Facebook Shops: A game Changer for e-commerce?

by Jimmy Jakobsson, Josef Rasch and Simon Beyer

Via Facebook’s marketplace, users can already make private sales, and dealers can sell their products via Instagram. Not to forget the live function, which at the height of the Corona crisis led to a renaissance of what is remembered as teleshopping by the pre-millennials. However, the introduction of Facebook shops represents a real break.

With the new function, which will be introduced for both Instagram and Facebook this summer, the tech giant is pursuing the goal of mapping the consumer’s entire shopping journey on one platform – and thus becoming a one-stop shop for the consumer. Jimmy Jakobsson, co-founder and CEO of Ingager, outlines why Facebook shops have the potential to become a game changer for the entire online trade, based on 5 theses.

Thesis 1: Marketing teams must reposition themselves
In the future, when the entire shopping experience is mapped onto a single platform, this will have a profound impact on the work of marketing teams. If you break down their main task to its core, you could say that today they are primarily responsible for directing traffic from social networks to their own websites. As soon as a user lands in their own shop, the e-commerce team usually takes over and, in the best case, ensures that the visitor becomes a customer.

In companies with e-commerce as their core business, the teams are often organised in this way, but now this logic could be reversed. In the future, when the majority of merchandise sales will take place on Facebook and Instagram, and thus outside your own website, it could make sense to have marketing teams work even harder on the sales strategy. E-commerce experts, on the other hand, have the tools to analyze customers’ buying motives and behavior via social feeds.

Thesis 2: Key figures are redefined
If traffic is increasingly shifting to external channels, what significance does your own website have? At this point we can give the all-clear (for the time being): When the first version of Facebook Shops is launched shortly, buyers will be redirected to the merchant’s shop for payment. The trend that the onsite tunnel – i.e. the totality of all user activities on one’s own website – is losing its importance is nevertheless obvious.

Key figures that e-commerce companies have tracked on their own channels – such as the average value of the shopping basket or the number of page impressions for certain articles – and the conclusions drawn from them have formed the basis for a large part of marketing decisions. With the increasing platform trend, new metrics must now be defined and data interpreted differently than before. In addition, Facebook and Co. is responsible for providing its business partners with reliable analysis tools so that they can also continuously optimise their external trading activities.

Thesis 3: Investment decisions need a new basis
Every online business has the claim to act as data-driven as possible. This is also because there is no comparable, such a valid basis for making far-reaching economic decisions – including those that affect the marketing budget. At the same time, we have been observing for years how it has become increasingly difficult to obtain the data that forms this foundation, for example due to the introduction of the DSGVO.

Now that more and more conversions are taking place on external platforms and the use of cookies is becoming less important, it is becoming even more difficult to generate a database for investment decisions. If this trend is confirmed and the large platforms increasingly take up a share of online sales, one of the biggest challenges for e-commerce companies will be to create alternative bases for decision-making.

One conceivable future scenario is that companies take a step back and, instead of focusing primarily on data-based insights, identify various variables that affect revenue. Investment decisions could accordingly be made on the basis of regression analyses, marketing mix models or comparable methods.

Thesis 4: Understanding the ecosystem becomes a success factor
The new shop feature will be available for both Facebook and Instagram – and yet (or maybe just because of that?) Facebook Inc. is not a company organized in silos. Behind the launch of Facebook Shops is the clear intention to mix and match individual services – including Whatsapp and Facebook Messenger – and to link them together.

So anyone who wants to benefit from Facebook Shops should focus at an early stage on understanding the entire Facebook ecosystem and orchestrating the individual channels in such a way that the user is addressed at as many touchpoints as possible. For example, it would make sense for buyers to be able to contact customer service via WhatsApp if they have questions. Those who exploit such synergies early on can quickly gain a competitive advantage.

Thesis 5: Headless e-commerce is becoming the benchmark technology
If Facebook shops really do become a resounding success, the feature has the potential to set a new technological standard. On both Facebook and Instagram, the shops are integrated via a separate tab and consist of a product catalog, which is managed by the Commerce or Catalog Manager. This technological setup behind the digital shop front is referred to in technical jargon as “headless e-commerce”.

Simplified, the term describes an agnostic processing of product information, analogous to the product information displayed. The advantages that headless e-commerce enables are many including a simplified set-up process but more importantly a seamless system integrations. Facebook Shops will be able to connect payment, communication, loyalty, ads and much more for the merchant. Headless e-commerce also offers improved functions for customization, the products displayed in Facebook Shops will be more relevant for customers than current ad options.

The technology behind Facebook Shops saves time for the merchant, enables new opportunities and display ads with higher degree of personalization. If Facebook Shops should prevail, we could indeed be dealing with a new benchmark in terms of e-commerce backend, which could also be transferred to external shops or mobile applications.

As already indicated, with the launch of the new shop function, Facebook is accelerating its intention to map the shopping experience holistically via one platform in the sense of a seamless customer journey. A goal that unites all the tech giants – but with Facebook, a player with strong social DNA is now venturing into the big e-commerce arena, which could give the ongoing platform trend a decisive boost.

The big advantage: Instagram and Facebook don’t have to bring customers and companies together first, they may already have a long-standing relationship with each other. For Facebook, the hurdle to sensitize the user to the new possibilities is therefore very low. At the same time, the value and importance of complementary services such as WhatsApp or Facebook Messenger can be massively increased.

All in all, the launch of the new feature can be seen as a clever move by Facebook Inc. For although the platform’s previous e-commerce features were never able to meet the high expectations, the effects of the Corona crisis have ensured that small and medium-sized companies have now understood that a presence on the web is vital for survival. An infrastructure such as Facebook Shops ensures that access to e-commerce becomes even easier for businesses – and new business models might rise from this enabling feature. young businesses, while established merchants, especially online pure players, need to quickly grasp the new rules of the game in order to keep up in a presumably much more dynamic environment.

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