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There's a new way for Instagram users to make an online purchase: Sliding into brands' DMs.
The news: Parent company Meta on Monday announced new features that allow Instagram users to order an item within a direct message on the platform. This includes capabilities to communicate with businesses about products and make a purchase directly from them. It all happens without leaving the chat.
How it works: In line with an ecommerce purchase flow, Instagram laid out three parts of the in-direct message process:
- Communicate with brands and businesses: Users can request information about an item, including chatting about customizations. This enables businesses to confirm product details, Instagram says.
- Place an order: Once a user decides they want to buy, businesses will be able to create a payment request with a product description and price. Users will be able to order the item from the business, and complete checkout using Meta Pay.
- Post-purchase: Instagram will also allow tracking of orders, and enable users to ask follow-up questions.
- The fine print: The feature is only available to businesses who set up their digital storefront.
Key stat: Meta says one billion people send messages to businesses across its apps each week. “We want to help people start conversations with businesses they care about and help them find and buy products they love in an easy, seamless experience, right from the chat thread,” the company said.
Social commerce on Instagram, a brief history: Instagram has long been an important channel for brands to reach consumers, as its photo-centered format provided an opportunity to show off their products via partnerships with influencers. More recently, Instagram has been rolling out features that enable users to connect directly with brands and make purchases from them within the app. These social commerce product releases have included:
- Shopping Stickers: When Instagram debuted Stories, shopping became a part of the feature in 2018 in the form of stickers that allowed users to tap for more details about a product.
- Checkout: In 2019, Instagram introduced tools that enabled users to make a purchase without leaving the app.
- Shops on Instagram: In 2020, Instagram rolled out full-screen storefronts where brands could present products, as well as tell their stories. This was an upgrade to a shopping feature that Instagram initially experimented with in 2016, in which brands could add shoppable photo tags.
- Going live: With a shop up and running, Instagram then rolled out additional features for brands to reach users. This included the capability to create a collection of products to be featured in live shopping events and Drops to showcase new releases. It also added a “view product” button to Reels that allowed shopping in its short-form video content.
- Product tagging for all: Earlier in 2022, Instagram opened up product tagging that was long available to brands and creators to anyone using the platform.
Where do DMs fit? It’s the latest example of how Instagram is bringing shopping to each facet of the platform. There are many different ways that brands can encourage shopping on Instagram, and this adds a new surface to the mix. Direct messages have long been a way to connect one-to-one with users for marketing. Now, they're a place to finalize a purchase, as well.
What does it mean for the development of social commerce? One school of thought on social commerce is that it will mean enabling the full range of activities associated with an ecommerce purchase to happen within a social media platform. Many of the existing functionalities on Instagram are centered around inspiring discovery of a brand or its products. At the same time, businesses already use direct messages to communicate with customers. With the new in-chat purchasing, Instagram is offering a way to complete a purchase and track an order through a feature that is core to the app.
One more thing: Reading through Instagram’s announcement today, one dichotomy comes to mind with the new features: While payments and order tracking can be automated, answering user questions pre- and post-purchase are likely the domain of humans. In fact, it makes a DM the venue for many customer service functions. That could make it an important site for customer experience. In some cases, brands and retailers have introduced chatbots for some of this work. Will they introduce automation on Instagram, and does Instagram have an integration to allow it?
They’ve got company: Instagram isn’t alone in its efforts to expand social commerce this year. The other big photo-centered social platforms are making moves, too. Snapchat is expanding augmented reality capabilities that are centered on browsing and buying products, while Pinterest recently signaled a big ecommerce push with the acquisition of personalized shopping app The YES, new features and the hiring of Google’s former commerce chief as CEO. Meanwhile, Twitter announced a partnership with Shopify to bolster its own Shops feature, and many brands are finding success reaching customers on TikTok.The bottom line: The social platforms are all centering shopping as they seek to adopt the lessons of the pandemic ecommerce boom for the long haul and seek new ways to grow revenue as digital advertising becomes more difficult amid privacy-oriented challenges. Plus, it's projected to be a $1.2 trillion market. Still, no platform has cracked social commerce yet. Each new feature is an experiment on the road to finding what resonates.
Trending in Shopper Experience
Product innovation, marketing and ecommerce helped boost sales 49% in the holiday quarter.
The clouds are getting darker in today's retail environment, but e.l.f. Beauty is shining. Digital commerce and marketing growth is a primary reason.
The makeup and skincare brand posted the following results for the quarter ended Dec. 31, 2022:
- Net sales increased 49% to $146.5 million year-over-year, driven by retail and ecommerce.
- Adjusted EBITDA was up 69% year-over-year, accounting for 25% of net sales.
- The outlook for the fiscal year was lifted. Net sales are now expected to be $541-545 million, up from $478-486 million.
The brand is also outperforming category trends. The cosmetics category grew 8% over 2021, while e.l.f. grew 36%.
“We grew our market share by 150 basis points and increased our rank to the #4 brand as compared to #5 a year ago,” CEO Tarang Amin told analysts. “We continue to be the fastest-growing top five brand by a wide margin.”
The strong results proved validating for a brand that prides itself on offering affordable cosmetics, and digital-forward marketing. They were also another sign of the resurgence of beauty as people return to in-person experiences post-pandemic and seek affordable luxuries that can provide joy despite tougher economic conditions.
Here’s a breakdown of the digital drivers of growth for e.l.f., and how it is showing strong results in a tough economic environment:
Marketing: Viral brands and sustained investment
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The brand prides itself on marketing that is both bold and pioneering on emerging channels.
One example came in the form of a holiday kickoff with the singer Meghan Trainor delivering a Weather Channel-informed report on social channels to celebrate the restock of the brand’s Halo Glow Liquid Filter, which was a viral sensation.
“The trifecta of e.l.f., The Weather Channel and Meghan Trainor helped us reach new audiences and entertain our community,” Amin said. “The campaign generated over five billion press impressions, exceeding last year's holiday campaign by a wide margin.”
The combination of innovation on product and virality in marketing helps attract a new audience for the brand.
“They see the viral buzz,” Amin said. “They see other people talking about this prestige quality, these great prices and particularly these days with platforms like TikTok, we get consumers doing their own demonstrations and comparisons.”
When it comes to metrics, Amin said the brand explores, “What percent behind each product are we pulling in new users?”
It's often up more than 50%, and attracts the core consumer in Gen Z as well as millennials and Gen X.
“I think the quality of these products at the prices we have and our ability to engage them really are attracting even more consumers to our franchise,” Amin said.
e.l.f. also deepened its marketing investment. The overall share of marketing is now 16%, as compared to 7% three years ago. It will increase to 17-19% this fiscal year.
“We recently completed our annual Nielsen marketing mix analysis and again saw exceptional ROI results, giving us further confidence that our marketing and digital initiatives are driving brand demand and delivering profitable growth,” Amin said.
Strong ROIs were observed across digital advertising and influencer marketing, while PR was “off the charts,” Amin said. Experimentation also plays a key role in developing these channels.
“The other thing about us is, we're not afraid to test and learn our new platforms. So we were one of the first beauty brands on TikTok. In the early days, it was hard to get attribution on TikTok. We now can see almost immediately when something goes viral on TikTok, the impact it has on our business and our ability to be able to attract that,” Amin said.
Ecommerce: Growing the squad
When it comes to ecommerce, Q3 digital consumption trends were up over 75% year-over-year, said CFO Mandy Fields. Digital channels drove 17% of total consumption in Q3, up from 14% a year ago. In the quarter that includes the holidays, digital channels were particularly strong through Black Friday and Cyber Monday.
A big point of emphasis for digital growth is the company’s Beauty Squad loyalty program, which provides early access, exclusives, free gifts and bonus points. The program grew enrollment 25% year-over-year to 3.5 million members. The loyalty program helps to boost the value of individual customers.
“Our loyalty members drive almost 70% of our sales on elfcosmetics.com have higher average order values, purchase more frequently, have stronger retention rates and are a rich source of first-party data,” CFO Mandy Fields said.
No slowdown in sight
Plenty of brands and retailers reporting earnings over this week are speaking of a slowdown in demand as a result of inflation and cooling demand in the economy. They also talk of consumers trading down to more affordable and smaller products that challenge margins. Amin batted away that kind of talk.
“No, we've not seen any slowdown in demand,” Amin said.
The response spoke to the unique place that beauty sits in this moment.
“What I'd tell you is, historically, mass color cosmetics, mass skin care has fared really well in…recessionary environments,” he said, referring to the Lipstick Index that posits beauty sales rise during economic downturns as people seek the small joys when they have less to spend on bigger items.
But there’s also a timing factor coming out of the pandemic.
“This is a category that really did suffer during the pandemic when people were restricted from their normal behavior,” Amin said. “So I've long felt there's a lot of pent-up consumer demand for the categories in which we compete, and we very much are seeing that.”