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Facebook Shops Makes Waves, But Is it Enough to Help COVID-Hit SMBs?

The COVID-19 outbreak has had a devastating impact on the revenue of small businesses, with nearly 3.5 million at risk of closure in the next two months, according to a survey from Main Street America (MSA). Facebook is looking to make life easier for these businesses while many of their stores remain closed by launching Facebook Shops, a feature designed to enable merchants to set up a single online store that can be accessed on both Facebook and Instagram.

The app, which officially rolled out on May 19, will be more widely available in the coming months, according to a company statement. Businesses of all sizes using the app can choose the products they want to feature from their catalog and then customize the look and feel of their shop with a cover image and accent colors that showcase their brand. There are currently more than 160 million small businesses using the company’s apps.

Facebook will not charge businesses leveraging Facebook Shops.

“We’re seeing a lot of small businesses that never had online presences get online for the first time, and we’re seeing small businesses that had online presences now make them their primary way of doing business,” said Facebook CEO Mark Zuckerberg during a livestreamed announcement Tuesday. “For lots of small businesses during this period, this is the difference between staying afloat and going under.”

Shoppers can access Facebook Shops on a business’ Facebook page or Instagram profile, or discover them through Instagram Stories or promoted ads. From there, they can browse the retailer’s full collection listed on the app, save products they are interested in and place an order—either on the business’ website or without leaving the app if the business already has enabled checkout in the U.S.

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“I do think that Facebook is uniquely positioned to help those businesses because they have so much data on their users, particularly location data,” Mark Lewis, CEO of e-commerce development and design firm Netalico, told Sourcing Journal. “This could be a good opportunity for local businesses to advertise and market to the people right around them and do things like pickup instead of people going into stores. In general, people are going to be less likely to window shop for years maybe, so this can be a virtual way for them to window shop from local businesses.”

Lewis noted that there is one caveat for local businesses interested in the platform—despite Facebook Shops itself being free, organic reach from social media business pages has declined toward zero percent for many smaller merchants.

“Local businesses can really take advantage of it, but they’re going to still likely going to have to pay Facebook to get ads in front of local people who already shop at those stores or new customers,” Lewis said.

While retailers still haven’t quite figured out social commerce as a consistent revenue driver, networks like Instagram, Snapchat, TikTok and Twitter have been invaluably instrumental in driving awareness. Forty-five percent of millennials have bought clothing from brands they discovered on Instagram, investment bank Roth Capital Partners said in a 2020 survey of this desirable consumer cohort.

When it comes down to it, leveraging Facebook Shops will be a decision largely based on how savvy businesses already are in generating a fandom through the app.

“What I’ve been saying to businesses that don’t have a big e-commerce presence already is look at your biggest audience or channel, even if you don’t get sales through it, and look at how you can monetize that channel,” Lewis said. “For businesses that already do have a big Facebook following, this is really good. You should focus on this as much as you can. For businesses that are just getting started, it’s an uphill battle to get organic reach and just get people on Facebook or Instagram or across social media to take you seriously.”

Facebook hopes to help out its 160 million small businesses during the pandemic by letting them set up storefronts in its apps.

Facebook Shops also enables consumers to message businesses through apps including WhatsApp, Messenger or Instagram Direct to ask questions, get support and track deliveries. The company says users will eventually be able to view a merchant’s shop and make purchases right within a chat in WhatsApp, Messenger or Instagram Direct.

It also plans to enable shopping from live streams, allowing brands and creators to tag items from their Facebook catalogs so that they appear on the bottom of live videos.

The social media giant has tested various methods over the years to get shoppers to purchase through Facebook and Instagram and further capitalize on mobile shopping habits, most recently introducing the Instagram Checkout feature in March last year. But while Checkout started with a focus on big brands, including Burberry, Dior, Prada, Michael Kors, Nike, Adidas, H&M, Uniqlo and Zara, to get people to purchase a product right off their Instagram pages, the feature hadn’t seen a significant rollout to SMBs.

That’s why Facebook is also introducing Instagram Shop as part of the new product push, enabling shoppers to discover and buy products within Instagram Explore. The @shop account will showcase collections from all brands and creators of all sizes and will enable users to filter by categories like beauty and fashion before making a purchase. Within Shop, small businesses can create actual storefronts that reflect the aesthetic feel of their brand, rather than the simple and uniform product catalogs available in the past.

Later this year, Instagram is adding a new shopping tab in the navigation bar so users can access Instagram Shop in just one tap.

The rollout comes less than a month after Shopify launched its own mobile app, also called Shop, designed to allows consumers to browse and purchase products from any merchants that use Shopify’s e-commerce logistics platform or its in-store point-of-sale services. Similar to Facebook’s motives, Shopify aimed its app at helping local businesses gain visibility during the pandemic.

Shopify’s Shop is designed to enable users to discover these merchants, receive relevant product recommendations from their favorite brands, check out upon purchasing and track all their online orders in one app. Brands get the benefit of not having to pay any additional fee to be on Shop, nor do they pay commissions for any app-derived sales.

Interestingly enough, even though Shopify developed its own platform, the e-commerce giant partnered with Facebook to help create Facebook Shops. Whereas merchants get control over customization and merchandising for their storefronts inside Facebook and Instagram, they can still manage their products, inventory, orders and fulfillment directly from within Shopify.