Facebook Shops Seeks to Cash In on Online Bonanza

Facebook on Tuesday announced Facebook Shops, which will let small businesses set up a single online store accessible from both Instagram and Facebook.

Businesses can choose products they want to feature and customize the look and feel of their online shop.

Consumers can find Facebook Shops on a business’ Facebook page or Instagram profile, or through stories or ads. They can browse the business’ collection, and save products that draw their interest.

If the business has enabled checkout in the United States, customers can place an order without leaving the app, or on the business’ website if they prefer.

Consumers can contact a business in Facebook Shops through WhatsApp, Messenger or Instagram Direct to ask questions, get support and track deliveries.

Letting consumers message SMBs directly “is a way to bolster engagement, exactly what SMBs need right now,” said Mandile Mpofu, editorial associate at Clutch.

“Consumers appreciate the convenience and it sounds like that’s exactly what Facebook Shops is offering,” Mpofu told the E-Commerce Times. “My hunch is that consumers will be more engaged.”

Thirty-four percent of SMBs responding to a recent Clutch survey used engagement to measure the success of their social media campaigns.

Facebook Shops “likely makes sense for companies that already use Facebook and Instagram to reach customers and have a limited e-commerce presence,” observed Rebecca Wettemann, principal at Valoir.

“What Facebook doesn’t tell us is what they’re charging for this service,” she told the E-Commerce Times.

The Facebook Shops announcement followed Monday’s release of the State of Small Business Report, which lists the results of a survey Facebook conducted with the Small Business Roundtable of 86,000 owners, managers or workers at SMBs.

Although the future appears bleak for SMBs, the report suggests going online may help:

• Thirty-one percent of SMB owners and managers, and 52 percent of personal businesses, reported their SMB currently was not operating;
• Cash flow was the biggest challenge 28 percent of SMBs expected to face over the next few months;
• Lack of demand was the biggest challenge 20 percent of SMBs identified;
• Fifty-one percent of businesses reported online interactions with clients had gone up; and
• Thirty-six percent of personal businesses using online tools reported they were conducting all their sales online.

Facebook Shops began rolling out on Tuesday.

“Facebook has been very slow to get to three key areas: payments, commerce and identity,” said Ray Wang, principal analyst at Constellation Research.

“They were hoping their Libra project would serve as the foundation to deliver on this, but that hasn’t panned out given the regulatory approvals,” he told the E-Commerce Times.

“When you have 1.5 billion users and all you’re doing is monetizing ads with no commerce you’re at a disadvantage,” Wang pointed out. “Amazon’s monetizing commerce and getting into ads with (US)$10 billion in ad revenues already.”

Tangoing With Partners

Facebook is working with partners — Shopify, Bigcommerce, WooCommerce, ChannelAdvisor, CedCommerce, Cafe24, Tienda Nube and Feedonomics — which will help small businesses build and grow their Facebook Shops and use its other commerce tools.

However, Facebook will alienate platforms like Shopify, BigCommerce or Magento if it tries to set up its own e-commerce platform, cautioned Mark Lewis, CEO of Netalico Commerce.

It’s leveraging some of the integrations that already exist with partners instead, so it “becomes more of a direct channel of revenue than a separate platform,” he told the E-Commerce Times. “Right now they just want the most businesses on their platform as possible, because that’s the most potential for advertising sales.”

That could cost SMBs that also sell on Google and Amazon, because “Facebook has a history of making its technology not work nicely with others,” observed Valoir’s Wettemann.

That may cause technical issues difficult to resolve, she noted.

Making Up Ad Revenue Shortfalls

Like Google, Facebook could see ad revenues fall, because both rely on small businesses buying ads.

Facebook Shops is likely an attempt to offset that problem, Netalico’s Lewis suggested. “Parts of what they announced were already available, like having products and a checkout in Facebook/Instagram. Once merchants have their catalog feed set up in Facebook, it’s simple to run ads for them in Facebook and Instagram.”

Facebook has pledged to protect the privacy of consumers making purchases through Facebook shops.

However, the company’s motives are questionable, suggested Valoir’s Wettemann.

“Let’s face it, Facebook isn’t doing this because it’s a philanthropy,” she remarked. “While some consumers and SMBs still trust Facebook to handle their data, the short-term ‘help’ it’s giving SMBs because of the current crisis is to gather more data and make more money. Given Facebook’s track record on data and responsibility, I’d be wary of that.”

Coming Soon

In the future, consumers will be able to view a business’ shop and make purchases within a chat in WhatsApp, Messenger or Instagram Direct.

Social shopping in messaging apps “could be pretty huge, like WeChat in China,” Lewis predicted.

This summer, Facebook will introduce Instagram Shop, which will let consumers discover and purchase products in Instagram Explore. It will add a new shop tab in the navigation bar so consumers can get to Instagram Shop more easily.

Facebook has begun testing a feature on Facebook and Instagram that will let sellers, brands and creators tag products from their Facebook Shop or catalog before going live. These products will be shown at the bottom of videos, and consumers can tap them to learn more and make purchases.

The company is testing ways to link Facebook accounts to consumers’ loyalty programs. It’s also exploring ways to help SMBs create, manage and surface a loyalty program on Facebook Shops.

“This is Facebook connecting the dots more effectively and intentionally,” said Liz Miller, principal analyst at Constellation Research.

The engagement-to-commerce experience businesses previously could set up was broken, she told the E-Commerce Times.

Facebook Shops “steps sellers up from a stall in the bazaar to a store in the mall,” Miller said, “one where consumers are already connecting, engaging and communicating.”