Instagram is changing the way people buy things

New York (CNN Business)Instagram is great for sharing photos, interacting with celebrities and discovering trendy looks - everything even Amazon has struggled to perfect.

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New York (CNN Business)Instagram is great for sharing photos, interacting with celebrities and discovering trendy looks - everything even Amazon has struggled to perfect. Fashion houses, retailers and big brands see an opportunity.



Until recently, brands have used Instagram mostly as an advertising tool to reach consumers. But Instagram has made a series of moves to become a shopping hub, forcing companies to adapt their digital strategies.

Although Instagram remains a very small player in retail, if the platform disrupts shopping one day, retailers who got blindsided by Amazon years ago want to be ahead of the curve this time.

In March, Instagram introduced a new checkout option that allows customers to purchase products directly off a handful of companies' pages within its app. Previously, shoppers had to leave Instagram when they found a product on the app and buy it off retailers' websites. That was an irritation for customers, analysts say.

Instagram has also added tools that allow customers to shop items on its Stories and Explore pages. And shoppers can buy looks that Kylie Kenner, Kim Kardashian West and other celebrities wear on their Instagram feeds directly through their posts.

Instagram is a useful tool for shoppers to easily discover a curated mix of clothing from brands and celebrities, experts say. This type of hunt can often be frustrating for customers online. That's because browsing to find clothing is challenging on Amazon or retailers' websites and apps, where shoppers often have to scroll through dozens of pages and hundreds of products.

"What the internet hasn't been particularly good at is solving for discovery and window shopping," said Andrew Lipsman, analyst at eMarketer. "Instagram is starting to help fill that need for shoppers."

Instagram's efforts to transform into a shopping hub have enticed some brands. These companies see an untapped market to sell their merchandise directly to their large Instagram followings.

Companies like Adidas say they are taking advantage of the new tool by launching new sneakers and clothes on Instagram.

"Our consumer spends a ton of time on Instagram," said Emily Maxey, vice president of marketing at Adidas. "The consumer is using Instagram to research our products, connect with friends to get recommendations about our products, and ultimately buy.

Instagram's strategy resembles the popular social media app WeChat in China, said Lipsman. WeChat, the dominant messaging platform in China, has been successful getting shoppers to purchase off the app.

A Growing Opportunity

Shopping off Instagram could be a $10 billion market by 2021, according to Deutsche Bank, and the platform allows brands to woo shoppers beyond their own websites, brick-and-mortar stores and Amazon (AMZN).

Instagram says that 80% of the app's users follow a business. More than 130 million users every month tap Instagram posts to see shopping product tags.

"It's early days for shopping on Instagram, but we're excited about this over the long run," Facebook Chief Operating Officer Sheryl Sandberg said on an analyst call last month. Facebook (FB) owns Instagram.

More than 20 brands, including Nike (NKE), Adidas, Uniqlo, Warby Parker, Outdoor Voices, Prada, Dior and Kylie Cosmetics, are testing an updated checkout feature with Instagram. These companies hope the option will make it easier for customers to purchase through Instagram and boost their sales off the platform.

Companies like Adidas (ADDDF) and Burberry (BURBY) also say they are teaming up with Instagram to gain a larger stake in the future of shopping through social media. "We can be a first mover," said Maria Culp, spokesperson for the sportswear company.

Warning signs for retailers

Instagram does not disclose the fee it takes when shoppers buy a product off its app and brands have stayed mum about their financial arrangements.

Despite Instagram and its partner brands' optimism, analysts say there are challenges for retailers selling through the platform and embracing Instagram too closely.

It's hard for companies to make a profit on Instagram, said Jason Goldberg, chief commerce officer at advertising firm Publics. On Instagram, retailers sell one item at a time to customers, instead of trying to get them to buy a basket of items like they do on their e-commerce sites. "You can't say 'Oh, would you like socks with those shoes?' If someone wants to buy two things, they have to go through checkout twice," he said.

Sucharita Kodali, analyst at Forrester Research, argued that brands should be wary of becoming too dependent on Instagram for sales. That's because brands don't have as much control over their customers on Instagram as they do at their own physical stores or e-commerce sites.

"You're basically handing over some of your most important proprietary information to companies that have no commitment to your privacy and have no respect for the delineation between their customers and yours," she said.

Source: CNN Business' Kaya Yurieff

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