Does the power of Social Media influences E-Commerce Business?

Social media has become a great part of someone’s life. People can’t wait to update their social media accounts, or at least get updated about the world simply by watching their timeline. Social media here is defined as every internet-based application that allows you to create and exchange contents with other people around the globe.  The number of Internet users in Indonesia has reached 132.7 million people in 2016. With a number this high, Internet also is seen as a potential business platform. In 2016 the total of e-commerce in Indonesia has reached 26.2 million units, with its biggest selling product is in the fashion segment. Internet is not only giving advantages for companies for their business, but also some threats regarding the tougher competition in the market, especially for e-commerce companies.

A study has found that marketing through social media gave significant effect on increasing trust and loyalty of customers towards a brand. Therefore, companies see social media as a potential marketing medium, to retain their competitiveness in the market. By increasing their customers’ trust and loyalty towards their brand, companies can focus on expanding their market and gaining new customers.

According to several papers that this research was based on, there are five social media marketing (SMM) factors, (1) Website Security, (2) Clear & updated website, (3) Social media tools activity, (4) Online advertisement, and (5) Online interactivity. The result of this research shows that three of those factors, which are (1) Clear & updated website, (2) Online advertisement, and (3) Online interactivity, give significant effect on customer’s brand trust. While brand trust gives significant effect on brand loyalty. Therefore it can be concluded that those 3 factors of SMM give also significant effect in brand loyalty indirectly through brand trust.

We develop a structural equation model (SEM) to see which and how each social media factors influencing the buying behavior of the customer. Our models show that there are 3 factors that must be the focus of the e-commerce sites when using the social media platform.

This research is conducted by Annissa Tayara Callista and Akhmad Hidayatno