Instagram’s Displacement of E-commerce in Emerging Markets

As many already know Instagram is amongst the top five mostly used mobile applications in the world, alongside WhatsApp and Facebook. Built on network effect, it is not unusal for people to find themselves scrolling through random accounts and ‘liking’ photos of strangers. However what makes Instagram successful is not just it’s ability to recognize what content users enjoy, but also it’s ability to constantly feed that content. The capability to push targeted content to 500 million active users turned Instagram into a vast shop-window where businesses could display products in a trendy and picturesque way. However due to different cultural norms, higher market barriers and conservative purchasing behavior, many emerging markets are utilizing Instagram as more than just a means to increase visibility, it became a marketplace that is opting out traditional e-commerce websites.

Depending on the region, many developing markets have common cultural norms. Taking the Middle East in perspective, a large percentage are, but not restricted to, stay-at-home wives and mothers. Due to the steady increase in the cost of living, many began realizing alternative ways to generate income without having to drastically change their lifestyle. Unlike e-commerce websites, creating an Instagram store requires very little commitment, time and effort. From home cooked food to handmade fashion accessories, Instagram is being used as the means to take orders and sell products online. As a matter of fact Instagram shops proved to be so effective in these markets that they impact many fads and trends seen in these regions.

Market regulations & barriers are one of the major noticable differences when comparing developing to developed markets. Developing markets usually have immature regulations and high cost of entry. For instance the cost of registering a business in some contries could cost over 10,000 U.S dollars. In other regions creating an online shop and using it as a business channel falls under the grey market category; which is the legal but illegitimate way of trade. Due to the various and unfortunate obstacles present in these markets, people have turned to Instagram shops instead of other mediums because of it’s comparably easy-to-set-up and risk free nature.

Lastly, as a result of the general economic instability that these markets have faced throughout the years, many consumers have become conservative and cautious buyers. Till today, purchasing and paying for items online is still not a popular practice in these markets. Even though millennials have began to use some of the basic online payment methods, the vast majority of the populations living in these regions find it difficult to seperate the merchant from the merchandise. Hence most Instagram sellers spend some time communicating with buyers on a one-to-one basis through chat-apps & direct messages while relying mostly on cash on delivery (COD) for payment. Due to the absence of personal communication and the lack of a COD payment option, e-commerce websites are actually considered as a secondary channel for commerce in comparison to Instagram and Facebook stores.

Even though traditional e-commerce websites are easier to manage and easier to scale realtive to an Instagram store, it is self-evident that different markets require different channels as a result of different circumstances. Cultural norms, market maturity and consumer behavior are just some of the influencing factors that formulate the causes and success of these stores in emerging markets, nonetheless there has been an apparent growing popularity of these stores amongst developed markets as well. Regardless of the reasons, it is safe to say that Instagram has in-fact displaced commerce.