How Will Facebook Shops Affect Small Businesses?

CATEGORY: Communication | CSR | Data | Digital Marketing | Social Media | Strategy | Technology

On May 19, 2020, Facebook officially announced the introduction of Facebook Shops. This initiative has been trailed by mixed reactions as is typical of business innovations by Mark Zuckerberg’s social media and technology company. Citing the challenge of struggling small businesses and the increasing closure of shops, Facebook stated its goal thus, “to make shopping seamless and empower anyone from a small business owner to a global brand to use our apps to connect with customers.

Questions about business viability in the face of a pandemic have been rife. As lockdown orders took effect in several states across Nigeria, small businesses, especially those whose products and services do not fall under the essential category, had to shut down. However, e-commerce sites such as Jumia still carried on activities albeit on a low scale, delivering merchandise to people’s doorsteps. Although there is optimism that what we once considered normalcy will soon return to our lives, we have already witnessed a paradigm shift. Digital, the inevitable future, has taken full presence across all sectors. Does this have any implication for small businesses and how does the introduction of Facebook Shops come into the mix?

Why are we concerned about small businesses?

For the sake of this post and for more inclusiveness of information, small businesses shall be categorised under the broader umbrella of small and medium-sized enterprises (SMEs). These businesses are loosely defined as those with a turnover of less than N100,000,000 per annum and less than 300 employees. In Nigeria, over 90% of businesses are SMEs, according to studies conducted by the International Finance Corporation (IFC) as referenced by the Central Bank of Nigeria.

The United Nations as well the World Bank affirm that SMEs are crucial to the economic growth of nations across the globe, leading employment and export growth. The National Bureau of Statistics reports that these businesses have contributed about 48% of the national GDP in the last five years. In spite of these figures that point to the strategic nature of SMEs, they are faced with challenges that have continued year after year:

  • Poor managerial skills
  • Multiple taxes and levies
  • Huge gaps in infrastructure
  • Unfair competition and low patronage
  • Poor financial support and restricted access to capital
  • Absence of strategy and execution of e-commerce plans and ideas

A look at the potential online

Technological advancement has seen a radical evolution within the last two decades, resulting in the increased online presence of individuals and by extension, businesses. In 2019, an estimated 2.95 billion social media users were recorded worldwide with a projection that this number would exceed 3 billion by 2023 since about a million people join social media daily. A further breakdown points to each person spending an average of 2 hours and 22 minutes on social networks and messaging apps per day.

Among these users, Facebook usage continues to dominate. As of January 2020, Hootsuite recorded that the platform topped the charts with over 2 billion users. Similarly, 54% of social browsers use social media to research products and services. It is, therefore, appropriate to say that there is a lot of untapped opportunities on social media for businesses. Every enterprise naturally migrates to the location that promises a larger customer base.

According to a survey that sought to study e-commerce habit in Africa, Nigerians reported a diversity in product purchases as well as a frequency of online purchases. Relative to other African countries that made up the population sample, Nigerians appear to have a stronger disposition towards online shopping. On the flip side, the percentage of SMEs who sell online is still largely unknown.

Several e-commerce sites, some of which have shut down operations, contributed to the kick-off and scaling of the online shopping habits of Nigerians namely Jumia — which was rated as Nigeria’s most visited e-commerce site; Konga; V-Connect — formerly a business listing website but now providing e-marketplace services; There is also OLX Nigeria and Jiji — best known for providing a platform for interaction between sellers and buyers.

The place of Facebook Shops in all of these

Facebook Shops have been described by its owners as a mobile-first shopping experience where businesses can easily create an online store on Facebook and Instagram for free. Users can choose which items they want to feature and merchandise with product collections. The platform also enables customisable fonts and colours to enable brand owners to tell their brand stories. Potential customers and visitors can then browse, save and order products as is obtainable on e-commerce sites. Using WhatsApp, Messenger or Instagram Direct, users will be able to connect customers and respond to enquiries.

Facebook’s official announcement equally mentioned partnerships with Shopify, BigCommerce, WooCommerce, Channel Advisor, CedCommerce, Cafe24, Tienda Nube and Feedonomics to give small businesses the support they need. The aim is to leverage these organisations’ tools to help entrepreneurs start and run their businesses online.

In light of the nature and offerings of Facebook Shops, and the challenges which SMEs in Nigeria currently face, here are the ways our people at Anakle think this introduction will affect small businesses:

  • A quick way to keep up with the times
    “Coming at a period when the COVID-19 pandemic has nudged the world – and Nigerians – towards more online shopping, Facebook Shops might provide SMEs with a quick way to keep up with the times. By moving a business online, the challenge of sustaining a physical shop can be mitigated. In hopes that the setup process would be less bureaucratic than what most businesses in Nigeria already grapple with, this looks like a win.”
    -Omolara Dada, Social Media Manager
  • Prospects of a wide customer base
    “The introduction of Facebook Shops could offer a convenient way to grow a business. With over 2 billion global active users on Facebook and over 33 million active monthly users in Nigeria, this means an opportunity to “direct more eyes to your business.”
    -Olaitan Yisa, Online Accounts and Campaign Manager
  • Convenience
    “Even though there are a lot of online platforms which SMEs can trade on, the advantage of Facebook Shops over them is the ability to conveniently use their existing Facebook page to set up. If a user has gotten a hang of navigating the Facebook platform, exploring Facebook Shops would likely come off easier.”
    -Chisimchere Chukwu, Content Writer
  • An increased need for e-commerce strategy
    “Although this point was mentioned as a challenge for most SMEs, the introduction of Facebook Shops won’t make it go away. Instead, it will underscore the importance of marketing strategies that are tailor-made for selling on a densely populated platform such as Facebook. With the advantage of many users on Facebook comes the pressing need to stand out from the crowd.”
    -Ashley Opusunju, Deputy Chief Operating Officer
  • A shift in required infrastructure
    “Before now, SMEs faced the infrastructural challenge of inadequate power supply, bad access roads, etc. Migration to Facebook Shops will, on the other hand, call for amenities such as reliable internet connectivity to maintain communication with customers, logistics for delivery service, as well as setting up payment channels. “
    -Jetro Taiwo, Creative Lead

In the words Milan Kundera, “Business has only two functions – marketing and innovation.” A fast-evolving world calls for innovative change and adjustments, and with the increasing focus on digital, SMEs are compelled to move with the trends to remain relevant and profitable. The introduction of Facebook Shops shines a spotlight on certain existing challenges that can be solved on the platform. It also brings up the need for some structures that need to be in place to maximise offerings. What are the implications of these structures? Are there pitfalls to avoid? We’ll answer these questions in the next post.