Why are Brands Shutting Their Facebook Stores?

Eager to monetize the large followings they had built on Facebook, many large brands set up shop on the social network for the first time last year.

Now many of those Facebook stores are closing.

A Bloomberg report this weekend pointed out that Gap, J.C. Penney, Nordstrom and GameStop have all opened and closed shops on Facebook within the past year — undermining expectations that the social network will become a major revenue driver for retailers over the next decade.

“We just didn’t get the return on investment we needed from the Facebook market, so we shut it down pretty quickly,” Ashley Sheetz, VP of marketing and strategy at GameStop, told Bloomberg. “For us, it’s been a way we communicate with customers on deals, not a place to sell.”

GameStop opened a store on Facebook in April 2011, and closed it six months later.

“There was a lot of anticipation that Facebook would turn into a new destination, a store, a place where people would shop,” Sucharita Mulpuru, an analyst at Forrester Research, added. “But it was like trying to sell stuff to people while they’re hanging out with their friends at the bar.”

The End of F-commerce?

Still, none of this proves that social networks don’t have potential as sales channels. It may be that retailers simply haven’t harnessed the power of these platforms in the right way.

In most cases, retailers have entered the f-commerce market by importing their online catalogs and making them available for purchase in a Facebook app. The experience is nearly identical to shopping on their websites, with two major differences: 1) Shoppers can complete their entire browsing and checkout experience without leaving facebook.com; and 2) the Facebook apps tend to work more slowly.

In other words, consumers have little to no incentive to shop via these Facebook apps.

Others simply have not dealt in enough volume — offering, say, just one item for purchase each month, or discounting one or two items for a short period.

Although these efforts have generated a fair amount of PR buzz, most of these companies are losing money on these efforts because development costs are so high, says Maureen Mullen, director of research and advisory services at luxury research and consulting firm L2.

Or the problem may be Facebook’s competition. If spending time on Facebook is akin to spending time with your friends at a bar, Pinterest is more like heading to a craft fair, Forbes‘s Jeff Bercovici points out — you’re there to browse and to shop, and brands are finding the platform worth investing in.

Facebook, at present, isn’t built for that kind of shopping experience. But it could certainly build Pinterest-like tools to make it that way.

At the very least, Facebook has become an important traffic driver to retailers’ websites. For instance, 1.9% of traffic to Burberry’s website in September 2010 came from Facebook; a year later, 29.1% of site traffic was from the social network, Mullen wrote in an email to Mashable.

“[Burberry is] using the platform to drive traffic at a fraction of the cost of what it would have to pay on Google and other search engines. In addition a significant portion of that traffic and resulting sales is likely incremental,” she added.

Mullen also pointed out that half of shoppers are logged in to Facebook while they shop on third-party ecommerce sites, which lets retailers “capture the massive amount of user data Facebook has,” she says. Brands such as Smashbox and MAC are also incorporating friend recommendations within their ecommerce pages.

In other words, it’s too soon to lament the demise of F-commerce. What we do know is that replicating retailers’ ecommerce sites is not the way to go about generating revenue via Facebook, at least for now.

Image courtesy of iStockphoto, -Oxford-

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