Not Amazon, Instagram is likely to dominate the future of online retail
Retailers need to be where their customers are, and increasingly, that’s Instagram, which has 1 billion monthly users. Its fashion following also makes it a place to show off the hottest styles and in-season merchandise. That’s better for margins than selling on a platform where price is the main driver — another knock to Amazon.
Luxury fashion is getting ready for its selfie. If it likes what it sees, the global apparel market could become a battle of the Everything Store against the Everyone Store.
Selling on Instagram is no longer just the province of retailers. A small group of influencers, including Kim Kardashian West, can now join in. And a new feature, Checkout, makes shopping much more convenient.
This is a big step forward in elevating Instagram commerce. It brings the holy grail of social shopping — being able to buy any garment directly from anyone’s Instagram post — much closer.
For luxury brands, Facebook’s app delivers what they’ve long sought in digital commerce: control over product presentation and pricing. In fact, the tech giant might just have created a high-end alternative to Amazon.com.
Selling fits well with Instagram, a visual medium beloved of fashionistas. Since 2017, store chains have been able to tag clothes, handbags or make-up in their posts. Clicking on the tags brings up product information, but to buy, shoppers are redirected to the retailer’s own website.
But Checkout, which debuted in March, makes the whole process much simpler, as consumers can complete their purchases without leaving Instagram.
What’s just as significant is that about 55 influencers will be able to tag products from Checkout trial brands in their posts. Kylie Jenner’s and Chiara Ferragni’s millions of followers will be able to shop their photos in just the same way as they can from the feeds of H&M and Zara, some of the 26 brands involved in the initial trial.
This could pave the way for Instagram commerce to explode. You wouldn’t need to be famous to sell clothes — your sister could buy the animal print skirt you were wearing in your latest post.
That is still a long way off. Turning everyone into a store would be a huge undertaking, even for a company as big as Facebook. But Checkout provides a glimpse of what that social shopping utopia might look like.
For now, the tool is only available in the US. Burberry Group, Prada and Dior are some of the high-end labels involved in the trial, and the global luxury market will be keen to see what they make of it.
There are a few potential pitfalls.
Checkout will require sellers to give up some control over customers, because their primary relationship will now be with Instagram. It has also introduced a transaction fee for brands using Checkout. That could become a problem if the platform starts to account for a disproportionate amount of sales. And of course, brands — in particular luxury houses — like the control over their image that posting on Instagram gives them. That could be jeopardised if it turns out that anyone can put up a photo to sell their wares.
These are risks worth taking. Retailers need to be where their customers are, and increasingly, that’s Instagram, which has 1 billion monthly users. Its fashion following also makes it a place to show off the hottest styles and in-season merchandise. That’s better for margins than selling on a platform where price is the main driver — another knock to Amazon.
Although Seattle’s shopping giant has been trying to improve its fashion credentials, it still doesn’t cut it at the high end. That’s one of the reasons why Jamie Merriman, analyst at Bernstein, says Instagram could become the go-to destination for a plethora of more-premium brands.
Though it’s early days for Checkout, it is already having some success. Adidas AG chief executive Kasper Rorsted cited it as one of the factors behind a 40 per cent increase in online sales in its first quarter. That builds on the success that retailers such as Burberry have had with the version of shoppable Instagram that preceded Checkout.
Indeed, this isn’t the platform’s first crack at social shopping. But the ease of Checkout means it has a good shot at making it work. As well as generating useful data on consumer purchasing that Facebook can use to improve its ad model, the tool can also deliver extra revenue.
Meanwhile, the competition is heating up. Google is making it easier to buy products from the YouTube platform, while its new visual search function, Lens, lets users photograph a product and buy it online.