INSTAGRAM INTRODUCES BUYING FROM BRANDS WITHOUT LEAVING THE APP.
Today’s consumers have many channels available to them. When they want to shop, they utilize a multitude of devices to find, buy, and talk about their purchases.
A little over a month ago, thanks to a partnership with PayPal and twenty leading brands including Prada and Kylie Cosmetics, Instagram ignited the latest and greatest path to conversion. Instagram users are now able to purchase products without leaving the app.
DECLARATION OF MOBILE
Two large drivers of the current eCommerce landscape are personalization and mobile. Smartphone users frequent their individually curated feeds for inspiration on what to buy next, and in response, brands and retailers have prioritized creating a mobile message for each consumer.
As this hyper-targeted marketing continues to evolve, the message oftentimes sparks a level of humanization with the consumer through these customization abilities. The use of this interest targeting is usually served through social media platforms, mainly Instagram. If that message entices a consumer to purchase, the user will typically lean toward the path of least resistance.
Social media and mobile network accessibility have driven a surge in mobile browsing and shopping. From the 2018 Adobe Digital Insights State of Digital Advertising report, mobile sessions across all age groups and industries are up 21% YoY while desktop sessions are down 21%. We use these key learnings to guide our recommendations to clients, similarly to what Nicholas Chao in Forrester states:
“Consumers are undergoing a disruptive shift towards mobile convenience. For key digital behaviors, a mobile is no longer just an option, but an expressed preference.”
As a result of this shifting consumer experience, pressure has been put on brands and retailers to deliver the best possible mobile experience.
For years now, Instagram has offered a platform for brands and retailers to project their products and campaigns directly to consumers. This form of marketing leaves the purchase experience in the user’s hands: they see something aspirational, and then progress down the purchasing path. This is substantially faster than venturing to the local mall, catching a glimpse during a commercial break, or glancing down at a side table magazine.
Brands and retailers quickly amassed a dedicated following that are eager to comment, share with friends and use as a launch-point for purchase.
In 2017, Instagram rolled out shoppable posts as a new outlet for brands to connect with their purchasers. Users were given the ability to click through to a brands site, utilizing product tags embedded into posts.
Back then, when clicking on the tag within the post, an intermediary window would redirect the user to the product purchase site. As best stated in a 2017 Business Insider article,
“Instagram is incredibly influential in product purchases…The vast majority of Instagram users, 72%, say they have purchased a product they saw on the app, and Instagram has become the leading social media site for luxury shoppers.”
As a result of this development, Instagram also began collecting new data points on very qualified users, with the platform releasing that an estimated 130 million people tap the product tags each month.
With its recent launch of in-app e-Commerce experiences, Instagram ultimately closed the gap in letting extremely qualified users leave the platform during the moment of purchase. (R)eCommerce is a profound recapturing opportunity for Instagram, regaining an originally acquired audience and enabling them to purchase without leaving the app. Now, the user experience will look like this:
PAYPAL AND RIPPLING MARKET EFFECTS
As the most trusted name in mobile and alternative payments, Instagram decided to partner with PayPal in powering the checkout experience. PayPal’s EVP and COO, Bill Ready, confirmed the partnership in an official statement, highlighting that the new ‘Checkout’ feature will be available within posts and stories through shopping stickers and tags. The feature will allow users in the U.S. to directly buy, track and manage purchases while also allowing businesses to sell within the app.
As some brands and companies such as PayPal greatly benefit from this development, this is not the case for all. One of the more interesting takes regarding Instagram’s move spoke to its effect on Shopify. As Karen Baker, CEO of ShipperHQ stated,
“Shopify’s largest customer was Kylie Jenner – well that seemed to be driven mainly from Instagram – so hey impact people.”
Shopify offers merchants the ability to link their Shopify channel on Instagram, this directs customers to Shopify powered sites, in turn generating revenue for the platform. The checkout feature now bypasses the visit to Shopify and keeps the transaction within Instagram from start to finish. RBC Analyst, Ross MacMillan, commented that the development provides a new checkout mechanism for a brand separate from the Shopify platform. With Instagram checkout, Jenner’s cosmetics line can now work-around Shopify. With her customers staying within the app for the entirety of the purchase, it eliminates their revenue generated by site visits from Instagram.
With PayPal powering the eCommerce checkout for Instagram, a shift in the marketplace has been formed between Shopify and PayPal.
INSTAGRAM’S BOTTOM LINE
In order to be a part of the Instagram eCommerce environment, the platform will be profiting through a selling fee charged to brands. The hope is that brands will view this as a net positive, as users will convert more often given the increased efficiency.
This selling fee is not the only value add that Instagram is counting on, according to TechCrunch:
“Instagram’s ad business could also get a boost as Checkout could convince brands that the social network produces a better return on investment because there are fewer steps before purchase…Check-out equipped ads could be a gold mine for Instagram.”
Social media companies capture a large portion of their revenue from advertisers. The new checkout mechanism gives Instagram new ad-revenue opportunity. With mobile expected to capture $93.25 billion in ad spend, Forrester declares it as the leading platform for US advertisers.
The Digital consumer report tells us that nearly six out of every 10 consumers shop contextually. As shopping continues to get more social and commerce becomes more contextual, Instagram has positioned itself to capture a large share of those qualified users.