Instagram’s e-commerce bet to take on Amazon, Flipkart, Google might be a long shot

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Updated: January 13, 2019 4:23:21 PM

With its ‘Shopping on Instagram’ feature, the company will help customers buy products online. Apart from India, the company is expanding the feature to 26 countries from existing 46 countries.

Apart from India, the company is expanding ‘Shopping on Instagram’ feature to 26 countries from existing 46 countries.

Instagram is planning to compete against e-commerce biggies in India such as Amazon, and Flipkart even as Google too launched its shopping search feature last December. Facebook too had been testing the Indian e-commerce waters in the past.

With its ‘Shopping on Instagram’ feature, the company will help customers buy products online. Apart from India, the company is expanding the feature to 26 countries from existing 46 countries, the company said on its website. That seemed imminent since India is its second largest market with 71 million users – as per company statistics site Statista – following the US with 121 million users as of October 2018.

Selling on Instagram, hence, is a no-brainer for e-commerce startups particularly in fashion. “It is a great channel for an online fashion store like us to sell items to the right audience since the majority of its users are teens. Also visually it is very rich and that’s what a fashion brand needs,” said Sujayath Ali, co-founder and CEO of Sequoia Capital-backed online women fashion marketplace Voonik.

Also for startups like online-to-offline shopping marketplace Fynd (that offers its open API for businesses to develop omnichannel retail apps), it is a great opportunity. Fynd’s API, for instance, powers Google’s What’s In Store feature for shoppers to find out products stocked in stores near them. “I am sure once Instagram launches this, it will look at tech platforms like us to enable that,” its co-founder Farooq Adam said.

Mindset Matters

As Instagram looks to monetize its traffic and help customers get instant shopping gratification, it is important to understand how does it convert the eyeballs to actual purchases.

From the customer context, his/her mindset while browsing a brand page versus on an e-commerce site versus on Instagram is different “On a brand’s website it is about having already discovered the product, on marketplaces like Amazon then they are looking to discover products, but on Instagram, instead of buying it is more about aesthetic elements. I am not sure if it can drive customers to buy products,” said Devangshu Dutta, CEO at retail consulting firm Third Eyesight.

According to details mentioned on the Instagram website, a business can tag up to five products per image or video and up to twenty products per carousel in a feed. When an Instagram post is created with tagged products, the post is shared with the business’s audience on Instagram. The customer can check the product’s price and details and click on it which is directed to the product description page on Instagram. Customers can then go to the website of the product to buy it.

Here, the discoverability aspect of Instagram to allow customers to find the latest trends in products works great for startups. “As a discovery platform, it will help startups with significant access to customers and influencers,” said Pinakiranjan Mishra, partner and national leader, retail and consumer products, Ernst & Young India. “However, Instagram might start charging startups in some way,” added Mishra. The business account on Instagram, similar to Facebook, is free.

From a discovery platform, if Instagram switches to an e-commerce model and starts transacting then there will be some impact. “Most of the fashion startups are too small, so it might impact them mid-to-long term instead of short-term because the market is growing,” said Mishra. However, it might as well not be the case.

Customer Delight?

According to Forrester’s 2018 Customer Experience Index based on a survey of over 9,000 Indian online adult consumers in 2018, the rate of improvement of customer experience is slowing down. “Of the 36 brands surveyed, just five had a statistically significant rise in their scores, compared with 20 last year. The five companies include Bharti AXA, HDFC Bank, American Express, e-fashion and accessories site Koovs.com, and electronics retailer Ezone.

Across the end-to-end transaction in e-commerce that includes discovery, order, delivery, and post-delivery problems such as returns or refunds; customer experience has to be seamless. And, Instagram might struggle in it.

“While Instagram is good in product discovery and it might even figure out ordering, and payments but delivery and post-delivery experience will be very difficult as both are very operational in nature,” said Ali. “Companies spend decades to get them right. Neither Facebook, WhatsApp or Instagram have any experience in the physical operation of goods. So either they would stay away from it or would not do a good job.”

Instagram didn’t respond to the email seeking comments for the story.

Even if Instagram is able to pull off all that successfully, the fact that the transaction is initiated from its platform, customers might not find it seamless in case of any default. “If the customer buys a product, he/she is buying from the Instagram environment whether the payment happens on the brand page, e-commerce site etc. So, Instagram will be responsible for how it executes management of customer expectations,” said Dutta. “I think Instagram will drive impulse purchase, unlike fashion e-commerce sites where the buy is planned instead of impulse.”

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