Social Media

Facebook Shops Are an Ecommerce Game Changer

When the world’s largest social media network decides to become an ecommerce platform, you can bet it will impact the industry and make a difference long-term.

On May 19, 2020, Facebook added ecommerce Shops to Facebook business pages and Instagram business profiles.

To be certain, Facebook had already been dabbling in commerce before the announcement. The company had its Craigslist-like Facebook Marketplace and the ability to list and promote products on both Facebook and Instagram. But this is different. It is a significant step, and it may even be a disruptive form of social ecommerce.

Facebook and Instagram Shops will give small businesses a new ecommerce channel. <em>Source: Facebook.</em>

Facebook and Instagram Shops will give small businesses a new ecommerce channel. Source: Facebook.

The new Facebook and Instagram Shops consist of a shop tab and a product catalog managed, respectively, via the company’s Commerce Manager and Catalog Manager.

At least initially, Facebook is not charging merchants for sales made on the platform unless they use the company’s checkout process. In the latter case, sellers will pay a flat 40 cents for orders up to $8 or a 5-percent selling fee on orders above $8.

“Facebook has always been about connecting you to what you love. That means friends and family, but also products, brands, and businesses,” the company said in its official Facebook Shops announcement.

“For years, people have used our apps to buy and sell things, from the early days of posting a photo of a bicycle with the caption ‘for sale,’ to selling your coffee table on Marketplace and now shopping styles from your favorite brands and influencers on Instagram. It was the people who use our apps who envisioned social commerce. We’re helping them make it a reality.”

The “reality” of Facebook taking a major step into ecommerce could have at least five repercussions.

1. Headless Commerce

Facebook has decided to work with several existing ecommerce providers. Here is a portion of Facebook’s announcement:

We’re also working more closely with partners like Shopify, BigCommerce, WooCommerce, ChannelAdvisor, Cedcommerce, Cafe24, Tienda Nube, and Feedonomics to give small businesses the support they need. These organizations offer powerful tools to help entrepreneurs start and run their businesses and move online. Now they’ll help small businesses build and grow their Facebook Shops and use our other commerce tools.

In effect, the relationship between, say, BigCommerce and Facebook Shops is headless commerce. It is a move toward a new sort of ecommerce technology stack.

A simple explanation of headless commerce is that product information is stored in a way that is agnostic to its presentation. The same ecommerce backend could supply product descriptions, prices, images, and even videos to an ecommerce website, a mobile app, or a Facebook Shop.

If Facebook and Instagram Shops are successful (and they likely will be), look for other ecommerce platforms to integrate and partner with Facebook via headless commerce. Also, look for other platforms — social or otherwise — to create their own commerce integrations.

Headless commerce will make ecommerce ubiquitous, and Facebook Shops is an example.

2. More Analysis, Automation

Many of the leading ecommerce platforms closely couple catalog management, product information management, and presentation.

Shopify, WooCommerce, Magento, BigCommerce, and 3dcart are all well-known examples of ecommerce platforms that produce, if you will, an ecommerce website. There is a tight relationship between ecommerce management features and presenting products on a website.

These companies already recognize the need to go headless. BigCommerce has probably made the most strides to date, but all of them are looking for ways to provide a headless commerce backend. Facebook Shops will accelerate the trend.

As headless commerce evolves, ecommerce platform providers will need new ways to differentiate their services. The website won’t matter as much. Apps and integrations won’t matter as much since the headless approach will mean that those add-ons are essentially commodities.

Headless ecommerce platforms, however, could distinguish themselves around analysis and automation.

Exactly what form it takes is uncertain. I suspect it could include predicting demand, identifying market gaps, and automating aspects of product and order management.

3. Consumer-to-consumer Commerce

Facebook Shops are aimed at small businesses. In some ways, these social shops lower the barrier to entry for many would-be merchants, including consumer-to-consumer “small business” sellers.

Etsy’s dramatic sales growth during the coronavirus pandemic has reminded me of the impact CTC side hustles have on ecommerce.

Etsy reported a 26.4 percent year-over-year increase in active sellers during the first quarter of 2020 and a 16.4 percent YoY increase in active shoppers. The company’s YoY revenue rose 34.7 percent to $228.1 million in Q1, generating some $145.6 million in gross profit.

While small-to-midsize businesses are selling on Esty, many of the platform’s merchants are makers — CTC sellers. Many, at least in Q1 2020, were selling pandemic masks.

Facebook Shops give CTC sellers another low-cost, easy-to-use way to sell their wares.

4. Blockchain Currency

Facebook and Instagram Shops provide an excellent platform for the mainstream adoption of blockchain-based Libra digital currency.

Libra or the Libra Association is an organization, payment structure, and cryptocurrency from Facebook that will launch in 2020.

Libra members include Facebook, Shopify, and Uber. And the currency aims to be a stable, instant, and low-cost way to move money. Once Facebook Shops become popular, the company could incentivize both buyers and sellers to trade in Libra.

For example, the selling fee for a Facebook Shop using Facebook’s checkout could be 5 percent in U.S. dollars or 2 percent in Libra.

5. DTC Sellers

Facebook and Instagram Shops could provide direct-to-consumer businesses with a new sales channel.

Amazon has proved to be an excellent platform for many DTC businesses. The company’s massive marketplace lowered the overall costs associated with starting and running a DTC brand.

A savvy merchant could research products on Jungle Scout, find an opportunity, have it manufactured, and sell it to a waiting audience of shoppers on Amazon. That might now be possible on Facebook and Instagram, too.

Facebook will almost certainly use what it knows about its users to deliver relevant product suggestions, either as ads or Shop promotions. Regardless, the company will be able to provide an audience of shoppers.

If, as is the case with Amazon, DTC sellers can develop tools to identify market opportunities, Facebook and Instagram Shops could spur new DTC ecommerce growth.

Armando Roggio
Armando Roggio
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