TECHNOLOGY

It’s Time to Shutter Your Facebook Shop

So much for so-called f-commerce. Four reasons why Facebook users aren't buying.
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You'd think that Facebook would be a natural place for companies to sell their products and services. After all, the company claims far more than 800 million active users. But such big companies as Gamestop, J.C. Penney, Gap, and Nordstrom have all shut down their Facebook stores, according to Bloomberg.

Gamestop says that customers had no reason to shop via Facebook rather than go to the company's own website. Gap's explanation was similar, while Nordstrom decided on a broader social media strategy. Wade Gerten, CEO of social media development firm 8thBridge, which opened a number of Facebook stores for its clients, said that companies are bailing out and that so-called F-commerce deserves a grade of F.

Charles Nicholls, founder of e-commerce consultancy SeeWhy, recently wrote that, except for a few exceptions such as music and games, which can be inherently social, direct selling on Facebook is a bad idea for most companies for four reasons:

People don't go to Facebook to shop

Companies sell their goods through retailer chains, e-tailers, and their own e-commerce websites because, to paraphrase bank robber Willie Horton, that's where the consumers are. Getting sales rests significantly on catching people when they're in a buying mood. That's why shopping malls can be so successful. Someone goes into a mall ready to buy and then sees other opportunities.

But social networks are different. People go to them to socialize and have fun. Although there is a large group of people on Facebook, providing opportunities to shop may not work because that's not why they logged in.

The results aren't incremental

There are various reasons why you might want multiple retail outlets, but they generally boil down to more opportunities for additional sales. However, according to Nicholls, there is no evidence yet that Facebook creates those additional opportunities. Instead, they seem to cannibalize sales that a company could have made by using promotions to drive people to its own site.

There might be ways to make the purchasing process inherently more social, but that would mean a different approach than setting up a storefront on Facebook and directing customers there instead of your own site. And if there aren't incremental sales, then a company ends up spending more resources on its entire retailing strategy, lowering margins as a result.

T-R-U-S-T

Many people distrust Facebook. That might seem unfair, given that other companies collect the same types of data to better target advertisements and marketing. But this is a case where perception trumps reason. According to Nicholls, some studies (he didn't name them) suggest that people are reluctant to shop on social network sites because of concerns about security and privacy.

Small horizons

A company has latitude to do what it wants on its own website and to use information from viewing and purchasing habits to improve consumer experience and financial results. But you're more limited on Facebook. There is less space to display products and the Facebook stores typically have far less merchandise than on e-commerce sites. Throw in the further limitations of mobile interfaces to Facebook, which are very popular, and you now have a big merchandising challenge.

There might be ways to make a Facebook store work, but most companies would be better off redirecting the efforts into improving the effectiveness of their own e-commerce sites and in creating promotions to drive traffic.

IMAGE: Flickr/GOIABA (Goiabarea)
Last updated: Feb 22, 2012

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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