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Facebook Too Wants a Pie of the Booming Online Retail Market, Builds Shops into Pages

Jul 23, 2015 | Chemicals & Materials | Christina Johnsan

Facebook seems to be living by the aphorism, “The only thing constant in life is change,” considering the frequency with which it rolls out its updates. However, this time around, the change has got to do a lot more with boosting the bottom-line of the Menlo Park, California based company. In a bid to grab a pie of the highly lucrative online retail market, Facebook is planning to incorporate ‘shops’ within its pages, allowing users to buy products directly through its website and app instead of traversing to the retailer’s website.

Why Facebook wants you to ‘Shop Now’?

Facebook is the second most visited site on the web, and its bête noire Google recently announced ‘Purchases on Google’, its own version of the ‘buy’ button. Pinterest, Instagram, and Twitter already allow users to shop directly through their app and site.

Facebook earns the bulk of its revenue through digital advertising, however, with the addition of the buy button, it aims to transform itself from a platform for hosting ads to providing the complete shopping experience—from product discovery to checkout.

The online retail market is expected to be worth US$ 350 Bn by the end of 2015, according to digital market research company eMarketer. In contrast, the global digital advertising market is forecasted to reach US$ 60 Bn by the end of this year. Clearly, e-commerce represents a bigger opportunity for the likes of Google and Facebook, and the incorporating of ‘buy’ buttons hasn’t really surprised observers.

Will it be Second Time Lucky for Facebook?

It is remarkable to note that this is not the first time that Facebook has tried to make the shift from socialising to commerce. GameStop, J.C. Penney, and Gap have launched their storefronts on Facebook, only to shut them down within a span of a few months. Analyst opine that although Facebook is the most popular social media site in the world, users don’t associate it with shopping. Amazon and eBay have a niche audience, and users know what they are getting into when the click on the app or log in through their desktops. However, when users check into their Facebook accounts, making a purchase is not exactly the first thing on their minds.

So, if the previous attempts to e-commercialise Facebook have not yielded the desired results, what has changed this time around? Well, one key aspect that has prompted the “low double-digit” number of retailers and e-commerce companies to set up a storefront on Facebook is the proliferation of smartphones globally. When GameStop set up a retail page on Facebook in 2009, smartphone use was still at a nascent stage. Retail sites were not optimised for the mobile experience, and trying to make a payment through the smartphone was cumbersome.

Today, most of the leading websites are optimised for viewing across different devices, including smartphones, tablets, and phablets. The improved mobile experience can be gauged from the fact that mobile search on Google has outpaced desktop search in 10 countries, including the U.S. and Japan, and Facebook accounts for nearly one-third of all time spent on mobile devices. These statistics have been more than enough to convince retailers that mobile e-commerce could be as lucrative as desktop, prompting them to tie-up with leading search and social media websites.

Whether Facebook’s new update gets more people shopping remains to be seen, but one thing that has clearly emerged from the recent developments is that mobile e-commerce has the potential to become the cash cow for websites that rely heavily on digital advertising.