Facebook made further progress into the online shopping space last week with the launch of a new function known as “Facebook Shops”. It aimed to empower small business owners and global brands to create a single online store for consumers to access on both Facebook and Instagram. The tech company is not new to the eCommerce industry, having launched Facebook Marketplace in 2016 which allowed users to buy and sell products over the platform.
Nonetheless, the launch of Facebook Shops lands Facebook in a new competitive circle where eCommerce giants such as Lazada, Amazon, and Shopee have dominated.SMEs have been the focus of these eCommerce giants as well with the likes of Shopee in Malaysia, unveiling a RM15 million support package for sellers on its platform that aims to help local small and medium enterprises. It will include a digitalisation package to help new sellers kickstart their online selling journey, a seller fee subsidy to lower operating expenses, and a seller sales support scheme. Meanwhile just recently, Amazon also published its second annual “Small Business Impact Report” where it claimed that it aided over 1.9 million US-based small and medium-sized businesses (SBMs) generate more than US$160 billion in 2018.
And prior to the COVID-19 pandemic, Singaporean telco Singtel also partnered with Lazada Singapore to launch the 99% SME e-marketplace. This was a dedicated portal hosted on Lazada.SG for local Small and Medium Enterprises (SMEs) to advertise their offerings and tap on a wider online customer base. Singtel and Lazada’s partnership was one of the first in Singapore to rally and support local SMEs to operate in the fast-growing e-commerce market.
As the industry waits to see how much of an impact Facebook Shops will truly have on brands and consumers, industry players predict the changes it could potentially bring about in the world of eCommerce.
With the new function, Facebook is pushing online consumer behaviour further down the path where social and eCommerce will eventually be intertwined as one, founder of eCommerce and SEO consultancy Stridec, Alva Chew told Marketing. According to him, this allows the eCommerce space to become more fluid and accessible for both consumers and businesses. Social commerce will also contribute to a more bustling eCommerce scene where businesses have more options to expose their products to online consumer audience as well, Chew said.
He explained that social commerce has gained momentum over the last few years, with Facebook Marketplace gaining increasing traction in various countries around the Southeast Asia region. This new trend of social shopping will probably replace window shopping as a trend for a new generation of users and digital natives, Chew added. Meanwhile, users previously not familiar with conventional buying and checkout on eCommerce websites and marketplaces could find convenience with Facebook's initiative. Chew added:
Businesses that have been active on social media but have yet to fully jump onboard the eCommerce bandwagon may also see this as the push that they need to enter the fray.
Besides jumping on the eCommerce bandwagon, Facebook Shops also has the potential to cause brands to invest more in social media, Kevin Dechamps, experience commerce specialist, Sitecore, said. Previously, brands have been experimenting with social media, some more than others, Dechamps said. Now that they can turn Instagram posts into orders in a couple of clicks, they will jump on that opportunity. That said, the biggest impact will not be on the eCommerce scene, but rather Facebook's ad business, Dechamps explained. This is because having user data about the products people are interested in, what and when they are buying, at which frequency and track the actual conversion rate of ads "will be massive" for the company.
Meanwhile, Rakuten Advertising's senior VP, Asia Pacific, Stuart McLennan, said the move indicates, in the short term, that Facebook would want to get more involved in the customer experience of commerce, rather than just being the media channel driving to retailer stores. In the long term, however, Facebook could be considering entering the mobile or cashless payments scene through Facebook Shops, for example, similar to how WeChat first started its social app.
“If this is the case, the potential impact and opportunities Facebook Shops would have on eCommerce could be huge, especially with integrations across the Facebook family of apps such as Messenger and WhatsApp,” he said.
While Facebook Shops will not bring much change in the short term, McLennan explained that in the long term, more consumers could be interacting with Messenger and WhatsApp accounts to confirm product availability. Citing social commerce platform Juniper.ai as an example, he said that it was an early example of how brands could use technology and data to power product search on social platforms. That said, while this could be hugely beneficial for advertisers and consumers alike, McLennan said the challenge then lies in scaling this across multiple Facebook Shops rather than using one-to-one communication.
A threat to current marketplaces?
Similarly, CEO of eCommerce market research firm Digital Commerce Intelligence, Kyriakos Zannikos, also said it will not bring about any major changes. According to him, just because a social giant such taps into another domain such as eCommerce, does not mean it will succeed.
I think this will take some time to prove right or wrong, but my bet would be that users will not necessarily see Facebook as a shopping channel of preference, at least anytime soon.
He added that although Facebook Shops is entering the B2C space, it will not be that much different compared to Facebook Marketplace. Instead, it will generally be more of a threat to the C2C eCommerce platforms such as eBay or Carousell, as well as eCommerce tech providers such as Shopify. “I believe each big digital channel has a purpose that their users subscribe to. We go to Google to search, and we go to Facebook to connect and share with friends. We go to Amazon to buy. So seeing Facebook trying to enter a space that is not naturally their purpose, does not excite me much," he said.
He added that there will be brands and sellers that will find some angles to drive their business there, but these businesses will be smaller or rather niche ones. "Particularly for the big FMCG brands which I am in tuned with, I certainly cannot see any reason why a consumer needs a new eCommerce channel to buy," he added.
Agreeing with Zannikos is Stridec's Chew who said niche businesses might excel in the new platform. He added that social commerce will probably fill a gap that marketplaces seldom go into - fashion and apparel. "For businesses in this niche area, shopping-enabled social platforms could be the marketplaces that they can shine on," he added.
Nonetheless, Chew believes that Facebook Shops is not in direct competition with online marketplaces such as Amazon, Lazada, and Shopee. He explained that players such as Amazon, for example, are able to provide order processing and fulfilment facilities - warehouse and delivery - which many businesses need for their eCommerce operations to function smoothly. According to Chew, Facebook is probably not entering into the physical aspect of eCommerce, and as such, having a new shopping function does not necessarily threaten existing marketplaces.
Likewise, Rakuten Advertising's McLennan agreed with Chew that Amazon fulfils end-to-end logistics, which is something missing from Facebook Shops. He explained that Facebook Shops seems more similar to how Skyscanner provides the booking engine for certain flight partners, which is vastly different from Amazon which acts as a free discovery engine for brands, where consumers naturally come to search for products.
Meanwhile, Sitecore's Dechamps said while brands might take sales away from marketplaces when investing more in direct-to-consumer channels, online marketplaces such as Lazada or Amazon need not be too worried for now, considering the huge market share they have.
When it comes to purchasing an item, such marketplaces are still one of the first places where people start their product search.
He also said that social commerce and traditional eCommerce marketplaces are two very different channels and both have a place in the ecosystem. "Social platforms will probably take some market share away from marketplaces but will not become one," he said.
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What to consider before jumping on Facebook Shops
Despite the possibilities that come with Facebook Shops for brands and advertisers, there are many details that are missing when it comes to how Facebook Shops will function, McLennan said. "Will users be able to search across multiple stores at once? How visible will they be across Facebook apps and advertising formats? Most importantly, will the new functionality make it easier for consumers to shop and therefore see traffic flow from retailer sites to Facebook shops?” he questioned. He explained that brand owners, SMEs and advertisers should ensure the trade off works for them if they are thinking of joining the platform, as well as to evaluate the impact on their wider platform strategy.
I would always encourage brands to experiment, but I would urge most advertisers to only dip their toe in at this point.
Similarly, Digital Commerce Intelligence's Zannikos also encouraged brands to adopt a “wait-and-see” approach. Although Facebook Shops is just another channel to add to a brand’s eCommerce strategy, jumping in too early and investing too high in the beginning may end up as a risky business for brands.
Besides being cautious about jumping in to quickly, brands should also take note of logistical concerns. According to Dechamps, brands will have to integrate product information, pricing, inventory and find ways to interact with customers on platforms such as Messenger, WhatsApp, and Instagram. "Managing all this manually is not scalable so [brands] will have to make sure the systems they are using now can be integrated through API with the platform," he added. For smaller businesses, there are other factors to consider besides the convenience of having a place to take orders from customers. They have to consider how they are going to manage order volume, shipping and logistics, and returns and refunds before jumping on Facebook Shops, he added.
Dechamps also said that while reaching new potential customers, monetising social posts more easily, and removing friction between seeing a promotion and placing an order are clear benefits of joining the platform, the thing that would worry him will be its customer and sales data. "It is common knowledge that Amazon uses this data on its platform to track successful products, and then launch its own white labels brands to compete directly with other brands," he said, adding that the fees charged for the platform will be another thing to consider.
One pitfall brands should avoid is the lack of social in social commerce. Dechamps explained that Facebook Shops should not be treated as any other channel where brands just post their product details and wait for orders to come in.
"It is social, it is in the name. - you need to build a relationship with your followers."
Customers need to feel like they are dealing with a person and not a faceless brand, which Dechamps feels most brands are not ready for that yet.
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