The Pros and Cons of Instagram Checkout

Today, social media can make or break a brand. With the ability to instantly reach and engage thousands of new and existing customers, social media remains a key component for brands looking to build awareness, drive sales, and generate loyalty.

With the launch of Checkout on Instagram, social commerce just got a big boost. The new feature, which enables Instagram users to buy items directly from merchants without ever leaving the Instagram app, promises a more seamless shopping experience, giving consumers a quicker, easier way to purchase directly from one of today’s most-used social platforms. With over 130 million consumers currently tapping Instagram’s product tags on shopping posts, merchants shouldn’t ignore this new wave of online shopping.

But is Checkout really a silver bullet for sellers? For brands hoping to gain access to the new feature in the coming months, the benefits may be tempting, but there will also undoubtedly be risks to consider.

Benefits for Brands

For small to midsized retailers, Checkout promises to help level the e-commerce playing field. For brands, especially those that don’t have great web interfaces, reaching and converting customers directly through Instagram can help reduce the challenges of hard-to-use websites, enabling smaller, lesser known brands to better compete with larger, established competitors.

Additionally, Checkout is appealing as it reduces barrier to purchase, which ultimately increases conversion rates. Instead of being taken to a brand’s website, users can quickly purchase from a merchant without leaving the Instagram app. What’s more, personal information is stored directly on the app, giving users the convenience of only needing to fill it out once, instead of multiple times for various brands. With a purchase just a few screen taps away, there’s less risk of abandoned shopping carts — a major positive for sales. Even more, Instagram Checkout offers a new transaction channel with very little added operational complexity. Unlike a platform like Amazon.com, merchants will be able to integrate their current sales platforms or tools such as Shopify, BigCommerce, ChannelAdvisor, and CommerceHub, helping keep all operations and logistics consistent.

Risks to Consider

One potential drawback to Instagram Checkout is limited access to data. Users’ payment and shipping information is stored in Instagram, and merchants will only be allowed to access necessary customer information to fulfill an order — i.e., they’ll have less data than if the customer purchased directly on their website. For instance, consumers can opt to share their email addresses for marketing purposes, which are key to building long-term loyalty and driving repeat purchases. Additionally, Checkout could reduce opportunities for product discovery and building customer loyalty. Since the entire purchase is executed through Instagram, brands lose the opportunity to drive traffic to their site, where consumers can discover additional products.

A more tangible risk for merchants, especially smaller brands, is the selling fee associated with using Instagram Checkout. Rather than making users pay a convenience fee for purchasing through the app, Instagram will offset transaction-related expenses by handing the expense to merchants in exchange for higher purchase conversion rates. This may deter SMBs with smaller profit margins from using the Checkout feature.

While brands should undoubtedly weigh the costs and benefits of Checkout, the new feature ultimately promises to be a positive update for not only established brands, but also — and maybe even more so — for SMB retailers looking for new tools to compete and sell.

John Kinny is general manager at ShipStation, a shipping software company based in Austin, Texas.