Brief:

• Facebook unveiled Facebook Shops, a new feature to help small businesses in the U.S. turn their social media profiles into digital storefronts. Businesses can set up a single online store for customers to access on Facebook's core social network and photo-sharing app Instagram, according to an announcement and details shared by CEO Mark Zuckerberg during a livestream Tuesday.
• Shops will let businesses have online conversations with their customers via the WhatsApp, Messenger and Instagram Direct messaging platforms. Facebook introduced privacy controls that won't identify which individuals visit a digital storefront, unless they give permission to do so. The company is currently testing Facebook Checkout to handle sales transactions, CNBC reported.
• Shops also will let businesses tag products shown in Facebook and Instagram livestreams, letting customers see a product order page after tapping on those tags, Zuckerberg said during the livestreamed event. The company is working with e-commerce partners including Shopify, BigCommerce, WooCommerce, ChannelAdvisor, CedCommerce, Cafe24, Tienda Nube and Feedonomics to support small businesses with Facebook Shops.

Insight:

Facebook's introduction of Shops expands on past efforts to bolster mobile commerce, while the coronavirus pandemic has added urgency to helping small businesses whose brick-and-mortar stores were ordered to temporarily close.

Facebook has previously said that its core ad business is seeing weaker demand due to the pandemic, but e-commerce is on the rise among quarantined consumers who can't go to physical stores to buy goods. Shops could help Facebook capitalize on this opportunity and accelerate adoption for the shoppable features it's been steadily building out over the past several years that look to give a stronger competitive edge against companies like Amazon.

The social networking giant plans to expand the Shops program, giving businesses a unified way to interact with their customers among its family of apps that include Facebook, Instagram, Messenger and WhatsApp. Previously, businesses were allowed to list products on Facebook and Instagram separately.

In most cases, Facebook Shops will act like an online catalog for businesses, whose customers will have to leave Facebook and complete a purchase on a separate website. The company is currently testing Facebook Checkout among a limited number of businesses that were invited to participate in the pilot platform, which enables purchasing without leaving the Facebook app. Facebook charges a commission on those transactions, but hasn't disclosed its fee structure while the program is being tested, Zuckerberg said in the livestream.

Also being tested is an integration for loyalty programs so users can earn and keep track of their rewards by connecting their loyalty and Facebook accounts.

The livestream included a discussion with Tobi Lütke, CEO of Shopify, the e-commerce platform that helps companies build digital storefronts. Shopify last month debuted a mobile shopping assistant app called Shop that covers a range of services, from product discovery to payments, and provides real-time delivery updates. The app leverages Shopify's one-click Shop Pay checkout feature, previously called Shopify Pay, to handle transactions and Arrive to track the status of online orders.

For Facebook, small businesses are an important part of its clientele, making up most of its more than 8 million advertisers worldwide, Zuckerberg said. With many of those businesses ailing during the pandemic, Facebook has announced several initiatives to support them.​

The company last week introduced features to help local businesses connect with customers, including a #SupportSmallBusiness hashtag on Facebook and a "Support Small Business" sticker on Instagram that allows users to rally around local companies. Facebook also created a $100 million program that provides ad credits and cash grants to help companies cover wages and rent. As many as 30,000 small businesses in more than 30 countries were eligible to receive a grant from the company, per an announcement.

While most of Facebook's revenue comes from mobile advertising, the company has expanded into commerce amid a growing threat from Amazon, which has a fast-growing ad business. Facebook's commerce initiatives have included a shoppable 60-second spot on Instagram starring singer Celine Dion that let users buy a curated selection of clothing items and accessories. Around the holidays last year, Instagram also created a curated collection of products inspired by some of the year's biggest style trends that users could purchase without leaving the app.

Social media apps like Facebook and Instagram have become more popular for shopping as they seek to connect advertisers with target consumers, especially younger adults. Ninety-two percent of millennials and 97% of Gen Zers said social media is their top source for shopping ideas in a survey by installment payment service Afterpay.