Is Facebook Turning into an E-commerce Platform?

Facebook is continually seeking new business opportunities to boost their profits. This is why they introduced Instagram and Facebook Shops. However, it is safe to assume that Facebook will remain a social media platform rather than transforming into an e-commerce platform.

The Impact of Facebook Entering E-commerce

When the world's largest social media network decides to enter the e-commerce space, it will undoubtedly have a significant and long-term impact on the industry. On May 19, 2020, Facebook added e-commerce Shops to Facebook business pages and Instagram business profiles.
This move marks a substantial step in the evolution of social commerce, offering small businesses a new e-commerce channel.

Understanding Facebook and Instagram Shops

Facebook and Instagram Shops are a new tool for small businesses to create and manage product catalogs and display them online. They consist of a shop tab and a product catalog, both managed via the company’s Commerce Manager and Catalog Manager.

Initially, Facebook does not charge merchants for sales on the platform unless they use the company’s checkout process, in which case they pay a 40-cent fee for orders up to $8 or a 5% selling fee on orders above $8.

Facebook announced that they are working closely with existing e-commerce providers like Shopify, BigCommerce, WooCommerce, among others, to give small businesses the support they need. This partnership aims to create a headless commerce ecosystem, where product information is not tied to any specific presentation channel.

Vision of Facebook Shops

The official Facebook Shops announcement emphasizes that the company sees its mission as connecting people to what they love, whether it be products, brands, or businesses. This initiative is a natural progression of how people have been using Facebook and Instagram to buy and sell items from the early days of posting products for sale to today’s social commerce trends.

Implications of Facebook's Move

1. Headless Commerce

Facebook’s decision to partner with existing e-commerce providers marks a significant step towards a new form of e-commerce technology stack. This approach is known as headless commerce, where product information is stored in a way that is agnostic to its presentation. This move implies that the same e-commerce backend could supply product descriptions, prices, images, and even videos to various presentation channels, including e-commerce websites, mobile apps, and Facebook Shops. Other platforms may also integrate and partner with Facebook through headless commerce, making e-commerce ubiquitous.

2. More Analysis and Automation

Leading e-commerce platforms like Shopify, WooCommerce, Magento, BigCommerce, and 3dcart closely couple catalog management, product information management, and presentation. However, these platforms are increasingly moving towards a headless approach. Facebook Shops will accelerate this trend, and e-commerce platform providers will need to focus on analysis and automation differentiators to differentiate their services.

3. Consumer-to-Consumer Commerce

Facebook Shops are designed for small businesses and could lower the barrier to entry for consumer-to-consumer (C2C) "small business" sellers. Etsy's growth during the pandemic has shown the impact that C2C sellers can have on e-commerce. Facebook Shops provide C2C sellers with a low-cost and easy-to-use platform to sell their products.

4. Blockchain Currency

Facebook's introduction of e-commerce Shops provides a platform for the mainstream adoption of blockchain-based Libra digital currency. The Libra Association aims to create a stable, low-cost, and instant payment structure. With Facebook Shops becoming popular, the company could incentivize both buyers and sellers to use Libra. For example, the selling fee on Facebook Shops might be 5% in US dollars or 2% in Libra.

5. DTC Sellers

Facebook and Instagram Shops could provide direct-to-consumer (DTC) businesses with a new sales channel, potentially competing with Amazon. DTC brands often thrive on the Amazon marketplace, and Facebook Shops could offer a similar opportunity. Armed with insights into their users, Facebook can deliver relevant product suggestions to shoppers, similar to Amazon's offerings.

Conclusion

While Facebook may not fully transform into an e-commerce platform, this move will have far-reaching implications for the industry. Merchants and businesses will need to adapt to these changes and consider how they can leverage Facebook Shops to boost their e-commerce efforts.