A year ago, the social media app ventured more deeply into ecommerce game by adding an in-app Instagram payments feature. In what now seems to have been the testing period, some users were able to book appointments at spas and restaurants through a third-party integration with dinner reservation app Resy, according to the Verge. After this, some believed that the next step would be an Instagram standalone shopping app.
Instagram becoming a commerce platform with shop feature?
It became clear, in March this year, that the Instagram pay was just the first step among many for Instagram to become a commerce platform. As the company itself said in the blogpost:
“Checkout is just one part of our long-term investment in shopping”.
The following step was the Instagram Checkout feature, which enables users to store payment information with Instagram to make purchases more quickly and buy from the app without leaving it at any moment.
It already launched in the U.S., but in closed beta testing, with more than 20 top brands, including Adidas, H&M, Huda Beauty, which will no longer have to direct customers to their websites for shopping on Instagram.
Just like with shopping bag tags, the users will see checkout tags on feed posts, Stories and Explore content. When tapping the product, instead of the old “View on Website” button, users will input payment and shipping information with Instagram shop now feature.
After users buy something within Instagram with PayPal, Visa, Mastercard, American Express or Discover, they’ll be able to track it from a new “Orders” section of their profile, that shows the status of an order, plus cancel, initiate a return or contact the merchant. Although for now, Instagram will not be sending receipts through Direct messaging.
Instagram and merchants
In return for conveniently selling their goods on Instagram, merchants will have to pay a seller fee, which for some will pay off but for some may not. When Techcrunch asked how much the “selling fee” would charge merchant, the Instagram spokesperson said they aren’t sharing any specific numbers currently. Even though they are still testing the fee, they stand by the fact that it will not change the price of the items for consumers.
Additionally, merchants will only get the details necessary to fulfil an order, such as contact info and address, but not actual payment info. In the process, users will decide if they want to share their email address with the seller for marketing purposes. This might leave merchants with a little less data than if the purchase happened on their website. Instagram also responded to this by saying the platform will provide info on which sales it generates for a merchant.
Instagram says that before the introduction of Checkout, 130 million users tapped on product tags in shopping posts every month, so the increase in conversion rates are potentially huge. Some have already shared their experience of Checkout.
For Adidas, the price they pay for selling on Instagram is worth it, according to their CEO Kasper Rorsted. He said that online sales have jumped 40% since the beginning of the year , which Rorsted has attributed largely to Instagram. Now, with the Checkout feature, the numbers are expected to rise even because the app encourages people to shop more, making them less likely to abandon products. Rorsted added that the new feature has allowed the brand to dramatically increase its mobile conversions, an area it was previously struggling with.
Adidas is among one of the 20 brands currently testing out this feature, and it seems like the returns outweigh any of the data loss. In fact, Ouai, another Instagram Checkout beta tester, is using what sales data they do get from Instagram in addition to engagements to determine what type of content influences purchases the most.
However, for smaller business, the situation may not be a complete win-win. Gita Samani, Digital Consultant at Astound Commerce UK spoke about the benefits and the other side of selling through Instagram. She said that the trade-offs for the insta-seamless sale are quite big and risky. The first one being that brands and retailers are having to surrender a large slice of their hard-won brand equity and that their stores are practically becoming Instagram in-app store. More precisely, she said:
Customers who purchase goods through Instagram Checkout are effectively Instagram’s customers, not the brand’s. Instagram has made it clear that the platform will only share with brands the information necessary to fulfil an order. Brands aren’t even guaranteed a customer email address as customers will have to opt in. In an era when data is pre-eminent, that could be a bitter pill to swallow. (Netimperative)
For the small businesses that exist and depend solely on the app, selling on Instagram could indeed be great. It is because they won’t have to pay for domain name, hosting, shopping cart software, etc. Another additional benefit is not needing to pay for payment gateways which are necessary to process online payments, as all payments are processed onsite or in-app.
Nevertheless, this will certainly be a powerful tool in any businesses’ marketing armoury. Especially, since the platform has replaced word-of-mouth for some small businesses.
The ones who don’t opt-in, Instagram still stays a great advertising platform. For example, the insta-plant queen DirtQueenNYC will not be adding the new Checkout feature because for her, the face-to-face experience is very important.
What Instagram shopping feature means for the seller?
- Having an ever growing platform of users
- Increase in sales
- Easy onboarding and payment processing
- Additional sales channel
- Having the benefits of Instagram’s great UI and UX
What Instagram shopping feature means for the customer?
- Single platform for all steps of shopping
- Intuitive payments process
- Easy and simple information input
- Great digital experience
How will Instagram checkout impact the ecommerce ecosystem?
With the new feature, Instagram is stepping on a territory that has traditionally been dominated by the likes of Shopify, Squarespace and Wix. Instagram will now be circumventing the visit to the external platform and keep the transaction within the app from start to end. This means that Checkout could potentially steal traffic away altogether from the Shopify platform. This also applies to merchant’s ecommerce website so they might find themselves not investing in a website infrastructure at all and focus their resources on growing the Instagram business.
What will determine the way forward is the cost of driving traffic to website V/S sale conversion and cost of driving traffic to Instagram V/S sale conversion.
Finally, if you’re interested in how Instagram Shopping works, and if it’s a good fit for your brand, it is not difficult to set up the account and add the shopping feature. First, you have to be in some of the following countries:
- United Kingdom
Then, you need to set up a Business Profile on Instagram. Your Instagram business profile must be connected to a Facebook Page. The rest is easy, tagging products is just like tagging friends but you can check all of the details here.