Can Facebook’s Shop be a game-changer for brands? Christian Hassold, VP EMEA, Salsify looking at why Shop presents a massive problem to rival Shopify.
Facebook has long been attempting to carve out a slice of the eCommerce pie but has been largely unsuccessful to date. Facebook Gifts launched in 2012 but was quietly retired after two years. Marketplace, a tab within the app for peer-to-peer buying and selling, has failed to position the brand as a core retail player. And Instagram’s standalone shopping app never saw the light of day.
Many commentators saw the 2020 launch of Facebook Shops, followed by the ‘Shop’ tab this year, as the tech giant’s bid to finally compete with the likes of eBay and Amazon. However, the early signs suggest that it will not succeed.
What is Facebook Shops?
Together Facebook Shops and Shop are designed to create a frictionless online experience for consumers who no longer have to visit brand storefronts individually. Shops enables brands to create a free, online storefront where they can connect with the Facebook and Instagram user base. And the Shop tab lets consumers browse and buy a curated mix of products on the Facebook or Instagram app.
Neither experiences require shoppers to visit or enter payment details on another website. To this end, both products make use of Facebook’s messaging capabilities: users are able to contact businesses through WhatsApp, Messenger or Instagram to ask questions or track deliveries. For many, this showcase’s Mark Zuckerberg’s ambition to emulate We Chat and its in-app, commerce functionality.
The genius behind the concept is that it takes its cue from Amazon. Jeff Bezos has always prioritised the consumer experience above all else, which is one of the reasons why 86% of UK consumers purchased from Amazon in 2020. By providing consumers the ability to engage, shop, and pay without having to leave Facebook, brands can offer a more seamless direct to consumer experience.
“People don’t want to go to third-party websites or go to checkout, they want one-click buy. They want it simple, easy,” said Rich Greenfield, partner at consultancy LightShed Partners.
However, despite this seamless customer experience, Facebook has a number of challenges to overcome if it is going to cement itself as a eCommerce leader.
Where is Facebook Shops?
The first challenge is simply finding the shopping experience within the Facebook app. Facebook ‘Shop’ purports to be a tab which can be found in the Facebook app menu. The problem is that neither I, nor any Facebook user I have spoken to, have been able to find this elusive Shop tab or the stores that brands are setting up with the ‘Shops’ function. If the business is serious about its eCommerce ambitions, this findability issue is the first thing that needs to be addressed.
This leads to a related issue, brands are currently more focused on using Facebook as a shop window than a place to sell their products. Carlos Jorge, director of e-commerce at Fivestory, which retails luxury brands such as Missoni and Oliver People says: “Facebook and Instagram Shops are good platforms to represent your brand, almost like a calling card or a mood board.But as a conversion platform, not so much.”
Jorge also states that less than 10% of Fivestory sales are generated by Facebook Shops, but up to 20% of monthly site visits come from Facebook. This could well relate back to the fact that the shopping functionality in Facebook remains elusive for many. While brands see huge value in Facebook as an advertising platform, there is little evidence that Facebook is driving customers to Shops or Shop with its current capabilities. Which means that there is little incentive for brands to focus their efforts on the platform.
Stealing eyeballs from brands and revenue from partners
Even if businesses decide to invest in the Facebook eCommerce platform, many face a conflict of interest. Direct to consumer brands invest a large amount of money into their marketing and online brand presence. Ultimately, these businesses want to see eyeballs on their own platform. This gives them the opportunity to upsell and provide unique experiences or offers that drive loyalty. While Facebook Shop could be a driver for sales, there is a risk that it is talking away far more than it is giving.
The launch of Shops also puts Facebook on a potential collision course with longtime ‘frenemy’ Shopify – an eCommerce platform which makes it easy for brands to sell online. Payment processing is a core part of Shopify’s monetisation strategy and its here that the problem lies.
Many of the brands using the Shopify platform are also using Facebook and Instagram to connect and advertise to billions of consumers around the world. If these brands invest in the Shops platform, a substantial number of payments could now be processed via Facebook or Instagram rather than Shopify. Ultimately, Facebook knows how important its platform is to brands and it has deliberately turned it’s platform into a Shopify competitor. But the big question is whether brands will try something new or stick with Shopify.
The launch of Shops is not the first time that Facebook will disrupt the market. It’s also not the first time it is willing to upset its partners to shake up the status quo. The question is, given the challenges, will brands flock to Facebook Shops, or will this be a rare turkey for the Facebook juggernaut? The initial evidence suggests that, while Shops and Shop will drive up advertising revenues, they will not make Facebook a key player on the eCommerce stage.
By Christian Hassold
VP EMEA Strategy