How Do Instagram Checkout and Facebook Shops Work?

The eCommerce world has been evolving at a dizzying pace in response to COVID, led by rapid growth and innovations in mobile payments and online ordering. One of the most notable new tools for brands selling direct to consumer (DTC) online was announced on August 25th by Instagram CEO Adam Mosseri. 

"Instagram Checkout is now available to all eligible businesses and creators in the US allowing some small businesses to bypass traditional eComm platforms."
https://twitter.com/mosseri/status/1298279833974251522

This article will focus on the good, the bad, and the ugly of Instagram Checkout and aims to help you decide if it is right for your business. Spoiler alert - be sure to consider the impact on your integrated marketing channels. 

We’ll look into how Instagram Checkout and Facebook Shops work before diving into a light setup tutorial and finishing up with key considerations, drawbacks, and who this channel is best for. To streamline this article, we’ll be focusing mainly on Instagram Checkout. However, know that setup, management, and considerations are practically identical across channels at this time.

What Is and How Do Instagram Checkout & Facebook Shops Work? 

Instagram Checkout and the new Facebook Shop are the latest products from Facebook that boast a streamlined eCommerce experience. While shoppable ad and post formats have been available for years, this new shopping channel will remove any extraneous click barriers and allow users who see a product posted by their favorite brand or creator to be purchased directly on the platform.

On the customer side, to check out on Instagram you simply need to add an item from a shoppable post to your Bag, add your credit card, and check out. The largest benefit for both the customer and the business is that Instagram Checkout has essentially streamlined the path to purchase to just 2 - 3 clicks. Every subsequent purchase on Facebook’s family of apps (FB, IG, Whatsapp, and Messenger) will save your CC info and Bag information allowing users who jump from one platform to another to continue their checkout experience (and receive reminders about their abandoned cart).

 On the business side, admins can set up and customize the whole store through Commerce Manager within the backend of Facebook Business Manager. We won’t dive into a full step by step process here (there are plenty online already) but at a high level, you will be asked to: add your business information, agree to Facebook’s selling terms & conditions, upload a product feed, and customize your shop with product information/collection images (the fun part!).

 It’s worth noting that both Shopify and BigCommerce are in the process of finalizing integrations which will help you manage your shop throughout your current daily workflow. These will allow you to enable Instagram Checkout, edit your Facebook Shop, and make managing orders relatively painless.

Key Considerations & Drawbacks

Alright, now that we’ve covered the selling points and setup of these new channels, let’s take an anecdotal peek behind the curtain and talk about the positives and negatives.

There is no arguing that removing unnecessary barriers to purchase is a good thing; this should be a goal of all direct to consumer eComm brands. Facebook has been laying the foundation for these new shopping platforms for years, but this constitutes their first comprehensive push into the eComm space. Being able to tag your IG stories or even have a live stream where you talk about your product and allow for instant purchasing is a compelling enough reason to be an early adopter of this channel.  

The catch lies when you start looking at the selling fees and potential impact on integrated marketing channels. Though FB is waiving selling fees until the new year to incentivize businesses to opt-in, they will be charging a 5% fee on every item sold. When comparing this to Shopify (basic plan) and Woocommerce’s 2.9% fee on items bought using non-platform payment methods, we begin to see how Instagram Checkout may not be as feasible as we would have hoped, particularly for brands relying on their DTC channel to scale. 

Luckily, Facebook allows brands to opt-out of the Checkout feature during the set up in Commerce Manager, routing traffic directly to the site without incurring a  5% selling fee. At the time of writing this article, there is no information on what will be withheld from businesses who decide to take this route. Anecdotally, we assume future ad placements and eComm features will be withheld once the product is further built out. To opt-out of Checkout simply check the Your Website option during setup. 

While allowing customers to checkout directly through Instagram may reduce some barriers to conversion, it will reduce website traffic and the subsequent remarketing lists that support other campaigns like search, shopping, email, display and video. While it’s unlikely that the majority of online shopping behavior will shift from websites to social media platforms like Facebook and Instagram in the near future, even a 10-20% shift will have a noticeable trickle-down effect, thus increasing a brand’s reliance on Facebook and Instagram.

We do not believe that there will be a cosmic shift in consumer buying behavior but with 1 in 3 shoppers saying that they will be spending less time in stores after the outbreak is over, new online shopping channels should not be overlooked.

Businesses Best Suited for the Channel

This brings us to which businesses Instagram Checkout and Facebook Shops will be most suited for. Right off the bat, we see pure Instagram Checkout (buy on the platform) as being a fantastic marketing tool for lower price point products that don’t require significant research to commit to. For brands with more complex products, Instagram Checkout should be viewed as an additional product research tool until FB offers more tangible benefits (passing the data to the brand, allowing for more branding etc..) that negate the selling fee.

Ultimately, with higher ticketed products, customers are still going to want the brand experience and information that only a content-rich and SEO optimized landing page can provide. Consumer trust, something Facebook users are wary about, takes time to nurture and is achieved through a concerted effort from the brand across integrated marketing channels.

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