With Instagram ramping up its e-commerce capabilities, more brands are starting to use the company’s Checkout feature.
While all brand and business profiles have the ability to create shoppable product tags and build digital storefronts on their accounts, only a select group of brands have access to Checkout — a feature allowing customers to buy products within the Instagram app versus link out to an e-commerce site. While more brands seem to be granted access to the feature every few weeks — Abercrombie and Hollister launched Checkout in the last few days – it’s still unclear what brands get access and whether the feature will open up to all companies at some point.
There are still a lot of questions around the feature, and according to one brand marketer from a smaller DTC brand who entered into talks with Instagram about six months ago, the pros of using Checkout do not outweigh the cons. After a few weeks of back and forth, the marketer decided not to move forward with Instagram Checkout and said that, for most smaller brands, the feature doesn’t make much sense.
For our latest confessions, we spoke with this DTC brand marketer about why Instagram Checkout isn’t a fit for an emerging direct-to-consumer apparel company.
What initially attracted you to the idea of using Checkout for your brand?
I originally thought: Maybe we can convert a lot of new customers and grow our brand using this feature. And, yeah, maybe there’s a cost to it, but it could prove to be huge. Our customers are already [on Instagram], and there is low friction with Checkout. It’s less friction than on our own site. If customers bought from any one of those other brands [already using Checkout] and all their information is saved — their shipping address, credit card, it’s all there — they just have to hit Checkout. Also, the early-mover advantage was a draw. Maybe 15 to 20 brands were on it at the time, and we could have been one of the first.
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So what eventually made decide against it?
When we were going through the integration process, one big piece that stood out to me was that Instagram charges a 5% transaction fee, which is high. Maybe it’s understandable, considering they’re bringing you more customers. When you think about it, most brands use Stripe, a payment processor, and they charge roughly 2.9% plus 30 cents per transaction. Now you’ve got an extra 2% on top of that that you’re paying. I questioned whether it was worth that loss, at volume, especially when a lot of the sales are going to come from a current customer base.
[According to a Facebook spokesperson, “Instagram is testing a selling fee of 5%. This helps us fund programs and products that help make checkout possible, as well as offset transaction-related expenses. Checkout is in closed beta so the selling fee is also part of this test and may be different in the future.”]
We also started to look at the customer’s journey and flow through [Checkout], and how that might impact marketing. One of the things was that Instagram basically said, ‘You cannot market to the customer, and you can’t send them any transactional emails.’ So an order confirmation, shipping confirmation — none of that can be sent from the brand. Instagram does that. Those are all moments and touchpoints from a marketing standpoint, where we have a moment to communicate brand, even though it’s just a transactional confirmation. That’s taken away from us. It’s just not the best experience overall, and we decided not to go with it.
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What data did the platform say they would provide you with?
They provide enough data to fulfill the order. But they would also basically dictate what we could and could not do with that data. If they’re not allowing us to market to a customer, that’s not necessarily our customer anymore. It’s Instagram’s customer. That is one of the problems with Amazon, too. They hold the customer data and the rights to the data. The other part of it is that, on the fulfillment side, [Instagram has] really stringent rules. For example, if a customer messages [the brand with a refund request or an issue with the order], you have about 48 hours to messages them back. And while that’s all fine and well for what we would want to do, sometimes there’s a high order volume, like during Christmas or around a big a sale, and you can’t always get back to them back quickly. The other [requirement] for fulfillment is shipping within three days of the customer’s order. I’m assuming [Instagram] would’ve worked with us. But for many smaller advertisers and brands, accounts and handles have been shut down with no access or recourse afterward, I’d fear that could occur.
What would you want other smaller brands to know about Checkout from your experience?
Our brand has done well enough to make large capital moves, and there are a lot of companies of our size that have done well and can move into offline marketing, like retail stores or catalogs. But many smaller brands are very much dependent on these pay-to-play platforms like Facebook, Instagram and Snapchat. If they’re going to use a feature like Checkout, then their business is [going to be] based off of Instagram marketing or Facebook marketing; they are putting all of their eggs in one basket. When using Checkout, their customer source is controlled by Instagram in a much more strict way than it was when they were just marketing with them.
We also learned that Checkout required integration with Shopify and that, if we opted in to Checkout, there would be no way to undo the integration. So that 5% fee and those restrictions around marketing and fulfillment, we would be stuck with them.
[According to a Facebook spokesperson, “We offer different ways for businesses of all sizes to test checkout. Businesses can utilize our native Commerce Manager tools, choose from a variety of platforms, or integrate directly with our APIs.”]
