Instagram's in-app checkout could prove to be a negative for Shopify
Instagram announced plans to bring a checkout feature to its mobile apps, which appears to be putting pressure on shares of Shopify (SHOP) on Tuesday morning.
INSTAGRAM ADDS IN-APP CHECKOUT: Instagram, a unit of Facebook (FB), announced Tuesday morning that it is bringing a checkout feature to its mobile apps. The company said in a blog post that Checkout "enhances the shopping experience by making the purchase simple, convenient and secure. People no longer have to navigate to the browser when they want to buy. And with their protected payment information in one place, they can shop their favorite brands without needing to log in and enter their information multiple times." In summary, when users tap on a product to look at the details, they'll see the option to "Checkout on Instagram," at which point, they can enter their billing and shipping information, which is stored for future purchases, and track their order. Users will be able to pay with Visa (V), Mastercard (MA), American Express (AXP), Discover (DFS) and PayPal (PYPL), Instagram said.
The feature is currently only enabled for 22 brands, including Prada, Uniqlo, Oscar de la Renta, as well as fast-fashion companies like H&M and Zara. Previously, completing a purchase on Instagram required using a pop-up on the retailer's site.
In the blog post, Instagram commented that "To make things easier for people who love to shop, we've introduced a number of updates in the last year including product tags in Feed, product stickers in Stories and a shopping destination in Explore. People told us that they wanted more time and space before buying so we made it easy to save and share products. As a result, we now have 130 million Instagrammers tapping to reveal product tags in shopping posts each month."
WHAT'S NOTABLE: The Verge reported last year that the company is building a standalone shopping app. The app, which may be called IG Shopping, will let users browse collections of goods from merchants that they follow and purchase them directly within the app, two people familiar with the matter told the publication in September.
POTENTIAL NEGATIVE FOR SHOPIFY: Instagram's in-app checkout could prove to be a negative for Shopify, whose app store contains dozens of plugins related to promoting and managing Instagram-based businesses. Shopping on Instagram has also been one of Shopify's biggest growth drivers for new accounts in the past year. In September, Shopify said in a blog post that "With over 500 million daily active users, it’s no secret that Instagram presents a real opportunity for brands and influencers to build highly-engaged, loyal audiences." The company added that "Instagram Stories present a tremendous opportunity to creatively showcase your products, and with over 400 million daily active users and growing, the potential for engagement is high."
PRICE ACTION: In morning trading, shares of Shopify are down nearly 1% to $204.27. Shares of Instagram parent Facebook are up 1.3% to $162.59.
Keywords: Instagram, in-app, checkout, Shopping on Instagram