Instagram Checkout – The Future of E-Commerce?

As one of the largest social media applications globally, Instagram not only keeps acquittances connected, sends cute puppy pictures to your fingertips, but it also opens doors to influencers and products that are catered to your preferences. According to video technology company VidMob, more than one third of Instagram users have made a purchase through an Instagram ad. Instagram is well-positioned to take advantage of its reach and transition from a social media site to a social commerce giant.

What is Instagram Checkout?

This is not the first time the Facebook-owned picture sharing platform dabbed in the social commerce theme. Its parent company Facebook has implemented Marketplace, a community more catered to C2C sales. In addition, Instagram has implemented “Paid Partnership With…” tag and product tag functionalities for influencers to better direct customer traffic to merchants. Instagram Checkout makes the shopping experience more seamless, as it allows users to browse, shop, and pay for their purchases – all without leaving the Instagram app. This makes it easier for businesses to leverage influencers to lead to direct sales, and presents opportunities for smaller businesses to make sale without having an e-commerce platform.

What’s in it for Instagram and the Merchants?

Besides the obvious benefits of greater exposure to customers, merchants may also spend more on Instagram ads, as a direct checkout experience may convert more ad browsers to paying customers. However, merchants may lose out on important user data as that will stay with Instagram and definitely further boost Instagram’s ads algorithm. For Instagram, this makes it easier for the influencers to earn commission based on revenue that can be tracked through Checkout. The financial benefits for Instagram are also staggering – not only does it charge 5% per shipment on all transactions, the network effects its ad functionalities can create with checkout will definitely be noticed and compensated.

Sizable Opportunity?

On the other side of the Pacific Ocean, social commerce has gained significant e-commerce market share in China. In 2019, retail social commerce accounts for $186B, or more than 10% of e-commerce sales in China. Similar to Instagram, the dominant social media platform in China - WeChat has introduced “Mini-Programs” in 2017 as a way for WeChat users to shop and led to much success. Combined with WeChat Pay, users can also checkout directly from the app. In recent years, livestream marketing has also become more prominent among youths in China, through platforms offered by e-commerce companies (i.e. Alibaba).

There clearly is a growing market for retail social commerce, and it remains to be seen whether Instagram can rise to the challenge and grab the market leader position.

References: 

https://www.forbes.com/sites/forbestechcouncil/2020/08/17/why-social-commerce-could-eclipse-e-commerce/#7555ff9937c2

https://martechseries.com/mobile/mobile-marketing/e-commerce-and-mobile-commerce/bigcommerce-teams-facebook-unlock-checkout-instagram-feature-us-merchants/

https://www.emarketer.com/content/china-social-commerce-makes-up-11-6-of-retail-ecommerce-sales