How Facebook plans on capturing online sales for luxury products

While confinement unveiled the urgent need for many brands to accelerate their e-commerce, Facebook decided to launch last May its latest “Facebook Shops”, a trade interface consolidated for both Facebook and Instagram. One step further towards the juicy business of e-commerce that platforms all want to grasp, with Amazon in the lead and who could very soon launch a new platform for luxury brands only.

Violaine Gressier, Head of the Luxury Department at Facebook France, explains why luxury brands represent today a strategic sector for the American giant.

What does the luxury sector entail for Facebook in terms of business?

The luxury division of Facebook has existed for over six years. As you know, we do not communicate figures in industrial sectors, yet it is clear that luxury is very important for Facebook: it is strategic. It is globally managed in Paris, as this is where the major luxury brands have their HQ. It has now been five years that these players have been active on Facebook and Instagram and we have become one of the most important media in their mix. Nevertheless, I would say their digital transformation is still ongoing. The majority of big brands are coming to us for their media, yet today, digital transformation is happening through e-commerce. And confinement has accelerated this realization. Brands have also had to think about how to serve their client that wasn’t able to go to a boutique. They also needed to understand the clients’ digital behavior, and the means to contact them via messenger services. Omnichanelling has been on the forefront ever since. For example: in the beauty sector, many consultants who were used to advise in boutiques ended up at home. Brands then thought about ways to continue to have them work and speak to clients and prospects via WhatsApp or Messenger. But this example doesn’t mean there are oppositions between offline and online, it’s the client journey that is in the center.

Your will to penetrate the e-commerce sector has already been tested with the « checkout » function. What news on that front?

When the sanitary crisis was at its highest in spring, the notion of trade was one of the big priorities for the Facebook, Instagram, Whatsapp and Messenger platforms. We are noticing that users want to have the possibility of buying a product after having looked at it on one of our platforms. The “Checkout” function is implemented for the time being in the USA, and enables to purchase directly on Instagram, without leaving the platform, in a few clicks, by filling out your address and bank details. The package is then sent to you without redirected you to the website of the brand. These are the functionalities that we are testing, as there is a true demand from the user to buy compulsively. This function will certainly be launched in Europe beginning 2021.

Are you not preventing the brand from directly accessing its consumers, which is key for all brands today ?

No, we don’t prevent anything, we add bricks to the purchasing journey. It’s a fact: acquiring a product on a digital platform is relatively long. Therefore, we offer this possibility on our platforms, as the main challenge of purchasing online is that there are too many steps involved in the process. But the brand can very well only use our platform to drive traffic to its website, the choice is theirs. When purchasing happens on our platform, it’s a discovery buy, with no precise idea in mind, just like when you go shopping downtown. Each brand needs to have its own strategy.

What is your business model in case a buyer stays on Instagram and buys a luxury product: do you get a commission along the way?

Yes, a percentage is drawn. I can’t yet communicate about it, as this is not totally set in stone, but it is relatively small. It represents the financial part of the buy, considering the brand takes care of shipping and after-sales service. We don’t work as a “marketplace” as Amazon does, we don’t have the logistics to.

If you had to name a functionality that has emerged during the sanitary crisis, what would it be ?

During Covid, live and messenger platforms have clearly stood out. There has been a 50% increase of live streaming on Instagram. This represents a huge interest for luxury brands, such as Chanel for example, who broadcasted its show live during the month of March, on all platforms not only ours. And I can already tell you there will be evolutions on Facebook and Instagram linked to live streaming. For example, shopping during a live stream. This is already possible in the USA, with the checkout function. We have also seen a very high growth of video messages on WhatsApp. It is interesting, as we are only at the beginning of what brands can do with these message services. They are user appropriate as they enable an intimate space, by choosing groups and people and adapting perfectly to the client relationship or after sales service.

Are augmented or virtual reality still important topics?

Yes, it’s what the company has been betting on for a long time. Offering filters on Instagram and Facebook has existed for a long time. It’s a way of capturing the user’s attention by engaging interactions. Luxury brands are very present in these gaming concepts and immersive universes. We believe communication between brands, people and users will happen through virtual reality.