What Is Instagram Checkout?
Instagram Checkout allows customers to complete purchases within the Instagram app itself instead of being redirected to the merchant's website. Earlier, completing a purchase on Instagram required using a pop-up web view on the retailer’s site, where users are more likely to abandon their shopping carts. Reasons for the drop off could range from bad page design to long page load times. The customer experience is inconsistent and more often than not the customer leaves items in the cart in frustration.
This feature is a game changer, significantly improving customer experience and creating a new revenue stream for parent company Facebook, which has recently signalled that it expects commerce and payments to represent the future of the company.
By allowing people to complete their purchases inside the app, it is expected that Instagram will be able to ensure more transactions are completed. Instagram will monetise this service by charging a fee (undisclosed) to the sellers.
How Will This Impact The E-Commerce Ecosystem?
While Instagram has launched its closed beta with large retailers, it will eventually become an important weapon in the arsenal of the small business - a territory that has traditionally been dominated by the likes of Shopify, Squarespace and Wix. Currently, merchants can link to their Shopify channel on Instagram, which brings customers to the site and generates payments revenue for Shopify.
With the Checkout feature, Instagram circumvents the visit to the external platform and keeps the transaction within the app from start to end. While Shopify’s gross payments volume from Instagram purchases are very small today, the new feature could potentially steal traffic away altogether from the Shopify platform.
What Are The Potential Implications For Small Business Owners?
Instagram checkout will draw lesser traffic to the merchant’s website as the transaction will take place on the app itself. An additional service fee might become a part of the costs of running an e-commerce store if Instagram is a place that has traditionally drawn traffic to their website.
Stores that sell highly “visual products” on Instagram might find themselves achieving a higher sales conversion than before.
Small businesses might find themselves in a position to be able to compete with the big brands - Checkout might create a level playing field where David can take on Goliath!
If the feature becomes a success, small e-commerce businesses might find themselves not investing in a website infrastructure at all and focus their resources on growing the Instagram business.
Cost of driving traffic to website V/S sale conversion and cost of driving traffic to Instagram V/S sale conversion will dictate the way forward.
It is too early to say what will happen but small e-commerce businesses should start teaching themselves more about Instagram and if I were Shopify, I would show more than a passing interest in Checkout.
I would love to hear your thoughts in the comments below.
Shomik Roy is a business strategist and marketer. He is also an MBA student at Schulich School of Business, Toronto. Shomik’s area of expertise lies in marketing strategy and scaling up sales.