Instagram launches shopping checkout, charging sellers a fee

Instagram is opening a whole new revenue stream. Now the 130 million people who tap Instagram’s product tags on shopping posts will be able to buy those items without leaving the app, thanks to stored payment info. “Checkout with Instagram” launches today in the U.S. with more than 20 top brands, including Adidas, Kylie Cosmetics and Warby Parker, which will no longer have to direct customers to their websites to make a purchase.

An Instagram spokesperson confirms to TechCrunch, “We will introduce a selling fee to help fund programs and products that help make checkout possible, as well as offset transaction-related expenses.” When we asked how much the “selling fee” would charge merchants, the spokesperson told us, “We aren’t sharing the specific number right now. We are testing a selling fee with businesses during the closed beta. It will not change the price of the items for consumers.” That indicates Instagram wants merchants to cough up the fee in exchange for higher purchase conversion rates rather than forcing users to pay a convenience fee for buying through the app.

Instagram’s ad business could also get a boost as Checkout could convince brands that the social network produces better return on investment because there are fewer steps before purchase. For now, only organic posts from the launch partner merchants will feature Checkout buttons, and ads aren’t eligible. But Checkout-equipped ads could be a gold mine for Instagram, just as Facebook’s News Feed ad business looks shaky and CEO Mark Zuckerberg declares commerce as a fixture of the 2019 roadmap.

Checkout tags will appear on feed posts, Stories and Explore content from the brands in the closed beta that Instagram plans to eventually open to more businesses. When users tap the post to reveal product tags and open one, they’ll see a Checkout with Instagram button instead of the old “View on Website” button.

Their first time through they’ll enter their payment information, which is stored for future purchases. “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,” Instagram explains. Saving merchants from abandoned shopping carts left by users frustrated with having to sign up with each different brand is the key value offered here. TechCrunch recently reported Instagram is prototyping a Fundraiser sticker for Stories that similarly saves payment info — a database Instagram clearly wants to build up.

After users buy something within Instagram, they’ll be able to track it from a new “Orders” section of their profile that shows the status of an order, plus options to cancel, initiate a return or contact the merchant. They’ll also get a notification from Instagram when the order ships. Interestingly, Instagram isn’t mixing receipts into its messaging product like Facebook does with Messenger.

Merchants will only get the details necessary to fulfill an order, including contact info and address, but not your actual payment info. Users will see an opt-in option to share their email address with the seller for marketing purposes. Checkout with Instagram could leave merchants with a little less data than if the purchase happened on their website. But Instagram says it will provide info on which sales it generates for a merchant.

Users can pay with PayPal, Visa, Mastercard, American Express or Discover. Instagram plans to allow merchants to integrate their Shopify, BigCommerce, ChannelAdvisor, CommerceHub and other tools with the Checkout feature. Meanwhile, Instagram confirms that interacting with Checkout will be used as a signal for ranking which content you see. Payments are processed by PayPal — an area of business Facebook has been content not to invade, and PayPal’s fees will likely be covered by Instagram’s selling fee.

“We started using product tags to make shopping more convenient for our customers,” writes Warby Parker co-founder and co-CEO Neil Blumenthal. “Checkout takes this experience one step further, making it even more intuitive and seamless for people who have discovered products they want to purchase instantaneously.” Here’s the full list of launch partner brands: Adidas, Anastasia Beverly Hills, Balmain, Burberry, ColourPop, Dior, Huda Beauty, H&M, KKW Beauty, Kylie Cosmetics, MAC Cosmetics, Michael Kors, NARS, Nike, NYX Cosmetics, Oscar de la Renta, Outdoor Voices, Ouai Hair, Prada, Revolve, Uniqlo, Warby Parker and Zara.

There’s still no sign of an Instagram standalone shopping app that was reportedly in the works. Instead, it launched a dedicated Shopping channel in Explore and tags for Stories six months ago. We recently spotted Instagram prototyping a Pinterest-style feature that would let users make publicly visible their private Collections of Saved posts. That would be a great way for commerce influencers to recommend Checkout-equipped products. Facebook has spent five years experimenting with different Buy buttons, but now it finally has them in a place they feel natural.

Instagram has fiercely protected the right to link out of its app in order to keep you steadily consuming its content. Now with more than one billion users, Instagram has trapped people’s attention inside, and it’s finally ready to sell the right to sell there.