Tuesday, Facebook (NASDAQ: FB) made its biggest breakthrough in e-commerce with the launch of Shops, an initiative to help small businesses create an online store. The social media giant is rolling out features that will help small business owners set up a unique digital storefront that will be available to users on its Facebook and Instagram platforms. Facebook says it will be free and easy to set up a store, allowing merchants to quickly switch to e-commerce.
Facebook received a huge boost from the news, gaining more than 6% on Wednesday, pushing the title into uncharted territory as investors sensed the enormous opportunity offered by e-commerce. At first glance, it seems that Facebook would have the most to gain from this decision, but another company should benefit even more: Shopify (NYSE: SHOP).
A gateway to electronic commerce
Companies will be able to choose the products they want to present in their catalog and customize the look and feel of their store, with a variety of pockets and accent colors that will allow merchants to better present their brand. Businesses in the United States will also be able to activate the payment functionality, which will allow customers to place an order and complete the transaction without ever leaving the application.
Facebook will charge a small fee for each purchase, although the real money comes from the additional advertising potential – which provides the lion’s share of Facebook’s fortune. Merchants “will be able to connect with their customers via WhatsApp, Messenger or Instagram Direct to answer questions, offer assistance, etc. “
There is no doubt that a new push in e-commerce via Facebook is a logical next step. The company has a captive audience of 1.73 billion daily active users (DAU) and 2.6 billion monthly active users (MAU), so it makes sense to increase its exposure to online shopping and sales. . It’s important to note that Facebook had already established a bridgehead in ecommerce, allowing users to buy and sell items on the Marketplace corner of its platform, with users also following brands and influencers on Instagram.
The devil is in the details
One of the important details that seem to have been lost in the redesign is that Facebook, which was already in partnership with Shopify, will wait behind the scenes to give these entrepreneurs the tools they need to start or manage and move their businesses. online. . Shopify is one of many back-end technology partners, a list which also includes BigCommerce, WooCommerce, ChannelAdvisor, CedCommerce, Cafe24, Tienda Nube and Feedonomics.
The e-commerce provider released its own missive on the deal on Tuesday, which helped highlight the opportunities offered by the partnership.
“Shopify powers more than a million businesses that are transforming the landscape of direct consumers and changing the way we shop. With Facebook Shops, we are bringing the technology industry together to help entrepreneurs succeed at a critical time, “said Tobi Lütke. , CEO of Shopify. “By linking Shopify’s platform and business capabilities to the reach and scale of Facebook, we are reducing barriers to entrepreneurship and advancing the future of commerce.” “
The company also revealed that the payment functionality will be powered by Shopify, and its existing merchants can automatically connect their businesses to Facebook stores, potentially increasing their own sales.
Why this is a big problem for Shopify
Shopify already provides the tools to support the next generation of e-commerce entrepreneurs. By partnering with Facebook, the company is expanding its business, introducing a new wave of merchants to everything Shopify has to offer. Those who achieve some success on Facebook will likely expand beyond the confines of this e-commerce gateway for beginners and move on to the more robust set of tools and services that Shopify has to offer.
Facebook has much to gain from expanding its links to e-commerce – but the opportunity for Shopify could be even greater.