Facebook is making a foray into e-commerce in the hope that its 2.6bn users will begin shopping on its platform.
The social networking giant has unveiled a service known as Facebook Shops; which puts it in direct competition with Amazon and eBay.
“Facebook Shops” will allow sellers to create digital storefronts on Facebook or Instagram, the company said on Tuesday; adding that it would benefit by gathering valuable data on what shoppers want. Users will be able to browse products, message businesses to arrange purchases, and in some cases; buy them directly via a recently introduced online checkout feature.
The digital stores planned by Facebook is reminiscent of the marketplace structure pioneered by an African e-ecommerce giant, Konga in Nigeria.
Mark Zuckerberg, Facebook’s chief executive, said in an interview with the Financial Times; that he had accelerated plans for Facebook Shops to take advantage of the boom in online shopping during COVID-19 crisis.
He added that the social media giant would be able to use the data to improve its advertising service; while charging more for it.
“If you browse a shop inside of our app or if you buy something; we will see that and we’ll be able to hopefully use that to show you better recommendations for other things that you’d be interested in in the future,” he said.
Shops will help businesses “complete the conversion and the transaction [of a sale] more frequently with less drop-off”, Zuckerberg added. This will, in turn, translate into higher bids for advertising.
In the US, where Facebook has rolled out a checkout service from Instagram; the company will also collect a small fee to cover credit card processing costs and fraud monitoring.
The venture, which is Facebook’s most significant foray into ecommerce to date, represents a challenge to Amazon. This is because of the huge number of users that Facebook can channel to storefronts. It may eventually also present a challenge to food delivery platforms such as Grubhub. Zuckerberg suggested that, in the longer term, it “would be good” to host restaurant and food ordering services.
However, the Facebook founder said that he was not trying to replicate Amazon’s “end-to-end experience”. He stated that instead, Facebook would work with existing e-commerce services such as Shopify; which helps small businesses create online shops and takes care of analytics and payments. Zuckerberg added that Facebook would also integrate with shipping and logistics services.
“What took them so long?” said Rich Greenfield, partner at consultancy LightShed Partners, of Tuesday’s announcement. “It appears very obvious that the next step, especially if advertising is under pressure; is how are you going to take advantage of the e-commerce wave which is benefiting the likes of Amazon?”
“People don’t want to go to third-party websites or go to check out. They want one-click buy. They want it simple, easy,” he added.
While the move signals Facebook’s bid for dominance in markets beyond social networking; the social element of the platform will stand it apart, said Debra Aho Williamson, an analyst at eMarketer.
“It’s going to be about tapping the connections that are formed between consumers and businesses in a social sense. That’s not really something that’s done on Amazon or Google [Shopping],” she said.
Facebook Shops will make use of Facebook’s messaging capabilities. Users will be able to contact businesses through WhatsApp, Messenger or Instagram Direct to ask questions; or track deliveries, for example. It will also have tools for creating and tracking loyalty programmes.
Zuckerberg said Facebook would focus the rollout in developed regions such as the US and western Europe; where the company had the resources to vet sellers properly — as rivals such as Amazon battle against counterfeits.
“In countries that don’t have as much infrastructure, that’s one of the challenges [preventing] the full launch of this,” he said. In the longer term, he said he envisaged a system whereby sellers had reputation scores and star ratings.
Analysts have speculated that Facebook has long-term ambitions to emulate so-called “super apps” such as WeChat; which allow users to message, buy products and send money on one platform.
Additional notes from Financial Times