Why influencers will become the largest distribution networks this decade
By: Dhruv Patel
Tags: Influencers, Instagram, Social Media, Social Commerce, Social

Introduction

Working for a large CPG manufacturer has led me to spend a lot of time thinking about where the space will see further disruption. I’m less interested in making the case that influencers are underutilized as a marketing asset and more interested in proposing they are likely going to be the largest distribution network at some point within this decade.

People Buy Products To Reflect Who They Are.

Without the help of our friends in the marketing departments at manufacturing companies, each product on the shelf of a retail (or online catalog) would render to be a meaningless commodity.

Two things are and always have been true.

Social proofing will always be important to a consumer’s decision The product has to create some additional value for the type of persona they want to carry

The rise of influencers has taken a lot of pressure off marketers to think about every possible way to communicate the meaning of a brand. After all, influencers are content creators first. The organic content postings they create across social networks is what creates meaning behind their own personal brand. With enough successful content engagement, they start to solidify themselves amongst a group of people who identify with the same beliefs, values and interests. The importance of this is best understood through the Gen-Z consumer and their desire to replicate trends from communities they follow.

If you’re not familiar with the “LikeToKnowIt” app, here’s some background: A social media user sees an influencer wearing a jacket that they like, they take a screenshot of the post and upload it to the LikeToKnowIt app. The app returns results of where the user can buy that jacket.

This seems like a very friction induced process — log into social media, find a jacket you like, take a screenshot, open different app, upload picture, click results to go to a different site, put in credit card information, checkout. But it works. In 2018, the LikeToKnowIt app add 1.3 million users and generated $300 million in retail sales (Source: Forbes.) Again, people are always looking to buy products with stories and experiences they resonate with through who they are or want to be.

When consumers feel a sense of belonging to a person or community, they are more likely to engage with a product in the name of social proofing, even if they have to work through inefficiencies.

None of the same things could be said about traditional retailers. There is no sense of community. Nobody has loyalty or a sense of belonging to Wal-Mart. It’s no wonder why marketing spend has exponentially increased in influencer marketing — brands are aligning themselves to communities that already exist.

In just 5 years time, influencer marketing spend has disproportionately outpaced global advertising spend (CAGR: 50% vs. 4.8% respectively). The key realization made is that consumer brands can extract more value per each dollar spent in marketing. Brands do not just cater to a single customer to buy a product, they start building loyalty through the influencer’s audience.

Let’s break that down: In a traditional retail environment, brands pay for marketing channels like TV advertisements, online banner ads, etc. However, in addition to that they have to optimize for store shelf space, trade spend and many more factors to just get a person to pick up their product (let alone buy it.)

In contrast, partnering with influencers is a different story because most transactions happen online. For example: if an influencer is promoting a particular product, the link to that exact product is made available without the additional consideration of any of the before mentioned items. There is no room to worry about shelf space.

The key takeaway is that working with influencers eliminates consumer variability because eye level shelf space is no longer a factor that exists as when they are walking up and down isles of a store. All products get equal shelf space treatment.

Ultimately, the conclusion here is that it’s hard to imagine in that impact of DTC will not cause a shift in commerce to be more community and social oriented as a result. After all, each years brands and validating influencers by sending increasingly more and influencers will likely continue building their communities and working with brands — not to just promote links to their products, but have entire catalogs online where their audiences can shop for products they align with.

The fact remains this behavior is already being replicated with apps outside of LikeToKnowIt. Look at the projected growth of social commerce in the next 5 years. It is expected to nearly quadruple.

I would not be surprised to see the market for shopping directly via influencers increase 20–30x by 2030 as people continue to be invested in their communities and actively desire a convenient shopping experience.