Changing retail habits: Facebook vs Amazon

Along with a multitude of other habits of our lives, retail habits have dramatically changed during the pandemic. With many bricks-and-mortar shops forced to shut down and consumers too nervous to go to the ones still open, e-commerce has been experiencing huge growth. Before the pandemic, online shopping made up about 15% of total retail sales. According to the Bank of America, e-commerce now takes a 27% share. 

Prior to the pandemic, most e-commerce purchases were discretionary items like fashionable clothes or electronics.

However, the stay at home orders mean more people have been shopping online for essentials they might ordinarily buy at a supermarket or an affordable department store. For example, Walmart’s online sales have increased by 74%. 

This environment has been ideal for the e-commerce giant, Amazon. People who shop on Amazon tend to already know what product or brand they want. They go there when they’re looking for the best price. As people are more budget-focused than usual at the moment, the changing retail habits have been great news for Amazon. Up 26% from this time last year, the pandemic has brought Amazon USD $74.5 billion for 2020’s first quarter.

While Amazon has traditionally appealed to product-aware consumers, it’s often perceived to fall short for the ‘just browsing’ type of shopper who tends to discover and purchase a product on a whim. This has been brick-and-mortar retail’s one advantage over Amazon’s convenience and pricing model. 

With this in mind, tech giant Facebook is now carving out a niche for itself in the product discovery sector of e-commerce. With such an incredibly large market share, Facebook Marketplace has already captured the attention of many people looking for a bargain. It makes sense then that Mark Zuckerberg and co has announced Facebook Shops, a new feature that gives traditional bricks-and-mortar shops new ways to sell online. Facebook Shops allows users to find new products and buy them directly in the application. 

When it comes to payment processing, stores can either use a third-party platform or they can use Facebook’s ‘checkout’ feature. Although the latter incurs a 5% fee, the charge is lower than that of Amazon or eBay. 

With this new feature, businesses will be able to generate revenue directly through Facebook and Instagram. As a result, they will be incentivised to spend more on ads on these social media platforms.

As retailers in Australia start to reopen, effective and affordable online visibility is key and many businesses are already pivoting to a more visible presence online. By using Facebook Shops, small retailers will be less reliant showcasing their products through bricks-and-mortar stores. Instead, they should benefit from highly targeted audiences discovering them on social media. Facebook Shops will also enable them to simplify their online revenue streams and get direct ROI on their social media ad spends. 

It will be interesting to track which Australian listed retailers are able to embrace this new technology quickly and visibly, and take advantage early of the windfalls of what is sure to follow such an incredibly large, habitual audience.  

Sources:

• The Guardian, First Thing: Amazon gets a pandemic sales boom, but its workers walk out
• ROI Revolution, How Coronavirus Is Impacting Ecommerce
• Vox, Here’s Facebook’s new plan to make you shop on Instagram

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