eCommerce is the biggest Christmas story for Europe’s retailers this year, as consumer spending continues to shift online. While the effects of the pandemic may have hit millions in the pocket and the COVID Grinch threatens high street footfall, BRIDGE urges retailers to explore their payment mechanisms for new ways to innovate, differentiate and attract festive shoppers.
Christmas is traditionally one of the biggest events in the retail calendar. The three-month festive runway forms a significant chunk of many retailers’ revenue and profit for the year. So, with COVID restrictions and health concerns keeping shoppers off the high street, it’s natural that many of Europe’s stores will be increasing their focus this year on new opportunities to innovate and attract festive shoppers through their online outlets.
Retailers will have taken comfort from John Lewis’s recent move to open its online Christmas store early in response to a huge spike in festive-related searches. People are looking for reasons to celebrate, brighten their homes and extend the festive feeling for as long as possible this year.
On the other hand, it may also be an indication of financially-induced forward-planning as millions of cash-strapped households across Europe – and around the world – seek out deals that spread the cost of Christmas over a much broader period.
This year, the challenge for retailers in the weeks leading up to Christmas is greater than having the right goods at the right price. And, with other key shopping events like Halloween, Black Friday and Cyber Monday also looming in the retail calendar, competition for more careful consumer spending is fierce.
So, what can retailers do to differentiate their online store, attract customers and maximise sales this Christmas?
eCommerce will be essential this winter
So far in 2020, eCommerce is emerging an undisputed winner as social distancing measures and health concerns continue to deter people from heading out to the shops. Research from Kantar predicts that online retail will continue outperforming traditional retail, and this is supported by the latest data, which shows high street foot fall almost 40% lower this year than in 2019 and retail unit vacancies at their highest in six years.
No one knows how the pandemic will play out over the winter, or whether further lockdowns and enforced retail closures may be necessary on either a local or national level. But smart retailers will already be aware that their digital presence is going to be the key to success this Christmas.
Ramping up on eCommerce in readiness for the festive season will require retailers to recognised and address a couple of major consumer trends.
- Cart and payment abandonment
Firstly, there’s the longstanding issue of cart abandonment, which already stops three out of every four online transactions reaching completion. Part of this problem is payment abandonment, where consumers reach the checkout and are ready to buy…but fail to see the transaction through. In most cases, consumers are highly likely to abandon the shopping cart – even stop shopping with the retailer altogether – if their preferred payment mechanism is not available at the checkout or, for whatever reason, they experience the dreaded ‘transaction failure.’
- Fragmenting payment preferences
Secondly, there’s the growth of alternative payment methods – from PayPal and digital wallets through to local charge cards, pre-paid vouchers and even cryptocurrencies. As consumers increasingly gravitate towards their own specific payment preferences, the days when retailers could get away with offering a single payment option (such as debit cards only) are limited.
In both instances, retailers need to take a critical look at whether their payment systems are helping or hindering their customers and their business.
Does the payment stack offer the flexibility to add and remove payment options easily, to innovate and trial new offerings and see what really appeals to shoppers? And – critically – does it give access to valuable data that reveals habits and preferences at the payment end of the customer experience.
From limitation to liberation
This might sound a little technical, but payments is no longer just a hygiene factor at the end of the customer journey – a bolt on to collect money from the customer. It is something that retailers can gain more control over and the results can drastically impact overall eCommerce success far more than many realise.
In fact, it’s precisely because of the perceived complexity of payments technologies that so few retailers take proactive steps to innovate and gain more control of the payment element. Introducing an integration layer can change all that, which is how payment orchestration technology is bringing simplicity to the merchant end of payments processing for the first time since the advent of eCommerce.
Payments orchestration allows retailers to integrate a wide range of payment services with ease, rather than having options limited to a single payments service provider (PSP). It can intelligently route each transaction based on a retailer’s needs and preferences, even giving access to data and insight from the payment’s end of the customer journey to spark new marketing and loyalty campaigns. The implications for retailers are far-reaching.
Not only can retailers ensure they’re providing the range of payment options their consumers prefer, but they can build in greater resilience to service outage and transaction failures that lead customers to abandon their carts. Automatically rerouting payments in the event of a delay or technical problem with an individual PSP, ensures that the customers that reach the point of completing their purchase are always able to do so.
Flexible payments to the rescue
Payment orchestration technology also allows retailers to innovate with new and short-term or seasonal payment initiatives. This Christmas, more than ever, this means an enormous opportunity to win customers that might be starting their shopping early to try and secure deals or spread the cost.
While only the most optimistic economists would forecast a festive splurge this year, the eCommerce landscape has changed so dramatically that there are plenty of opportunities out there for retailers. Those that are equipped to be more creative in their payment options can stand out from their competition and encourage consumers not to hold off on Christmas spending.
In recent years, customers have also been seen to experience ‘sales fatigue’ by the time December hits, meaning retailers need to be flexible in areas other than simple price discounting. Finding out what works for consumers and experimenting with new incentives requires the agility to innovate at speed.
Buy Now Pay Later payment schemes like Klarna and Clearpay have grown exponentially in the past few years and could now be introduced by more retailers to help customers spread the cost of their purchases. Historically many retailers have resisted flexible payment terms due to the cashflow implications. However, using payments orchestration technology, retailers can seamlessly play and pause payments channels based on what’s best for their business and customers at any given time.
It could mean permanently introducing flexible payment methods to coax customers into big ticket purchases, or offering Buy Now Pay Later in support of major retail events such as Black Friday, to capitalise on heightened consumer interest without having to support the channel on an ongoing basis.
Relegate payments complexity to Christmas Past
The complexity of the payment’s stack can make retailers think this is a no-go area for innovation. It’s the primary reason that 80% of retailers still process payments through a single PSP, despite the risks involved, and it’s why 81% of leading European ecommerce providers still don’t support a ‘local’ payment method.
But these days are numbered and, with all eyes on how consumers choose to spend in this unusual festive season, now is the time for retailers to regain control and use payments as an opportunity to innovate.
Solving legacy payments issues such as cart abandonment and payment option limitations now represents essential remedial action. But beyond this, retailers should recognise the enormous potential of payments as long-term strategic tool; a way to set themselves apart in the market and capitalise fully on seasonal sales opportunities.
The COVID ‘Grinch’ may prevent some of our Christmas shopping traditions and reduce the opportunity of in-store promotions to socially-distanced and suitably sanitized experiences, but the ‘new normal’ offers plenty of exciting opportunities for retail too.
As a result, we can only foresee that Christmas retailing will be ‘won’ by those that deliver creative payment options and offers to savvy online shoppers and help spread the joy of the festive season in a budget-friendly way.
About the Author
Brian Coburn is CEO of BRIDGE, a payment orchestration technology innovator. Formerly CIO at Stagecoach, Brian’s position at the forefront of the company’s technology drive to improve efficiency and competitiveness shaped his approach to business and provided deep insight into the importance of the payments function in the eCommerce offering.