Too early to write off potential of Facebook commerce

Facebook is likely to carve out a strong position as a commerce platform for certain types of businesses and transactions

June 6, 2012

Despite the fact that some big US brands have shuttered their Facebook storefronts, Facebook is likely to carve out a strong position as a commerce platform for certain types of businesses and transactions.

Commenting on the disclosure that major US retailers Gap, JC Penny, Nordstrom and Gamestop have all closed their ‘Facebook commerce’ offerings in the past year, Consology co- founder Kevin Meltzer says that some product offerings are better suited to being sold in a social environment such as Facebook than others.

Several American retail chains found that their customers preferred to shop on their e-commerce Websites rather than buying goods through their Facebook storefronts. However, fans did like social aspects such as sharing their wish lists and discussing planned purchases with others on Facebook.

Says Meltzer: “There are a number of potential reasons that these Facebook commerce offerings failed to take off. Perhaps social media isn’t the right place to sell jeans and T-shirts to consumers because it is a place where they hang out with their friends. Many Facebook storefronts lack advanced features compared to the full electronic commerce offering that these retailers offer through their Websites. It could also be that consumers are just not used to F-commerce yet and that they will be more eager to use Facebook as a channel when their level of comfort with the privacy and security of the platform grows.”

One thing that is clear is that it is still too early to write Facebook storefonts off as a failure. Meltzer says that Facebook and general social commerce is likely to be a game changer for many classes of goods and products, despite the early failures. Virtual products such as music, movies, e-books, prepaid cellular airtime and event tickets are especially well suited to Facebook commerce, he adds.

Music and movies are a good fit with the social experience of Facebook.  For example, Facebook apps enable you to track what your friends are listening to or watching, share recommendations with each and then to check out the content on a service such as Netflix, Hulu or Spotify (provided you are in a country where these services are supported).

This makes it easy for media companies to sell since consumers are actively engaging with their content.  Because the transactions are small and gratification is immediate, consumers also don’t feel the need to spend as much time on research as they might if they wanted to buy branded clothes or shoes.

Meltzer says that each company needs to make sales and service available in the channels that customers find most convenient. With customers spending more and more time in social media sites such as Facebook – increasingly become a hub for news and media consumption in addition to social interaction- it makes sense for many organisations to reach them there.

Now that Facebook has listed on the Nasdaq Stock Exchange and has large cash resources available, we can expect to see Facebook invest in products or acquire companies that will drive it’s revenue earnings potential. Online commerce is one such area that Facebook could turn into a very profitable part of their business model both for traditional online users as well as for mobile users of their platform.

“Business models for social commerce are still in their infancy,” Meltzer says.  “For some companies, Facebook commerce will be a game changer. Others may get more benefit from directing transactions to their Web sites and keeping Facebook as a channel for engagement and marketing. What is important is to have a clear view of how social commerce fits in with your broader channel strategy,” concludes Meltzer.