Facebook, the social network, wants to become the social commerce destination, too. To get there, it has launched a series of products to help small businesses both connect with and sell to consumers.
As the pandemic made e-commerce crucial, Facebook sped up the release of the social commerce tools it had in development.
In May, it launched Facebook Shops, which allows businesses to sell on their Facebook and Instagram pages. Then in September, it unveiled Facebook Business Suite, which helps businesses manage sales and customer interactions across Facebook, Instagram and WhatsApp, the messaging site it purchased in 2014.
And just last month, Facebook purchased customer-service platform Kustomer, a move that will aid its efforts to transform WhatsApp and its other messaging functions into sales tools.
Pandemic reveals ‘a major opportunity to sell on our platform’
“As COVID hit early this year, we saw a major opportunity to accelerate our investments in products that directly support a business’s ability to sell through our platform,” Graham Mudd, vice president of business product marketing at Facebook, told CO—. “We saw how important e-commerce was going to be for at least the year ahead, and how it might change consumer behavior in the long run.”
The new digital commerce tools are free, but they are part of Facebook’s strategy to keep small businesses, which make up the majority of its advertisers, engaged with their platforms.
More than 200 million business use the company’s apps, and supporting small business is “more important than ever,” Facebook founder and CEO Mark Zuckerberg said in October while announcing the company’s third-quarter results.
Strengthening the ties between small businesses and Facebook, Instagram and WhatsApp is also good for Facebook’s bottom line, which is dependent on ad sales.
Facebook’s total ad revenue for the third quarter, which ended in September, rose 22% to $21.2 billion from the third quarter of 2019. Most of its 10 million active monthly advertisers are small businesses, according to Facebook.
A new home for small-business ‘storefronts’ on Facebook
While many small businesses have had a presence on Facebook or Instagram for years, previously “there was no structured way to share their products with potential customers, and actually make sales,” Mudd said.
“What we’ve built is the ability to attach a storefront to your profile on Facebook or Instagram,” he said. “You can upload your product catalog, prices, sizes, colors, all the details.” Customers who click on products can quickly make a purchase.
Facebook Shops can be integrated with a business’s existing e-commerce platform, such as Shopify or BigCommerce. Facebook also is rolling out the ability to take payments through the Facebook Shop function.
Mudd said Facebook is being careful and deliberate about vetting businesses before letting them add the payment function. “We want to make sure the business on the other side of that transaction can be trusted and is going to fulfill the service or the sale in a way that meets the expectations of the consumer,” he said.
As COVID hit early this year, we saw a major opportunity to accelerate our investments in products that directly support a business’s ability to sell through our platform.
Graham Mudd, vice president of business product marketing at Facebook
Facebook is waiving processing fees for payment collection for the remainder of this year. While it might start charging processing fees in the future to cover costs, it is not currently looking at fees as a revenue generator, Mudd said.
“Over time we hope and expect that this will help to support businesses in growing, and as they grow, they’ll use our ad products to find more customers and drive more sales,” he said.
A ‘natural segue to commerce,’ but proceed with caution
Many small businesses already were using Facebook and Instagram for marketing and were buying Facebook ads, so “in theory it’s a natural segue to commerce” on those platforms, said Andrew Lipsman, a principal analyst focused on retail and e-commerce at eMarketer.
But the longer-term question businesses need to ask, Lipsman said, “is to what extent they want Facebook to be the intermediary for their business.”
That is a question businesses face with any platform, he said, whether it’s Facebook or Amazon. “There’s a potential to become very reliant on those platforms and it may not be a trade-off that you want to make in the long term,” he said.
Facebook is facing stiff competition from Amazon for small business ads, Lipsman said. “Amazon has much better data assets than Facebook does,” he said. While Facebook and Google have amazing behavioral data, he said, Amazon has purchase data and can target ads based on a person’s buying and search history. Expanding commerce will give Facebook a better defense against Amazon on the ad front.
Lipsman also cautioned that while Facebook’s commerce tools are currently free, there is no guarantee Facebook won’t add fees in the future as it looks to diversify its revenue streams. “In fact, it’s almost inevitable that’s what will happen,” he said. “Small businesses need to go in eyes wide open and understanding that fact.”
Facebook isn’t revealing how many businesses have joined Facebook Shops, but it’s received some enthusiastic testimonials from small business owners who credit the new tools with helping them grow their businesses during the pandemic.
Mimi Striplin, founder of The Tiny Tassel, a jewelry, clothing and accessories business in Charleston, South Carolina, told CO— that Facebook Shops and Instagram have helped her expand this year to the point where she has opened her first physical store in Charleston.
“We found it very easy to set up Shops,” Striplin said. “We use Shopify for our e-commerce and their integration makes it seamless,” she said.
The Tiny Tassel’s customers also are fans, she said. “Initially we expected there to be a learning curve, but our customers seem to have picked up on the feature very quickly, and have noted that it’s convenient and quick to use,” Striplin said.
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