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What is Facebook Shops? Here’s what you need to know

Amazon and Etsy have a new competitor.

Jun 17, 2020, 7:00 am

Tech

 

Libby Cohen

Facebook‘s new feature Facebook Shops launched last month, and it aims to square up against other retail giants to bring small businesses online.

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With millions of businesses on Facebook already, the social media giant has slowly emerged as an e-commerce platform.

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It started with Facebook's Marketplace where users listed individual items for sale. Then, Instagram became a popular spot for brands and influencers to sell their products by swiping up on stories linked to product sites.

Now, this most recent push will combine all of those features, aiming to make online shopping synonymous with these social media apps.

With Facebook Shops, all transactions will be made through Facebook or Instagram. That begs the question: should customers trust the social media platform with their banking information?

Here's everything we know about Facebook Shops.

What is Facebook Shops?

Facebook Shops is taking the several e-commerce components that Instagram and Facebook already have and is combining it onto one page.

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Facebook Shops enables small and medium sized businesses to set up shop directly on Facebook and Instagram. Similar to an individual website, owners can list products and run promotions where many customer's preside: social media.

So, users will simultaneously share and post to friends while seeing ads and profiles for businesses.

It's happening at a time where many small to medium size enterprises (SMEs) have flipped the sign to closed on their storefront.

In their State of Small Business report, Facebook says the coronavirus pandemic shut down more than a third of small businesses to which a half of those will not likely reopen. The report surveyed 86,000 U.S. SME owners and employees. Over half of the businesses were owned by women.

"If you can’t physically open your store or restaurant, you can still take orders online and ship them to people," Zuckerberg said in a livestream. "We’re seeing a lot of small businesses that never had online businesses get online for the first time."

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Facebook will charge a "small fee" on each transaction, but will make a majority of earnings on ads, according to vice president of ads Dan Levy.

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Zuckerberg admitted that Facebook Shops adheres to their business goals. Primarily through ad sales, and partially through transaction fees, Facebook Shops could increase revenue by $30 million according to Business Insider.

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"Our business model here is ads, so rather than charge businesses for Shops, we know that if Shops are valuable for businesses they’re going to in general want to bid more for ads," Zuckerberg said according to CNBC. "We’ll eventually make money that way."

How will Facebook Shops work?

Facebook Shops is rolling out over the following months. Businesses wanting to open up shop on Facebook and Instagram create their company profile for free.

SMEs start setting up their store by creating product lines and filling out payment and shipping preferences. Then, owners customize and style their page with a selection of colors and fonts. Finally, Facebook notifies SMEs when their profile is ready and they can publish their uniform page on Facebook, Instagram or both.

Companies that already have Facebook profiles for their business can switch to a Facebook Shop with the commerce manager which changes the page to sell on Facebook. The businesses can also promote their new profile on ads to appear as stories or posts.

Once live, customers can browse products and make in-app purchases though there is the option to go directly to the business' site to complete transactions.

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While SMEs can address customer issues via direct messaging and Messenger, Facebook eventually plans to enable browsing and purchasing directly from a message window. A loyalty program is also in the works.

"You’ll be able to easily see and keep track of your points and rewards," Facebook wrote in a blog post. "And we’re exploring ways to help small businesses create, manage and surface a loyalty program on Facebook Shops."

Many of these Facebook Shops features are already on established e-commerce sites Etsy and Amazon. The only differences is that Facebook is entering the competition with an audience of 2.6 billion monthly active users on Facebook and 1 billion monthly active users on Instagram.

Is my banking information safe on Facebook Shops?

Just like with Facebook's cryptocurrency Libra, Facebook Shops will likely face some criticism.

Facebook pushed Libra in order to shape a new global financing system last year. But, there was international agreement against the new currency. Privacy officials from the U.S., the U.K. and the E.U. said Facebook could not be trusted with personal user data in their Libra Network.

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"Many of us in the regulatory community have had to address previous
episodes where Facebook’s handling of people’s information has not met the expectations of regulators, or their own users," the officials wrote.

That same year over 400 million Facebook user phone numbers were leaked. In 2018, 50 million accounts were compromised. And no one can forget Zuckerberg's testimony in front of the Senate for the improper use of user data during the 2016 election.

"It's clear now that we did not do enough to prevent these tools from being used for harm as well," Zuckerberg said in his apology to Congress.

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Facebook preemptively combated privacy concerns as the new feature launched.

Kara Sutton, Privacy Policy Manager at Facebook, wrote that Facebook shares "shop performance and traffic" information with businesses in a blog post.

Sutton wrote that Facebook won't share any further personal information like email addresses with participating businesses unless a user gives them permission to do so.

But, Facebook Shops will impact the ads that users see across the platforms. Sutton said that interactions on Facebook Shops will influence ads seen across both apps.

As for banking information, Facebook wrote that payment method, transaction date, billing, shipping, contact details and card numbers are "securely" encrypted.

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*First Published: Jun 17, 2020, 7:00 am