Social Commerce and SME Competitiveness in the Fashion Industry: Insights from an Emerging Market

This theory posits that resources among business actors are inherently heterogeneous, meaning that not all enterprises possess the same types, quality, or combinations of resources (Hunt, 1995, 1997). Due to these variations, business strategies are never entirely identical or universally comparable. Some firms establish strategic partnerships with business allies as part of their efforts to expand market reach (Oh, 2018). Others focus on leveraging information to enhance performance and strengthen organizational learning as a means of developing internal capacity (Zhang & Yu, 2020). The interaction between collaboration and information utilization drives innovation, which serves as a fundamental source of competitive advantage. This synergy enables firms to capture market opportunities more effectively (Gupta et al., 2016). In addition, the uniqueness of raw materials owned by a company contributes to business growth and performance in competitive markets (Yang & Aumeboonsuke, 2022).

Tangible resources such as infrastructure and equipment are essential for supporting operational efficiency and effectiveness (Juárez-Luis et al., 2019), while human resource competencies play a critical role in enhancing productivity (Situmorang et al., 2024). Moreover, a firm’s ability to absorb and integrate technology is a crucial aspect of resource management, particularly in responding to rapidly changing market dynamics (Mahendra et al., 2025). In other words, competitive advantage is not always achieved through price reductions or discounts, but rather through the firm’s ability to leverage and combine unique resources to create value (Sujarwo et al., 2022).

Social Commerce Investment refers to the efforts of business actors to allocate resources toward social media-based marketing activities aimed at strengthening market position and consumer engagement (Grover et al., 2025). This encompasses various forms of investment, including the development of content designed to entertain and provide an enjoyable experience for users (Moghddam et al., 2024). Active interaction between viewers and streamers enhances psychological closeness, trust (Aref, 2024), and perceived usefulness (Moghddam et al., 2024). The credibility and accuracy of information further foster user trust and positively influence purchase intentions (Huwaida et al., 2024), while ease of use encourages repeat purchases (Guo & Li, 2022), increases platform usage frequency, and strengthens users' willingness to recommend the platform to others (Guo & Li, 2022), increases platform usage frequency, and strengthens users' willingness to recommend the platform to others (Qu et al., 2023).

Ease of use not only shapes attitudes toward the platform but also increases the likelihood of impulsive purchasing behavior (Xiang et al., 2022). Moreover, the dynamics within social commerce communities foster user engagement (Busalim et al., 2023) and facilitate decision-making processes (Islam & Sheikh, 2024). Thus, investment in social media serves as a strategic avenue for business growth through market penetration strategies, primarily by expanding reach and attracting new consumers (Dincer & Dincer, 2023). Based on these, it is presumed that:

H1: Social Commerce Investment positively affects Pro-Growth Penetration Strategy.

The Transactive Memory System (TMS) refers to a team-based knowledge structure in which members collectively share, store, and rely on each other’s expertise (Liu et al., 2019). This system develops through an initial recognition of individual expertise, followed by testing and verification of capabilities, ultimately evolving into a structured knowledge-sharing framework (Liu et al., 2019). TMS enhances decision-making efficiency as information can be readily obtained from the most reliable sources within the team (Yao & Wang, 2024). The system also improves team agility, as knowledge specialization enables sales teams to tailor their approaches precisely to meet the diverse and complex needs of clients (Shahzad et al., 2022). Furthermore, coordination within the system facilitates team adaptation to change and uncertainty, ensuring work continuity and performance stability (Feng & Madni, 2024). Communication is a critical factor that allows teams to manage relationships effectively while enhancing the ability to build connections and expand networks within and beyond the organization (Nawata et al., 2020).

Simultaneously, the distribution of knowledge fosters innovation (Cabeza-Pullés et al., 2018), which becomes a strategic advantage for sales teams, strengthening their bargaining power in mutually beneficial exchanges (González-Mohíno et al., 2025). Such innovation also reflects cross-functional collaboration, where integrated knowledge and capabilities accelerate product distribution and reinforce market penetration (Aggarwal et al., 2023). Moreover, credibility enhances network connectivity by fostering more targeted interactions, which in turn strengthens market control (Wang et al., 2018). Thus, the Transactive Memory System forms the foundation for the development of collective knowledge that reinforces sales networks and drives sustainable market growth (Cetin, 2019). Based on these, it is presumed that:

H2: The Transactive Memory System positively affects the Pro-Growth Penetration Strategy. H3: The Transactive Memory System positively affects Sales Network Power.

The Pro Growth Penetration Strategy refers to an approach aimed at entering and expanding market share by emphasizing sales growth (Umniyyatul & Aprianingsih, 2023). Market penetration is often initiated through discount offerings that enhance perceived product value and encourage repeat purchases (Goeyardi et al., 2022), while low-pricing strategies play a crucial role in increasing sales volume and attracting new customers (Ekankumo & Thankgod, 2024). Price and promotion are key factors in penetration strategies that contribute to market share expansion (Gikunda et al., 2023). Market penetration is not merely about geographical expansion but also the result of strategic distribution efforts, which reduce inventory costs and strengthen business networks (Han et al., 2013).

In the B2B context, innovative products are more likely to attract business partners as they offer superior functionality, efficiency, and ease of use (Rodrigues et al., 2012). Product development and adaptation shape perceptions of quality and differentiation, fostering customer loyalty and sales growth (Ade et al., 2025). Effective market penetration requires synergy between product, price, and promotion strategies, while business performance growth is reflected through increased sales, market share expansion, cost efficiency, and profitability (Bukoye & Muritala, 2023). This approach enables companies to build and sustainably develop sales amidst the competitive and ever-changing market landscape (Xue et al., 2019). Based on these, it is presumed that:

H4: Pro-Growth Penetration Strategy positively affects Sales Network Power.H5: Pro-Growth Penetration Strategy positively affects Sales Performance.

Sales Network Power refers to a firm's capability to reach, manage, and optimize its sales network effectively (Ferdinand & Zuhroh, 2022). This includes the extent to which the company can ensure that products are distributed quickly, efficiently, and accurately to end consumers (Wang & Robinson, 2023). In a business context, sales network power is not merely defined by the existence of a network, but rather by the quality of relationships, the effectiveness of communication, and the ability to create shared value within the distribution chain (Ramos et al., 2019). This capability enables products to enter previously hard-to-reach markets, significantly expanding market coverage and increasing transaction opportunities (Parida et al., 2016).

Sales network power is considered an external asset, consisting of customers and strategic partners who possess the ability to access broader consumer segments and foster mutually beneficial collaborations (Ferdinand & Killa, 2018). Furthermore, a strong network, including through social media, enhances access to market information and customer needs (Muna et al., 2023). Such networks also facilitate collaboration and knowledge exchange, thereby strengthening competitiveness and brand positioning in the marketplace (Abeson & Taku, 2007). In other words, sales performance is not solely determined by the individual competence of salespeople but also by how effectively they are connected and collaborate with various stakeholders (Gonzalez et al., 2009). Based on these, it is presumed that:

H6: Sales Network Power positively affects Sales Performance.

Based on the aforementioned considerations, Table 1 illustrates the key characteristics of e-commerce and social commerce which should be taken into account by a thorough examination of the proposed relationships. Further, Figure 1 depicts the conceptual model to be analyzed.

Figure 1.

Conceptual framework

Source: own processing

The findings of this study indicate that the majority of fashion entrepreneurs engaged in social commerce in our sample are female, accounting for 68.16% of the respondents. This result aligns with the characteristics commonly attributed to Indonesian women, who are known for their meticulousness, attention to detail, and strong inclination to nurture and maintain social relationships (Larasatie & Ulifah, 2023). Such characteristics serve as valuable assets in the fashion industry, which demands precision in product presentation, consistency in brand building, and active engagement within communities. Moreover, women are considered more adaptive in keeping up with fashion trends, making them better prepared to navigate the dynamics of social commerce platforms (Vassalo et al., 2024). Regardless of gender, the majority of business owners hold a Bachelor’s degree, representing 60.70% of the sample. This educational background enhances their analytical ability to identify business opportunities and challenges, and it is strongly associated with the level of digital literacy required to manage social commerce businesses effectively (Reddy et al., 2023).

In terms of age distribution, the majority of respondents fall within the 27–32 years age group (45.77%) and the 33–38 years age group (39.30%), which are considered productive age categories. At this stage, entrepreneurs tend to be more stable and cautious in making business decisions. The combination of professional experience and emotional maturity makes this group better equipped to invest in social commerce (Hanafizadeh et al., 2021). Furthermore, 44.33% of the respondents utilise both Instagram Shop and TikTok Shop simultaneously, indicating a strategic effort to reach a broader and more diverse market. The use of multiple platforms reflects an adaptive approach to the distinct characteristics of each platform, thereby optimising sales performance (Ma et al., 2023).

The measurement model assessment confirms that the research instruments demonstrate satisfactory validity and reliability. As shown in Table 2, all item loadings exceed the recommended threshold of 0.70, while the Average Variance Extracted (AVE) values are above 0.50, indicating adequate convergent validity (Hair et al., 2020).

Furthermore, Cronbach's Alpha and Composite Reliability values for all constructs surpass 0.70, confirming strong internal consistency (Sarstedt et al., 2022). Discriminant validity, tested using the Fornell-Larcker criterion, reveals that the square roots of AVE for each construct are greater than their correlations with other constructs (Table 3). This provides empirical evidence that all constructs are distinct and conceptually independent from one another (Henseler et al., 2016). Additionally, the collinearity assessment in Table 4 shows that all Variance Inflation Factor (VIF) values fall between 1.006 and 1.044, which is well below the recommended threshold of 5. These results indicate that multicollinearity is not a concern within the structural model, ensuring that the estimated path coefficients remain unbiased (Magno et al., 2024).

In addition, the structural model evaluation considers the R² values to assess the model's explanatory power. As shown in Table 5, the R² values for Sales Network Power (0.365), Sales Performance (0.477), and Pro Growth Penetration Strategy (0.342) reflect moderate explanatory power (Hair et al., 2011). These findings indicate that the exogenous variables adequately explain the variance in the endogenous constructs, supporting the model's predictive relevance (Nguyen et al., 2024).

The findings indicate that Social Commerce Investment does not have a significant effect on Pro-Growth Penetration Strategy, thus H1 is not supported. This finding implies that having a broad or influential sales network does not necessarily guarantee better sales outcomes in social commerce. In other words, although all fashion SMEs may have equal access to platforms such as TikTok or Instagram Shop, not all possess the necessary resource combinations to leverage these platforms effectively. One of the most critical resources is the ability to build and maintain relationships with consumers. For many SMEs, this remains a major challenge, as not all business owners have the time or commitment to engage intensively with their customer base. Without consistent interaction, brand-consumer relationships weaken, communities become passive, and their function as a promotional force diminishes. Consequently, consumer engagement declines, loyalty erodes, and the effectiveness of promotional efforts aimed at market penetration deteriorates. Moreover, social commerce heavily relies on the entrepreneur's creativity in producing authentic product photos, short videos, and live-streaming sessions. This presents additional challenges, as not all SMEs possess the technical skills or access to the necessary equipment and software to produce high-quality visual content. As a result, their content becomes scarce or substandard, limiting product visibility on platforms such as TikTok or Instagram Shop, narrowing distribution reach, and reducing market penetration opportunities. Furthermore, collaboration with influencers has become a crucial factor in building consumer trust. Influencers serve as opinion leaders who shape consumer perceptions and preferences through their online presence.

Evidence shows that consumers tend to trust recommendations from familiar or admired individuals more than conventional advertising. However, many SMEs lack the financial resources to engage influencers with significant follower bases. This challenge is even more pronounced for SMEs located in smaller cities or regions with an underdeveloped influencer ecosystem, making it difficult to find relevant influencers who align with their products. Consequently, even innovative products often fail to reach potential consumers effectively. Additionally, the use of influencers in social commerce strategies can significantly affect pricing structures. Collaborations with popular influencers often involve substantial costs, forcing SMEs to raise product prices to cover these expenses. Unfortunately, such price increases can diminish product competitiveness, especially against more established SMEs that already enjoy greater recognition on social commerce platforms.

Similarly, Sales Network Power shows no significant influence on Sales Performance, indicating that H6 is not supported. This situation can be observed in the sales network power developed by fashion SMEs on platforms such as TikTok and Instagram. One of the key factors contributing to the weakness of these networks is that the fashion products offered are often insufficiently attractive to larger or more established business partners. Due to their limited product variety, SMEs tend to engage with partners operating at an equal or even lower business level, such as small retail stores or home-based outlets. These partners typically face significant market access limitations, restricting their ability to distribute products across diverse consumer segments independently. Consequently, they become highly dependent on the SMEs, particularly for the provision of digital content and promotional materials. As a result, the sales networks established tend to offer little contribution to revenue growth. Rather than being built on mutually beneficial, performance-driven relationships, these networks are predominantly formed based on social proximity or community ties. This dynamic restricts product recognition to within these social circles, limiting the ability to reach broader consumer markets and thereby constraining sales potential. Consequently, the number of products sold remains stagnant.

At the same time, limited production capacity prevents SMEs from fulfilling market demand consistently. Moreover, the informal nature of employment within these businesses often results in low worker commitment and irregular attendance, further reducing productivity. These combined factors directly impede the speed and efficiency of product distribution. Product shortages frequently occur, prompting consumers to switch to alternatives that are more easily accessible. In addition, the persistent lack of product availability contributes to negative consumer perceptions, with SME products increasingly seen as unreliable in fulfilling market needs.

The empirical findings support H2 and H3, indicating that internal resources within SMEs, such as collaboration, specialization, and task division, significantly influence both progrowth penetration strategies and sales network power. In Indonesia, SMEs are typically managed by a small number of individuals, often involving family members in daily operations. This lean structure facilitates fluid communication, efficient coordination, and rapid decision-making without bureaucratic constraints. Clear task division also enhances management effectiveness, with each member responsible for specific functions, such as production, marketing, or customer service. This creates an impression of professionalism that attracts resellers, both online and offline.

For resellers, product selection is not based solely on quality but also on the producer's ability to ensure stable business support. A well-structured SME offers reliable product availability and market responsiveness, providing resellers with greater confidence. Moreover, clear internal roles facilitate collaboration, creating mutually beneficial relationships. SMEs gain additional marketing support without excessive advertising costs, while resellers receive ready-to-sell products, marketing materials, and reliable supply chains. Although many SMEs actively promote their products through TikTok and Instagram, physical stores remain an essential element of their growth strategy. In regions with limited internet access or among consumers who prefer in-person purchases, offline resellers play a vital role. These resellers bridge the gap between digital marketing and direct consumer access, allowing SMEs to combine online brand awareness with offline market expansion.

The lean and flexible structure of SMEs also contributes to maintaining competitive pricing and developing new product variants. Many SME owners take on multiple roles, reducing operational costs and keeping prices affordable. This structure also facilitates rapid information exchange, allowing SMEs to respond quickly to market trends and consumer feedback. Consequently, SMEs can develop relevant product innovations without the complexity typically found in larger corporations. Effective information flow within SMEs enhances their promotional strategies. Direct field observations and consumer feedback are easily translated into targeted marketing approaches, enabling SMEs to design promotional messages and penetration strategies that suit market conditions. This targeted approach is both cost-efficient and effective, allowing SMEs to focus on relevant consumer segments without relying on expensive trial-and-error methods. Similarly, direct involvement of team members shortens delivery times, including customized orders. SMEs can quickly adjust production and packaging based on consumer needs without lengthy administrative processes. As a result, consumers receive tailored products and more personalized service.

The empirical findings reveal that the penetration strategies implemented by SMEs significantly influence both sales network power and sales performance. The empirical findings support H4 and H5. In practice, fast delivery enables products to be easily distributed across multiple sales points, increasing the likelihood of consumer purchases. Moreover, speed in distribution ensures consistent product availability across channels. Continuous product availability not only facilitates initial purchases but also supports repeat transactions, sustaining long-term sales growth. The lean structure of SMEs naturally translates into more efficient pricing. With fewer operational cost components, such as large employee salaries, complex administration, or expensive logistics, product prices remain competitive. For consumers, this provides access to quality products at more affordable prices compared to similar offerings from larger firms with more complex cost structures. As a result, consumers are inclined to purchase larger quantities, whether for personal use, household needs, or resale purposes. This pattern directly contributes to increased SME revenue, driven by both higher purchase frequency and transaction value.

Targeted promotions and the introduction of new product variants reflect the ability of SMEs to identify market opportunities. For consumers, this provides access to a wider range of product options beyond the often-limited alternatives available in the market. Instead of being restricted to monotonous product choices, consumers can select items that better match evolving preferences. Accurate promotional messaging combined with continuous innovation enhances the overall shopping experience, increasing both purchase intention and consumer loyalty. Competitive pricing also ensures that SME products remain attractive to resellers and other business partners, who can secure healthy profit margins upon resale. This creates mutually beneficial relationships, where SMEs maintain sustainable income while business partners remain motivated to promote the products.

Furthermore, well-executed promotional strategies accelerate product circulation in the market. As products gain visibility and popularity among consumers, reseller sales increase, subsequently driving higher demand for SME production. The ability of SMEs to regularly introduce new products, coupled with fast distribution channels, allows resellers to position themselves as trendsetters in local markets. This strategic advantage attracts consumers seeking novel or unique products that are not yet widely available. Business partners who become trendsetters enjoy greater brand recognition and increased customer traffic, which translates into higher profit potential. Consequently, SMEs that consistently deliver product innovation and rapid distribution become more appealing to business partners, providing them with opportunities to secure a first-mover advantage in the market. This capacity for innovation not only demonstrates responsiveness to market changes but also reflects a commitment to building long-term partnerships. By continuously developing new products, enhancing designs, and improving quality, SMEs reinforce partner confidence that the products they promote will remain competitive and relevant over time.