Two things: Facebook unveiled Facebook Shop, and Google partnered with Ecobank to “offer timely and relevant solutions, including Google My Business and Google Ad products” to the bank’s customers. Both solutions from the ICT utilities go back to my warning call in a Harvard Business Review article where I examined the future of African tech in a world dominated by Google and Facebook. The Google product will abstract what many African tech firms offer for largely free and Facebook Shop will become a mortal threat to many ecommerce companies. By the time Facebook adds Libra and an evolved payment system, turning Facebook, Messenger and Instagram into a global market platform, African fintechs may struggle. Practically, if you can buy from a Facebook Shop and pay therein, you will not see any incentive of clicking out or launching another app.
Starting today, you’ll be able to browse and buy products directly from a business’ Facebook Page or Instagram profile.
Both Facebook and Instagram already supported a degree of e-commerce — for example, Facebook has its Marketplace and will likely make a bigger push through its Libra cryptocurrency initiative, while Instagram allows users to buy products featured in posts and ads. But the company’s new tools go further, enabling businesses to create a full-fledged Facebook Shop.
Creating a Shop is free. Businesses just upload their catalog, choose the products they want to feature, then customize it with a cover image and accent colors. Visitors can then browse, save and order products.
Yet, this can also be good for small companies especially those with solid digital game plans. Simply, all you need is to have a Facebook Shop or Instagram Shop, and by doing that Facebook helps you run a digital platform. Yes, there is no need to hire a web developer and maintain a website since you can sell right on Facebook. This service will knock out many tech services and make some fintech solutions irrelevant especially not selected as integration partners. People may even send you to Facebook to process their payments form their websites.
Those businesses will be able to create a Facebook Shop for free — they just upload their catalog, choose the products they want to feature, then customize it with a cover image and accent colors. Visitors can then browse, save and order products.
Facebook’s vice president of ads Dan Levy said that while the company will charge “small fees” on each purchase, the real monetization will come from driving more advertising. (Shops can also be featured in ads and stories.)
Yet, there is nothing new here. Facebook has been the #1 ecommerce operator in Africa. In January 2018, I wrote on what was to come: “This has been expected. I have predicted that by 2022, the ecommerce platforms we may have are really Facebook, Instagram and WhatsApp in Africa. I expect these ICT utilities to add store features in their platforms to make it easier for people to list and sell things. That also means that people can get paid easily”. According to Mark Zuckerberg, Facebook CEO, Covid-19 pandemic accelerated the evolution of the Shop product in a video stream to Facebook users.
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According to Geopoll, a polling company, Facebook group is growing massively, threatening companies like Jumia and Konga on ecommerce. The informal groups in Facebook are now ecosystems of digital commerce as users use them to shop without going to the traditional ecommerce companies.
.. Yet, this goes beyond Facebook; Instagram would be the best show room most businesses would have in Africa. That is already happening in the continent as photographers, designers, and artists are abandoning traditional websites to focus on their Instagram engagements. As ICT utilities like Instagram put store features, in their platforms, many things would happen: they will disrupt the traditional nexus of ecommerce.
What To Expect
The dominance of Facebook group as an ecommerce ecosystem, especially for marketplaces, would be driven by the following as noted in that Jan 2018 piece:
Free Internet: When you shop on Facebook, under the Internet Free Basics, you do not waste mobile credit. This means that more people will increasingly adopt it. It puts the traditional ecommerce players on clear disadvantage.
Trust: Facebook deals with the issue of trust in African ecommerce. Both the buyer and seller have clear linkages with others as the accounts do not just appear. So, it makes the bonding better. You would see a seller account with 2000 likes and that boosts your confidence level that the seller is genuine. Traditional ecommerce companies do not enjoy that since accounts are not socially associated in their platforms.
Commission: We expect Facebook commission to be lower compared with traditional ecommerce. The implication is that more people will flock to Facebook group. The Facebook group has an element of entrepreneurial freedom since the sellers can “build” the stores themselves.
Network effect: While a company like Konga is hosting about sub-500k active users in its platforms, Facebook has largely everyone that is online in Nigeria. That is a huge advantage. That can move sellers to operate accounts there.
Facebook vs. Amazon
Interestingly, Facebook may offer a real challenge to Amazon in ways Walmart’s Jet was unable to do. Walmart is shutting down Jet and repositioning its Walmart.com. So, this evolution of Facebook, of turning business profiles into shops, should worry Amazon.com because if people feel very comfortable buying things while on Facebook, the incentive to open the Amazon website will diminish. Yes, if people do not visit Amazon, that will do it for Amazon. A high degree of abstraction and disintermediation would be expected with this industry-shaping move by Facebook. For eBay, it may be the end.
Facebook is expanding into the world of e-commerce, announcing a new service that puts it in competition with Amazon and eBay. Facebook Shops will allow businesses to set up free “storefronts” on Facebook and Instagram, working with third-party services including Shopify. CEO Mark Zuckerberg says the move will help rebuild the economy and support small businesses, which have been suffering in recent weeks as physical shops are shuttered. Online shopping has seen a bump during the pandemic and e-commerce companies have drawn record sales.
People, African ecommerce and fintech in a world of Facebook Shop and Instagram Shop will be different.
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No cause for alarm, especially for those who have clarity of thought.
The same way we have malls, large open markets, yet most streets across the land are dotted with small shops; and they are all selling something.
The bigger the noise and chaos in the big platforms, the more likely people will withdraw, humans are never comfortable with overcrowded environments for too long, the same will play out online overtime.
Again, original product remains what it is, and you can only get it where it’s sold, if the markers don’t go to big platforms to sell, you must meet them where they are.
There are many ways to deconstruct whatever Facebook is cooking, it’s a question of having the liver to go about your thing unperturbed.
I don’t think the FB/Shopify partnership will impact Amazon’s revenue much in the next few quarters Prof. Firstly, I think the move will hurt the other E-commerce CMS platforms in the short term e.g. Woocommerce (the current market leader), Magento, Prestashop, Bigcommerce and Opencart. I expect Shopify will eat into their market share.
Secondly, if the service is free and there’s no exclusivity to shopify. Nothing stops Amazon from doing the same – they’ll take a hit on margins and grow revenue in the longterm. Knowing Jeff Bezos, I expect a massive response. 51% of Retail Sales for Q1 2020 were from third party sellers.