Instagram is continuing to lead and innovate the social commerce space. Over the last few years, Instagram has continued to release features to help monetize brands’ feeds. This includes (but is not limited to) the swipe up to shop functionality in Stories, in-feed product tags, and the shop button on business profiles.

How Social Commerce is Changing the Retail Game

Now, in the latest update from Instagram, the company seeks to continue advancing toward a truly seamless commerce experience inside the app without need to go to a brand’s website or app to make purchases.

Introducing Instagram checkout

This week, Instagram announced a new in-app checkout functionality, simplifying the process between discovering content on Instagram and purchasing it.

This week, Instagram announced a new in-app checkout functionality, simplifying the process between discovering content on Instagram and purchasing it. Only 23 select U.S. retailers are part of the initial beta rollout, including brands like Adidas, Burberry, Kylie Cosmetics, Nike, Outdoor Voices, and Warby Parker.

According to Gartner L2, fashion brands adopting shopping functionality on Instagram has increased from 12 percent to 42 percent year over year. And adoption rates among high-end prestige brands have increased by 25 percent. This shows that brands are eager to connect the commerce experience with their social content.

“I love shopping, and it sucks on mobile,” said Ashley Yuki, the Instagram product executive who is in charge of shopping, in an interview with Recode. “I think people abandon [shopping] flows now. I know I do. You just kind of give up.”

The new social shopping

Currently, as part of the shopping process, consumers will be asked for their name, email address, billing information—enabled by Visa, MasterCard, Discover, and PayPal—and shipping address the first time they make a purchase. Instagram will save this information inside the app for future purchases. Notifications about shipment and delivery are pushed out to customers via Instagram notifications.

While the allure of seamless shopping on Instagram is strong, brands should beware of what they’re giving up: data control.

The functionality will eventually allow for brands to integrate Shopify, BigCommerce, and other payment platforms to complete purchases. For overseeing the purchases, Instagram will be taking an undisclosed fee, or cut of sales, for facilitating these purchases.

“We view checkout as a way to make shopping even easier for our users, and if eliminating the need to leave the app makes that process more seamless, we’re comfortable with that,” said David Gilboa, Warby Parker co-founder and co-CEO.

But what about purchase data?

While the allure of seamless shopping on Instagram is strong, brands should beware of what they’re giving up: data control. With Instagram facilitating the purchases, brands will have less information about the customer who purchases inside the app—contact information and addresses only—versus those who purchase directly on the website or through a company app.

It is likely that your brands’ most loyal customers will continue to use Instagram for discovery, but will maintain their purchase behaviors on your branded website or app.

This extends past data collected at checkout and includes behaviors exhibited on your website and products browsed, as well as the ability to digitally encourage splurge shopping through suggested or frequently purchased-together products.

Even with this loss of data, some brands still see the in-app conversion opportunity as potentially lucrative. Vadim Grinberg, VP of consumer growth and insight at Dagne Dover, told Digiday that because Instagram is a main acquisition channel, “it should [still] result in more Dagne customers overall.” So, the number of customers and purchases outweighs the loss of data control.

What about brand loyalty?

There are still incentives for customers to maintain their loyalty to their favorite brands by shopping directly, including company credit cards and offers, sales and promotions not available or honored through a third-party platform, and rewards programs. It is likely that your brands’ most loyal customers will continue to use Instagram for discovery, but will maintain their purchase behaviors on your branded website or app.

Product tags and promotional posts

Yuki says that as of September 2018, the number of people viewing product tags inside Instagram has increased from 90 million to 130 million. As users continue to look for, ask for, and use these features, Instagram has been considering how to facilitate shopping within the platform.

Yuki says that as of September 2018, the number of people viewing product tags inside Instagram has increased from 90 million to 130 million.

Upon launch, the beta program will not allow retailers to promote these shopping posts, but the ability to do so is in the near future. Yuki also mentioned that the data being collected at checkout could be used to supplement Facebook’s advertising.

A standalone app is not likely

While there have been rumors of Instagram launching its own standalone shopping app, the company has yet to confirm this. It has been said that having to download a separate app for shopping defeats the purpose of simplifying the process. This is likely why we saw the most recent feature release within the existing platform, where 22 percent of Instagram users log in every day and 38 percent log on multiple times per day, according to Garner L2.

It’s also important to remember that while this beta launch is exclusive to the U.S. and select DTC brands, this behavior and capability are nothing new. WeChat has been facilitating in-app transactions for years. Many global brands have seen the success of using that app in Asia and will be comparing the outcomes they see from this new Instagram functionality.

So, what does this all mean?

Currently in beta, Instagram checkout will not be available to every brand just yet. But that doesn’t’ mean you shouldn’t be considering this capability and the implications it could have on your social commerce strategy.

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Consider how paid Instagram posts and your organic branded content, along with product tags, can help you continue to gain awareness and grow your customer base. Just remember, the right strategy for your business may not be the one your competitors are using.

As always, the DEG social team will continue to keep an eye out for further platform updates, as well as insights garnered from the beta test of in-app purchases to inform your strategy moving forward.

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