Online sales climbed 24% year over year, while Best Buy’s overall sales were flat.
Facebook will sell only gift cards through its Gifts program, not tangible goods.
Facebook Inc. is getting out of the business of selling physical products. The social network, which last September launched Facebook Gifts to let shoppers buy presents for their friends on Facebook, says that by the end of the week it will sell only gift cards via the service.
The move is a reaction to consumers’ lack of interest in buying their friends tangible gifts via the social network, says a Facebook spokesman.
“Since launching Gifts last year, roughly 80% of gifts have been gift cards,” he says. “So, we're now adding more digital codes and making the Facebook Card redeemable at more merchants.” The Facebook Card is a Facebook-branded physical gift card that shoppers can buy their friends via Gifts. The Facebook Card, which is reusable, can be used both online and offline at retailers Target Corp. and Sephora USA Inc., as well as beverage chain Jamba Juice and Italian restaurant chain Olive Garden. Target is No. 18 in the 2013 Top 500 Guide and Sephora is No. 144.
Facebook Gifts builds on the social network’s practice of highlighting consumers’ friends’ birthdays in the top-right corner of its home page under the heading “Birthdays.” The social network features a link under notes such as “John Smith is 30 years old today” that says “Give him a gift.” When a consumer clicks on that link he can select either a digital gift card or Facebook Card to buy his friend. He can then write the friend and note and share the gift—either publicly on his friend’s wall or via a private Facebook message.
It isn't surprising that Facebook is shifting away from selling physical goods, says Sucharita Mulpuru, vice president and principal analyst for e-business and channel strategies at Forrester Research Inc. "Facebook is quick to abandon things that don’t work or don’t gain traction," she says. "They have limited resources to devote to things that aren’t promising."
And selling physical products involves a lot of moving parts, she says. "Facebook was essentially becoming an affiliate network and that involves a lot of logistics that aren't worth the effort if people aren't interested," Mulpuru says.
Facebook Gifts is the social network’s broadest attempt to enter e-commerce. But like an earlier foray—Facebook Deals, which launched in 2011 as a Groupon-like daily deal service that sold limited-time deals that focused on social experiences—it posed a slew of new challenges for Facebook. In the case of Gifts, those challenges likely included the logistical issues involved in fulfilling and delivering physical gifts to consumers’ homes.