Facebook hopes its 2.6 billion users will shop on its platform as it unveiled a service that puts it in direct competition with Amazon and eBay.
“Facebook Shops” will allow merchants to create digital storefronts on Facebook or Instagram, the company said Tuesday, adding it would benefit from collecting valuable data about what shoppers want.
Users can browse products, message companies to arrange purchases, and in some cases purchase directly through a recently introduced online payment feature.
Facebook CEO Mark Zuckerberg said in an interview with the FT that he had accelerated plans for Shops to take advantage of the online shopping boom during the coronavirus crisis.
He added that the social media giant could use the data to improve its advertising service and charge more for it.
“If you browse a store in our app or if you buy something, we’ll see that and hopefully we can use that to show you better recommendations for other things you might find interesting in the future,” he says. said.
Stores help businesses “complete the conversion and transaction” [of a sale] more often with less drop-off,” he added. This, in turn, will translate into higher bids for ads.
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 checking.
The venture, which is Facebook’s most important e-commerce move to date, poses a challenge to Amazon because of the sheer number of users Facebook can channel to storefronts.
It could also end up being a challenge for food delivery platforms like Grubhub. Zuckerberg suggested that in the longer term it would be “good” to host restaurant and food delivery services.
However, the Facebook founder said he wasn’t trying to replicate Amazon’s “end-to-end experience” but would instead work with existing e-commerce services such as Shopify, which helps small businesses create online stores and provides analysis and payments. Zuckerberg added that Facebook would also integrate with shipping and logistics services.
“Why did it take so long?” said Rich Greenfield, partner at consultancy LightShed Partners, of Tuesday’s announcement. “It seems very clear that the next step, especially when advertising is under pressure, is how are you going to capitalize on the e-commerce boom that is benefiting companies like Amazon?”
“People don’t want to go to third-party websites or go to the checkout; they want to buy with one click. They want it simple, easy,” he added.
While the move signals Facebook’s bid for dominance in markets outside of social networks, the social element of the platform will set it apart, said Debra Aho Williamson, an analyst at eMarketer.
“It’s about tapping into 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 uses the messaging capabilities of Facebook: users can contact companies directly via WhatsApp, Messenger or Instagram to, for example, ask questions or track deliveries. It will also have tools for creating and tracking loyalty programs.
Zuckerberg said Facebook would target the rollout in developed regions like the US and Western Europe, where the company had the resources to properly vet sellers, while rivals like Amazon battle counterfeits.
“In countries that don’t have that much infrastructure, that’s one of the challenges [preventing] the full launch of this,” he said. In the longer term, he said he envisioned a system where sellers had reputation scores and star ratings.
Analysts have speculated that Facebook has long-term ambitions to emulate so-called “super-apps” like WeChat that allow users to message, buy products and send money on one platform.
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