides scale and personalization and it's becoming more acceptable. And I think it will game change in a different way than it does in China here in the U S and it'll be slower for seeing it already. So I do think this is a pivot point. Well, if you think of the, the process of a shopping
[00:26:47] journey or even a B2B buying journey for that matter is you want your questions answered. And as both a consumer and a seller, you want those questions to get answered as quickly as possible. So they will click buy and then be happier because it happened fast. And there's no faster way for that to happen than in an interactive conversation with somebody who has all the information you need. And that's what we should be able to power in the future. And that's, that's really cool.
[00:27:16] So absolutely. Thank you, Andrew, for bringing us this latest piece in that puzzle. It's, it's awesome to have you here. Happy to be here. Thank you. Thanks again to Andrew for rejoining us. If you want to see that Pampers clip, head on over to the DSI LinkedIn page and you'll find it there. If you want to talk about all this stuff and more in person with hundreds of your compatriots, head on over to digital shelf summit.com and register to join us in new Orleans in April. Thanks for being part of our community. Thanks for listening. Bye. Bye.