Summer’s barely begun, but the biggest e-commerce news of the year just broke: Facebook Shops are now available to every business in the United States.
It was only a matter of time before Facebook made a major play for in-app purchasing. Instagram Checkout has been around since March 2019, and while it’s limited to select partners, it’s grown significantly. Just last month, Target became the first mass retailer to add Checkout. In April, Shopify launched its Shop app, allowing shoppers to browse, buy, and track orders from multiple stores in one place.
What sets Facebook Shops apart is its potential to create a frictionless buying experience at massive scale. If a business has enabled checkout, purchases are completed without leaving the app. Sounds perfect, right? Your customers already live on Facebook and Instagram; moving e-commerce there should mean lower acquisition costs. In fact, if you can host products natively on Facebook and Instagram, why bother managing an external website at all? Think how much work that is!
The problem with things that sound too good to be true is, well, they’re usually too good to be true. Don’t get us wrong — there may be opportunities in Facebook Shops. But before you rush in, we have a few words of caution.
Caution #1: Facebook sits between you and your customers.
It’s right there on the Commerce Manager Landing page:
"We don’t share customer data, aside from information needed to fulfill orders (name, email address, and delivery address). Customer email addresses cannot be used for marketing purposes."
In other words, Facebook controls your relationship with customers who buy through Shop or Checkout. You can’t email them with product updates, company news, or any non-transactional information at all. Yet email is the closest thing businesses have to a direct relationship with customers. It’s free communication, without fear of a tech giant hiding your messaging.
Over time, if fewer people are in direct communication with you, and Facebook controls access to your audience, they’ll almost certainly implement a pay-to-play scenario. It’s happened before: Remember when Facebook drove publishers to make video content, only to de-prioritize video a year later? Nobody knows what Facebook will do, but we know they have a history of algorithm changes that reward some types of content and penalize others. They may decide to make Shop content harder to find or increase CPMs, and you’ll have no recourse.
Caution #2: No engagement data for you.
Just as Facebook controls Shop customer data, it also controls engagement data, and you won’t get to see it.
Site traffic data is incredibly important if you want to understand your customers’ needs and wants. From a simple pageview report, we can gauge interest in certain products, improve messaging, and, of course, remarket to users based on their behavior. That last point is key: With Facebook Shops, you won’t be able to build audience pools based on user behavior. You won’t even be able to create lookalike audiences from Shop/Checkout behavior. (Sources say that Facebook is working on rolling this out sometime soon.)
From a UX standpoint, Facebook Shops will solve the common problem of slow website loading time, which we know can deter purchases. Faster loading time = more consumer spending = more data, none of which you’ll be able to use. Eventually, Facebook may even make their own branded products using sales and behavior data from your customers. That’s exactly what Amazon did.
Caution #3: There’s always a (financial) catch.
Facebook charges a 5% fee for every purchase. Let’s see how that compares to the competition:
Shopify - 2.4% + 30c per transaction
Shopify Plus - 2.15% + 30c per transaction
Paypal - 2.9% + 30c per transaction
Amazon Pay - 2.9% + 30c per transaction
Ouch.
There’s more. Facebook says that businesses “usually get paid within 8 to 10 business days of shipping an order,” but in some cases, payout time could be as long as 30 days. Not every business can afford that kind of wait. And did we mention that steep 5% fee? Speaking of which, if businesses decide they have to join Shop, and Shop checkout becomes learned behavior, what’s preventing Facebook from raising their fee in three years when they have everyone captive? Nothing. The answer is nothing.
Caution #4: More competitors, more competition, more cost.
In their press materials, Facebook highlights the ease and simplicity of setting up branded Shops. With virtually no barriers to creating a Shop, there will be a surge of small businesses using Facebook as their front end and a third-party inventory solution (like Shopify or Wix) as their back end. That’s exactly what Facebook wants: More SMBs in their ecosystem means more ad revenue for Facebook.
What it means for you, however, is an increase in competition for eyeballs and attention. The newsfeed only holds so much content, so you’ll have to pay more to get in front of your targets — and even your own audience.
Some final thoughts
Imagine walking into a mall that has the latest shows and entertainment, magically updating newsstands, and all your favorite stores. Oh, and your friends are there, too, and you can talk about what you want to buy, or what you just bought, or what you liked and what you didn’t like. (If your high school bully shows up, just hit the block button and make him disappear.) Why would anyone leave?
This is the world Facebook wants, and adding e-commerce to the mix gives users another big reason not to leave the platform. It’s worth noting, too, that as Facebook knits its apps together, some serious antitrust issues could arise (if it’s just one app, how would regulators break it apart?).
The good news is, if Amazon is any indication, Facebook likely won’t be able replace brand-centric eCommerce any time soon. Independent eCommerce sites are thriving despite Amazon’s nearly 50% market share of online purchases. Some have found success using Amazon to grow their businesses, many others have not. Customers may get an easier way to shop, but they also get a less enjoyable experience, and have a lower level of trust. Could this be the case for Facebook too?
The future of eCommerce is social and Facebook Shops is their first big iteration of this. While joining Facebook Shops may not be something you want to go all in on, experimenting with it now will better prepare you and your business for the shopping trends of the future.
Photo Credit: Facebook