Facebook Eyes E-commerce
The rise of e-commerce is nothing new. E-commerce sales as a percentage of total retail sales has more than tripled since 2007 to 16% last year, according to the Commerce Department.
While it was likely this trend would continue regardless, e-commerce's share of the total retail spending pie seems likely to get a boost as many consumers are confined to their homes as a result of the coronavirus.
Perhaps acknowledging this, and wanting to leverage its 2.6 billion users, Facebook made a big push into e-commerce earlier this week when it introduced Shops. Shops, which will be powered by third-party providers such as Shopify, will enable businesses to create free storefronts on Facebook and Instagram.
"I think this particularly important right now because so many small businesses are moving online to deal with the economic fallout from Covid-19," Facebook co-founder and CEO Mark Zuckerberg said. "As people are being told to stay home, physical storefronts are having a hard time staying open and millions of people are losing their jobs. I've been personally working with our teams on Facebook Shops every day for the last couple of months so we could accelerate launching it to small businesses who could use tools like this now."
Despite Shops being offered as a free service, Facebook stands to generate income through advertising and payments. If customers make a purchase through Facebook's checkout option, Facebook will charge a fee.
Facebook said there's more than 160 million small businesses using its apps. With Shop, Facebook will enable users to store their payment information to create a seamless shopping experience through storefronts on Facebook and Instagram.
Storefront owners will also be able to communicate with their customers through Messenger, Instagram, and WhatsApp. Facebook will eventually integrate live video functionality into Shop, as well as a loyalty program.
Shops has been rolled out on Facebook in the U.S. and will be available on Instagram this summer. Facebook shareholders cheered the news, as the stock broke out to new all-time highs on consecutive days following the announcement.
"Hopefully this helps relieve some of the pressure that small businesses are facing right now and helps them prepare for a more online future," Zuckerberg said. "I look forward to getting Shops into the world more widely -- let us know what you think!"
With Facebook now the fifth-largest company in the S&P 500—sporting a market capitalization of more than $650 billion, will the company's entrance into e-commerce end up being the catalyst that enables Facebook to join Microsoft, Apple and Amazon in the trillion dollar club?
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