Small businesses are the heart and soul of our communities, but with storefronts closed indefinitely and retail shifting almost entirely online, the struggle to stay afloat continues to intensify. Internet usage is at an all-time high, and eCommerce is thriving, but it is difficult for small and medium-sized businesses to compete with retail giants like Amazon and Walmart. In an effort to expand its influence into eCommerce and ease the pandemic-induced stress on small business, Facebook announced the launch of Facebook Shops.
Facebook Shops allows businesses to set up a single shop that can be accessed from both the business’ Facebook and Instagram profiles, as well as through stories and ads on both apps. It is free to set up, and allows businesses to choose which products to feature and even customize the theme to match their brand. They also have the option to enable the checkout feature, which customers can use to make purchases directly from the app instead of being redirected to the company website. If a customer needs assistance, they can ask the business directly through one of Facebook’s subsidiaries, WhatsApp, Messenger, or Instagram Direct. The user-friendly platform is meant to streamline the user experience for online businesses, but more importantly, to bring some businesses online for the first time. According to a Facebook survey,
“One-third of U.S. small businesses have stopped operating, while another 11% expect to fail in the next three months,”
and the tech company is hoping to use the new platform to rescue as many of these businesses as possible.
Facebook Shops launched last week and will continue to expand availability throughout the coming months. After the platform’s Facebook debut, Shops will make its way to Instagram, too. Instagram Shops is set to launch this summer, taking inspiration from @Shop, the Instagram-run account that has been promoting small brands since May 2019. Instagram Shops is designed to make online shopping a truly enjoyable experience: users can browse collections from brands and influencers, filter by a category, and make in-app purchases. To make things even easier, the tech giant announced plans to launch a shop tab in the navigation bar. Facebook also has two features currently in the testing phase. Live Shopping, a feature in which creators and brands can tag products in their live streams that can be accessed by clicking the links at the bottom of the video, will be released soon. In addition, Facebook will release a feature that connects loyalty points to your Facebook account, which will hopefully forge a stronger connection between customers and small businesses.
With any new technological innovation, there are always questions regarding privacy and information security, but Facebook was fairly transparent about what information is collected and shared. According to Facebook, your shopping activity will not be shared with your profile or friends, although you have the option to share your purchases through Messenger or even through your Instagram Story if you want to spread the word on a brand or product you love. When using Facebook Pay- which can only be done in the US and if the business enables the feature- Facebook collects payment information, but will “securely store and encrypt your payment card numbers”. The information that is actually shared is comparable to any other online shopping experience. Business insights such as shop performance and traffic are shared with the brand, but this does not include information that personally identifies the customer such as names, email addresses, or any other information that would enable the brand to contact the customer without permission. Shop activity will also be used to personalize app experience, so don’t be surprised if your Instagram feed or Facebook ads show content similar to a recent purchase.
Facebook is certainly not the only platform that small businesses can use to sell their goods online. Small businesses, entrepreneurs, and artists have been using Etsy to sell their goods for years, and Facebook’s own marketplace platform has been around since 2016, so why is Facebook Shops any different? For one, Etsy serves a particular niche market for vintage and handmade products, and Facebook Marketplace is for second-hand products. The real draw to Facebook Shops, however, is the worldwide reach, unlike any other platform. Business owners can build off of the social media following they already have and interact with their followers directly. During this unprecedented time, many Americans want to help small businesses, but don’t know how.
The easily accessible online shops bridge the gap between businesses struggling to sell and customers with pent up demand.
Of course, while this new platform will certainly help small businesses in a time of need, the venture is not entirely philanthropic. Facebook will take a small portion of all transactions, but the real profit will come from advertising revenue. Facebook has reportedly seen a drop in ad sales as a result of COVID, but also a drop in share value due to several factors involving the vulnerability of its revenue stream. For one, the majority of revenue comes from Facebook itself, and not its subsidiaries. Facebook Shops is not only a ploy to drive more traffic to ads, but also an opportunity to diversify the business by driving users to Instagram, Messenger, and Whatsapp. This is also a strategic move to further infiltrate the tech space into eCommerce, threatening to dethrone Amazon’s reign as an industry leader. Amazon and Facebook both have access to a tremendous amount of data and have the tools to use it to their advantage, but there are key differences in their business models. Amazon has a subscription service in addition to other resources that result in the hard-to-beat prices that have made the company the go-to for all things eCommerce. However, Facebook has the opportunity to bring a sense of community to online shopping in a world where people crave human interaction and personal connection more than anything. Facebook also appeals to the public’s willingness to help the small businesses that are the most vulnerable during this time.
The full extent of COVID-19’s impact remains to be seen, but global tech companies and small businesses alike have the power to make the most of unprecedented times. Facebook is just one example of a company that is using the panic of the crisis to not only make a difference for others but to also strengthen and grow its own business. Facebook has big plans for Shops: Zuckerberg intends for this venture to extend well beyond pandemic times and into our “new normal”, but the climate created by the virus might just be the perfect storm to turn this business opportunity into a success.