While Google and others offer similar tools, experts suggest the Facebook ads could prove 'extremely valuable.'

Facebook Inc. today rolled out dynamic ads for retail, a new mobile ad unit that retailers can use to drive in-store traffic and sales.

The ads enable a retailer to dynamically showcase products available in a store that’s nearby the consumer seeing the ad. The ads build on Facebook’s more broadly focused dynamic ads, which let retailers and other advertisers serve shoppers ads based on the products they looked at on the merchant’s site or app.

Retailers that have tested the ads include Abercrombie & Fitch Co., No. 58 in the Internet Retailer 2016 Top 500 Guide; Argos Ltd.; Macy’s Inc. (No. 5); Target Corp. (No. 22); and Williams-Sonoma Inc. (No. 21).

Using the ads, a fashion retailer can advertise a nationwide sales event happening at every store but only showcase the products that are in-stock at a nearby store and display the price found at that location. Because the ads are linked to a retailer’s local product catalog, if a product sells out in one store the campaign automatically adjusts so that consumers in that region will no longer see it advertised. Retailers can optimize the product selection for each ad based on consumers’ online and mobile shopping behaviors.

“We want to enable retailers to show the right person an ad showing her what’s available and in-stock at a nearby store,” says Joe Devoy, Facebook product manager. “We built this in reaction to feedback from the market. Most retailers don’t care where their customers shop—whether it is online or offline—but they need tools to connect the two. We’re trying to build a bridge between online and offline.”

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Facebook research suggests that 49% of in-store purchases are influenced by digital interactions—more than half of which take place on mobile devices.

That data suggest why the ads, while not original—Google offers a similar ad with its local inventory ads—could prove valuable to retailers, says Rebecca Lieb, an independent media analyst. “It’s not original or unique, but it is an important addition to Facebook’s arsenal of tools,” she says. “It could very effectively close the gap between online and offline attribution.”

Facebook also is introducing “store visits” as the primary reporting metric for the dynamic ads for retail ads. The metric, which was first offered in June, is estimated based on information from shoppers with location services enabled on their phone, as well as from merchants that use Facebook’s beacons that it began giving away last summer. The metric can focus on consumers who saw the Facebook ad within one day, seven days or 28 days before coming into the store.

The ads are a clear sign that Facebook wants to compete more directly with Google for advertiser dollars, says Cathy Boyle, eMarketer Inc.’s principal analyst, mobile. “This is clearly a sign that Facebook is going after the lower-funnel investments that Google has long captured. By giving retailers better tools, Facebook may steal some of those dollars that might have otherwise gone to Google.”

However, she notes that the majority of the dollars that will likely flow to Facebook will from retailers shifting ad dollars from offline ads to digital ads. She points to eMarketer’s latest projection, which predicts that digital advertising will account for 38.4% of North American advertisers’ ad budgets next year, up from 35.9% this year. That reflects retailers such as Ulta Beauty (No. 153), Kirkland’s Inc. (No. 508) and Williams-Sonoma shifting more of their ad spending to digital from print.

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“New dollars are coming from traditional media channels,” she says. “And there’s still more money to move, which benefits both Facebook and Google.”

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