IS INSTAGRAM THE ULTIMATE FASHION MARKETPLACE?
Originally conceived as a simple photo sharing iPhone app back in 2010, Instagram has had a skyrocket success that has led it to potentially become the proud successor of Net-A-Porter. And, as NAP did in the early 2000’s with the luxury segment, Instagram is in a position to revolutionize the way we shop fashion.
But, before developing the argument, let’s have a look at NAP and Instagram histories up until today.
Net-A-Porter story made short
Founded by Nathalie Massenet in June 2000 (just after the dotcom bubble burst), #NAP pioneered the luxury e-commerce channel by developing a completely new approach to market: the concept of a web-based magazine with the looks of Vogue where users could click to buy the garment.
After merging with Yoox (another online platform) in 2015 and being almost completely taken over (95% of stakes) by Richemont group in 2018, it operates sales platforms for 40 luxury labels as well as multi-brand online magazines and stores Net-A-Porter, Mr Porter and The Outnet. At the takeover moment, NAP was valued over EUR 5.3bn. NAP currently has 6 million active users per month.
Instagram story made short
Founded by Kevin Systrom and Mike Krieger in October 2010, Instagram was conceived as a mobile photo-sharing social media platform. 25,000 users already showed up on the first day. Three months after, it reached 1 million users.
Sold to Facebook in 2012 by USD 1bn, it started adding features to monetize its user base. Tags, sponsored ads, stories,… until it introduced shoppable posts on 2018, which redirected the user outside the app to the seller website and, in 2019, added it latest feature that allows shopping within the app.
Their founders resigned in 2018 due to loss of autonomy against Facebook.
Instagram has currently more than 1 billion active users per month and its estimated market value is above USD 100bn.
User generated content: the key to Instagram success
As per the short success histories above, it is clear that NAP and Instagram have many similarities that make it attractive to the people (aka potential customers). They are both visual and, above all, inspirational.
The main difference is the source of inspiration. While NAP’s fashion editor generates and has complete control of all the content on its website, Instagram is “just” providing a platform and relies on the people to fill it with contents (user generated contents). This free, non-commercial (initially, at least) approach has connected with the people and has brought Instagram to have more than 1 billion active users per month nowadays.
Instagram user base is so huge that many businesses, specially the ones that depend on images to sell their products, have turned their eyes to this platform. According to Instagram, there are more than 25 million of business accounts, 80% of platform users follow at least one business account and 7 out of 10 hashtags are branded.
How does Instagram make money?
Instagram didn’t generate any revenue until 2013 when introduced paid advertising on its service. Despite this, it was bought by Facebook in 2012 by around USD 1bn. Instagram value was (and it still is) the reach of mobile users.
Main source of revenues from 2013 up until now have been sponsored posts and stories which have been undoubtedly a big deal. But now, as users can differentiate them from organic posts, their attractiveness will lower (but still being really attractive).
But the path for increasing future revenues is clear as per Instagram spokesman: “Since our earliest days, people on Instagram have loved to shop ... Checkout is just one part of our long-term investment in shopping”.
The new revenue model will be based on charging a bit per transaction, what Instagram called “Selling fee”, whose amount has not been revealed yet. This new feature, at the same time, may impulse further investments in advertising resulting in a double win scenario.
Instagram is currently estimated to be worth more than USD 100bn.
Instagram vs Amazon
#Amazon is currently the king of e-commerce. In 2018 it reported more than USD 180bn in retail sales. Those are with no doubt impressive figures that make Amazon reach the 2nd position within the biggest retail companies worldwide just behind Wal-Mart.
It seems that Amazon wants to become “the marketplace”, making sure the customer can meet all of her needs and engaging with her from the first stage of the shopping journey.
So, it is heavily investing in being destination for product browsing to replace Google and capture the customer from the very beginning.
Developing private brands in diverse sectors but specially in fashion/apparel is also part of Amazon’s strategy. In fact, Amazon is the No. 1 seller of apparel in the US. Probably based on a broad range of options and aggressive pricing.
So, if Instagram, apart from solely inspiring through visual and user generated context, is able to convert inspiration into sales, as it already has both the customer base and the biggest shop window, then it will become the destination marketplace within the fashion industry.
Net-A-Porter pioneered the digital commerce showing the power of creating an inspiring context to build a solid community around fashion and luxury and push customers to buy.
Instagram built a community around photo-sharing with no “business-making” purposes but it had such success that the opportunity to monetize the customer base was so attractive that it has progressively evolved to be in a position to become a key conversion channel in the fashion arena.
And Amazon plans to become “the marketplace” but with a customer engagement approach that does not fit with the fashion dynamics.
Three completely different approaches to capture the fashion customer. Inspiration vs practicality. Controlled vs user-generated contents. Business vs fun mindset. All valid. The only thing that is clear is that, in the fashion industry, it seems than the lines between e-commerce and social media are blurring.
Note: The list of brands currently using Instagram’s new feature
Anastasia Beverly Hills (@anastasiabeverlyhills)
Huda Beauty (@hudabeautyshop)
Kylie Cosmetics (@kyliecosmetics)
MAC Cosmetics (@maccosmetics)
Michael Kors (@michaelkors)
NYX Cosmetics (@nyxcosmetics)
Oscar de la Renta (@oscardelarenta)
Ouai Hair (@theouai)
Outdoor Voices (@outdoorvoices)
Warby Parker (@warbyparker)