Instagram recently released Checkout, its new all-in-app service for brands to sell products directly to consumers with a couple clicks on a photo. The beta release is rolling out with heavyweight brands, including Zara, Nike, and Prada. For this teardown, I’ll walk through the overall product, my impressions from the buyer and seller perspective, and success metrics for the future roadmap.
Checkout starts with someone clicking on a desirable clothing item shown from one of the brands in the beta test. According to Bruno de Martino, a PM at Instagram who helped bring the feature to launch, Checkout is designed to work with both posts and stories, but I’ve only been able to view the feature on posts so far. When a post has shoppable merchandise, one tap on the photo shows all the merchandise you can choose from.
What are the goals of Checkout? First and foremost, this allows Instagram control over its e-commerce presence; by keeping everything in-house, Instagram can ensure the same type of experience for all of its users, regardless of brand. Among the details in the launch, I noticed that “once your first order is complete, your information will be securely saved for convenience the next time you shop.” With payment info saved on the platform, Instagram (and, by extension, Facebook) can significantly lower barriers to continued purchases from its userbase.
What I like
From the seller persona, I see that this solves a key problem of user dropoff that comes from shifting multiple platforms. Before Checkout, people could at best click on a product photo, get redirected to that brand’s website, and go through the checkout process there.
Of course, I expect that Instagram is getting a cut of the sales, whereas redirecting people to my website allows me to cut out the middleman. For this to be worthwhile, a buyer needs to be getting significantly higher conversion. Given that Instagram retains buyer information, this is definitely plausible.
As a buyer, Checkout makes purchasing stuff I like on Instagram a lot simpler. I don’t have to make accounts at several different companies if I see few different styles I want to buy, and the checkout process itself feels very streamlined. This opens up a new way of discovering clothing through visual channels, which feels very natural — it’s how I’d shop if I were in a physical store.
- 4% of users who follow one of our beta test sellers purchase at least one item.
The “follow one of our beta test sellers” addition is an important differentiator because of the narrow scope of the beta test. I don’t follow any of the beta-tested brands, for example; I wouldn’t know that this feature was active on Instagram if it weren’t for the press coverage.
Why 4%? Without data from Instagram, I use a 3% benchmark for average e-commerce conversion rates. I also know that Instagram will be charging some fee to process payments through Checkout, and that businesses are likely the ones paying the fee. With 4%, assuming that the fee Instagram charges is less than 25% of the purchase, then it’s worth it for businesses to use Checkout instead of redirecting people to their own websites: (4%)*(100% – 25%) = 3%. This makes the product a win-win for Instagram and its business customers.
- $X in revenue generated for Instagram
Instagram is launching Checkout in a bid to take its ecommerce presence to the next level. From a financial perspective, I imagine that executives are hoping this will be a big money-maker, especially as Instagram’s parent company Facebook faces increasing scrutiny on its ads platform. To that end, it makes sense to have a revenue-based goal defining the success of this beta release, although I’m uncertain about what specific dollar amount is used. To calculate this, I would need more specific information on the brands currently testing Checkout, as well as the cut Instagram gets from each sale. I noticed that most of the brands in the beta release are high-profile, so this revenue metric should be significantly higher than the average revenue Instagram projects it can get per business at full scale.
The rollout of Checkout seems to be going pretty smoothly so far. Thinking ahead, I have a couple recommendations to continue to improve the buyer and seller experience.
- Allow influencers to create affiliate links
Nike is listed as one of the beta testers, for example, and a lot of athletes on Instagram are sponsored by that legendary swoosh. By using the same technology in the beta, but allowing approved accounts create sponsored Checkout posts on their own profiles, brands can logically extend their reach from paid ad posts to direct selling. Given today’s hero worship of celebrity, I imagine that these posts will prove lucrative to all sellers involved.
- Allow editing of addresses in-process
I created a test address to explore the Checkout feature from a buyer perspective. Instagram Checkout has verification procedures, so I wasn’t able to enter an address that didn’t exist, but it does auto-save any address entered in the checkout process, even if the transaction isn’t completed. To delete the address, or modify it, I had to go to Settings –>Payments –> Delivery Info, which takes me away from the buyer experience. A simple fix would be to allow a buyer to tap a current address and edit it as they go through the checkout funnel. I don’t think this would take a lot of engineering time, and it would further ensure that users maintain the streamlined experience Checkout seems to be going for.