How Retailers Can Capitalize on Instagram Checkout

In March, Instagram publicly announced a new e-commerce feature. Rather than tagging items in posts and redirecting interested parties to an online shop, “Checkout on Instagram” enables brands to sell products to users directly inside the app. The promise is that companies can minimize any extra steps in the transaction process, and therefore decrease the likelihood of abandoned shopping carts. Furthermore, they can better capture consumer interest — while they're heavily engaged on social media — and thereby increase sales conversions.

Currently, more than 20 brands are beta testing the feature, including Adidas, Burberry, Dior, MAC Cosmetics, Prada, Warby Parker, and Uniqlo. Among these select brands, Adidas has already been generating results. CEO Kasper Rørsted shared on the brand’s earnings call that, in the first quarter of 2019, online sales saw a 40 percent year-over-year jump, which he largely attributes to the new Checkout feature and product launches via the Instagram app.

As the lines between social media and e-commerce blur and Instagram Checkout becomes more widely available, how can brands take full advantage of the exciting new feature and all that it promises? The answer lies in the metrics.

Use Social Media Engagement to Forecast Demand

By entering the e-commerce game, Instagram itself becomes a sales channel. What’s more, it’s a channel that offers extensive qualitative and quantitative data on consumer engagement from Instagram’s application programming interface (API). By connecting engagement data — e.g., number of likes, reposts and shares — with an overarching demand planning system, companies can derive more accurate demand forecasts. For instance, if there are high levels of engagement with a specific product in a post, then they can factor that into demand and adjust production numbers accordingly.

It's important to note that 1 million likes on a product post doesn't necessarily equate to 1 million anticipated orders. Social media data should be a consideration in addition to transactional data on actual purchases, consumption, sell-through, and other key performance indicators (KPIs). A level of cross-referencing between these metrics has to happen to get a holistic forecast of what the total demand landscape looks like.

Get a Clearer Picture on the Customer

Third-party data like the user data available through Instagram (liked posts, followers and following) provides valuable insight that can give companies a clearer picture of their customers and their buying behaviors. Such data supplements other key illustrative data, including:

• demographic information (age, education, occupation);
• transactional data (purchase frequency, purchase recency and price sensitivity);
• in-store data (repeat visits, promotion reaction and shopping cart products); 
• other third-party data (frequented locations, content preferences and media preferences); and
• external open data (weather and holiday effects). 

By tying all of this information together, brands can better cater to consumers and what drives them to make a purchase. On Instagram, it's possible to then target sponsored posts to suit individual tastes. For instance, two customers might both indicate an interest in women’s shoes, with one showing a preference for high-end designer heels, and the other leaning more towards minimalist casual sneakers. Women’s shoe lines from both ends of the spectrum can tap into these users’ accounts to target ads appropriately. With data on user purchasing behavior, they can even pinpoint when is the most opportune time for posts to appear in their feeds.

This makes for a more personalized experience, where people see products that they truly like, which leads to a higher likelihood of conversion —and means increased profits and less wasted ad spend. According to BRP Consulting’s 2019 Real-Time Retail report, 87 percent of customers today want a personalized and consistent experience across all shopping channels.

Deliver an Omnichannel Retail Experience

BRP Consulting’s Real-Time Retail report also notes that 56 percent of consumers are more likely to shop at a retailer that offers a shared cart across channels, yet only 7 percent of retailers currently offer that capability. With Instagram becoming a viable sales channel, there's an opportunity now to incorporate social media into a greater omnichannel retail experience, where there are no barriers between online and offline channels.

With omnichannel, a consumer might add an item on Instagram or an online store to their shopping cart. A brand can immediately see that there is interest and then use location data to notify the shopper that a nearby brick-and-mortar location has the item in stock. The shopper can visit the store, see the product in person, and then either complete the purchase from their phone or with a store representative. If they choose to buy online still, then the company can assign the closest distribution center to fulfill their order sooner. Everything works together seamlessly.

To take full advantage of Instagram Checkout and make the omnichannel future possible, companies need to break down the silos that exist across their supply chains. They have to connect many disparate parts, including e-commerce, order management systems, warehouse management systems, enterprise resource planning systems, in-store retail systems, and now Instagram. More will look to connective solutions like distributed ledger technology, or more commonly referred to as blockchain. With real-time data logged and disseminated with all links throughout the supply chain, these solutions offer heightened transparency and visibility into what consumers are really buying. Brands can thereby proactively plan their outreach, inventory and retail experiences to capture sales in any channel.

Neil Soni is senior director, strategy and business development, Omnichain Solutions, a supply chain technology startup that uses blockchain to help consumer packaged goods (CPG) brands and retailers drive business growth at scale.