Instagram is a platform made for mobile apps. In fact, the desktop version doesn’t even measure up to the app from a feature perspective.
With more than 1 billion active users, Instagram is the home to thousands of influencers and where some global brands were born. So, it made perfect sense that Instagram would use its substantial, global reach to jump into mobile commerce, especially as shoppers become more accustomed to shopping by app.
In addition to Instagram Shopping, it launched a checkout feature this past spring, with 23 brands participating in the closed beta including Adidas, Dior, Burberry, ColourPop, Kylie Cosmetics and Nike, among others. In exchange for being the marketplace’s first brands, the companies pay a fee to Instagram to sell their products directly via the app.
It’s a price that has been worth it so far, according to Adidas’ CEO, Kasper Rorsted. He noted in a recent article that the checkout feature means fans aren’t taken to the brand’s site, but instead an Instagram triggered popup to complete the sale. Having the sale happen directly from inside the app is meant to inspire people to shop more and make them less likely to abandon a cart because they don’t have to leave one app for a separate site.
But is it worth it? Even while Instagram checkout provides a very intuitive buying process, it removes the brand from the buying experience which has some clear disadvantages. It also reduces their ability to upsell and cross-sell and eliminates control over the cart abandonment process. Most importantly, and perhaps the most detrimental factor to the 1:1 relationship retailers work so hard to build, Instagram Checkout diminishes the ability to deliver a customized brand journey including offering perks and customer opt-ins.
We agree with Instagram on one important point: App commerce is a winning approach for retail, especially around peak shopping periods like Black Friday or Prime Day. And Amazon wasn’t the only one to profit from its made-up holiday. According to Adobe Insights, large retailers with over $1 billion in sales saw average daily revenues jump by 54% on day 1 and 72% on day 2, while SMBs realized a 28% overall boost.
From our perspective, retailers that partner with Instagram could be at risk of the following:
Potential Loss of Customer Loyalty
If brands can’t gauge customer likes and dislikes through clicks and swipes, how will they continually optimize the mobile shopping experience? The less relevant the experience, the less likely customers will return a second, third or fourth time.
Customer Experience Degradation
As mentioned above, Instagram will provide sales data to the retailer, but this is only one small piece of the customer journey. Without a complete picture of customer engagement and spotty data, they lack the customer behavior insights that inform user experience, shopping trends and how shoppers are interacting with brands.
Loss of Control
By keeping users within the Instagram app to make a purchase, retailers lose control and ownership of the customer relationship. When browsing their favorite brand’s site, they’re very likely to engage with its content, save items or purchase something else. This won’t happen inside the walled garden of Instagram Checkout.
It really does come down to customer ownership. Retailers invest a lot of capital into building these relationships and creating a full brand experience, so the fallout of handing over the reins to a massive social media platform is unknown at this point. Retailers and brands that want to create a truly 1:1 customer relationship and build long-term loyalty in the process generally invest in a mobile app commerce strategy in order to meet these goals.
What we do know is that Instagram owner Facebook has not been transparent enough on how it’s profiting off user data. As Facebook was recently fined $5 billion by the Federal Trade Commission for not keeping its promises to crack down on apps mining user data, we just don’t know how Instagram stands to gain with its checkout feature from a customer data perspective. One thing we can be sure of: Shoppers will shop the Instagram app, but is it worth it for retailers in the long run?
Mike Hann is President of Poq