Facebook, The Commerce Engine?

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I’m in a neighborhood “garage-sale” type group on Facebook and this weekend, spotted something I wanted to buy. When I started the conversation with the seller, Facebook showed me this message:

Facebook Commerce Blog

Facebook announced peer-to-peer payments about a year ago as a handy way to, for example, split a check with friends the same way you might with Venmo or Square Cash, but this was the first time I saw them promoted for a sale of goods. It seems Facebook is serious about building their business as a payment gateway. And there are two things that could be game-changing about it.

First – they’ve created a solution that’s scalable from single individuals to large businesses. The same technology used for a simple garage sale transaction can also provide a streamlined and frictionless way to deliver secure payments to a global retailer, without leaving the channel in which you’re conducting the transaction. It doesn’t even require the Facebook Messenger app to be installed, thus opening up the functionality to all of the nearly 1.6 billion users of the platform.

Second – and this point is facilitated by the scalability and simplicity in the first point – it’s a dramatic change from how we usually “find” items we want to purchase. Many retailers still think only of two distribution channels: their brick-and-mortar locations and their website. They might use social media channels to promote items, answer basic customer service inquiries, etc., but few consider social media to be a direct sales channel.

Retailers will tell you Facebook drives traffic to their website that results in purchases. BI Intelligence looked at conversion rates of traffic from various social platforms and found Facebook to have the highest rate, at 1.85%. Not bad, but as anyone who specializes in conversion rate optimization will tell you, the more steps required in the conversion “funnel”, the more likely the buyer is to drop out. As it stands, a typical process might look like:

Buyer sees dress on Facebook -> Buyer clicks through to main website -> Buyer adds dress to cart -> Buyer goes through checkout process including entering or confirming payment and shipment information.

There are many potential steps where the buyer may get distracted and not complete the purchase. Compare that to a process that never leaves the Facebook channel:

Buyer sees dress on Facebook -> Buyer clicks to start up an automated Facebook chat that confirms size, color, and shipping address -> Buyer confirms payment in channel.

A particularly robust automated self-service dialogue might even offer some accessories as an upsell once the initial purchase was confirmed, but the overall outcome would be to complete the transaction in fewer steps, without changing channels. It should result in higher overall conversion rates with fewer places for the buyer to step out of the transaction.

If we see commerce evolve in this direction, it will be yet another disruption for retailers – many of whom are just getting used to how the internet disrupted their brick-and-mortar business. Facebook-driven commerce would de-emphasize the website, change the nature of search-engine optimization, and place a high value on personalization, predictive modeling and brands’ ability to present themselves as a curator that drives purchases rather than a searchable repository.

Next week, at Facebook’s developer conference, F8, Facebook is likely to announce more innovative solutions that can drive “conversational commerce” for businesses, both live and automated. We’ll be there, so follow us on Twitter @AspectSoftware for live updates from the conference.

 

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