Facebook and eCommerce domination Part 2/3— Supreme shows us the way29 May 2020
Last article, we covered the basics of Facebook Shops: its past, present, and possible future. In this article, let’s talk about how this pits Facebook against other digital eCommerce tool platforms like Shopify, Amazon, and Google.
We're going to be talking about the middle portion of the Facebook Iceberg
There are three big parts:
- eCommerce (you can review that in Tetris, but make it $100 Billion)
- Signalling as a Service
- Strategic footholds against competitors (you can skip to Gee, Brain. What are we going to do tonight?)
Pre-requisite topic 1: Signaling as a Service
To examine this, we’ll talk about a concept called “Signaling".
There are two categories of purchases:
- Commodities- we buy Toilet Paper because we need to wipe our undercarriages
- Signaling- we buy Supreme because we need to signal our culture and taste (and ability to pay egregiously marked-up prices). The author argues that “well over 90 percent” of human behavior can be explained by signaling.
Note: buying a TUSHY bidet could fall into the 1st or 2nd bucket
Other examples of Signaling include Fundraiser events on Facebook, Athleisure, and Toms.
There is no company better in the world at enabling signaling at scale than Facebook. Between Facebook and Instagram, any signal that you want to embed in your post and picture can be fulfilled.
Pre-requisite topic 2: Strategy
My working definition of strategy is the Michael Porter definition: strategy entails doing different things in a different way from other competitors such that your positioning and activities is hard to replicate and follow.
Facebook and its agglomeration of apps makes an excellent case study for strategy. Anybody who wanted to compete with Facebook on this front would need to build:
- A payment processor like Facebook Pay
- A mature Ads marketplace
- An AR/VR arm to help merchants power virtual home try-ons (which is especially helpful during this coronavirus time)
Putting it all together: Facebook's strategy, along with its unparalleled ability to provide signaling services to users, puts it at the head of the pack for digital eCommerce
The only handful of companies even close to the ballpark are: Shopify (best-in-breed for digital storefront management), Amazon (best-in-breed for logistics with FBA), and Google (best-in-breed for Ads)
Let’s talk about where these 4 companies are strong:
- Amazon helps consumers buy commodities at the cheapest price and fastest shipping possible
- Shopify helps merchants spin up, manage, and operate their stores
- Google helps merchants target consumers via the world’s largest Ad platform
- Facebook is the only company that allows consumers to share, comment on, and signal what they've bought
I believe that Facebook's strategy is superior here: they've targeted and captured the very human urge to signal. With Facebook and Instagram, they've built vibrant networks to allow and encourage signalling. This gives them a great Forward Operating Base to build tools that allow merchants to sell to these consumers.