eCommerce Payments Optimization as a Merchant Growth Strategy

The ubiquity of online shopping might suggest that all major merchants have already taken the first step of selling online, but in fact, eCommerce participation rates vary widely by market and sector. Markets such as Italy, Russia, and Brazil lag far behind the U.S., Japan, and the U.K., but even in more developed markets many convenience stores, restaurants, and supermarkets are only now enabling digital sales channels.

For a merchant, this step of selling online for the first time is a proven path to growth and profit, but it is only one of a range of strategies that a merchant can pursue. It is a prerequisite to cross-border eCommerce, mobile, omni-channel.

However, there is another path to sustainable growth that warrants attention, and it is one worth considering before merchants set their sights on foreign markets or multi-channel enablement.

eCommerce Payments Optimization

Merchants taking their initial steps into the world of digital commerce realize that this brings a new set of challenges, from designing and hosting an online shop, to providing remote customer service and addressing the more complex fraud environment. Plus setting up order management and fulfillment systems, and establishing warehousing and shipping relationships. And then there’s payments – playing a crucial role in turning shoppers in buyers, not to mention integral to merchants’ bottom lines.

Realizing the full potential of eCommerce requires constant testing and tweaking of online marketing strategies, shopping and checkout setups, and payment handling tactics.  All of these aspects of a business provide endless scope for optimization, to the extent that this can be considered a key growth strategy. The customer experience can always be better, the conversion rate can always be higher, and fraud can always be lower. Optimize, optimize, and then optimize again.

From turnkey to enterprise-class solution

Successful optimization often involves evolving and adopting new operating models as the business scales. Outsourcing to ‘one stop shop’ eCommerce platforms (i.e. PrestaShop, Shopify) minimizes operational complexity for a merchant, but moving towards hosted eCommerce platforms (i.e. ModusLink) or developing customized in-house systems will ultimately provide the flexibility needed to optimize and give shoppers a simple and convenient experience.

Enabling customers to register payment details (or adding card vaults), adding relevant alternative payment methods, and optimizing fraud prevention rules can all maximize margins, reduce abandonment and encourage return shoppers. Deploying responsive payment pages, which adapt to the look and feel of the webshop, also helps to increase conversion rates.

Embracing new channels and business models to ‘meet the customer’

Operational complexities are magnified when merchants expand into non-direct distribution channels and business models involving enablers, intermediaries, and aggregators. However, this offers another path to optimization of a domestic eCommerce business.

There are two common examples;

• Online marketplaces – An increasing number of merchants host or participate in online marketplaces, with an estimated one-third of U.S. B2C eCommerce sales going through marketplaces, and a 2015 survey (conducted by the Ecommerce Foundation and Nyenrode Business University) finding that major retailers worldwide expect 40% of global e-retail to occur over a marketplace by 2020.
• On-demand service – Major U.S. retailers increasingly partner with “on demand” services to enable same-day delivery. Examples of these partnerships in the U.S. include the Whole Foods-Instacart partnership, Chipotle’s cooperation with Postmates, and 7-Eleven’s cooperation with DoorDash.

Enablers, intermediaries, and aggregators increase the complexity and challenges of payment acceptance, because the partner acts as a payments agent, or even as the merchant of record. These partnership models complicate payment operations and create legal and regulatory uncertainties, all of which must be effectively managed.

For example, a shopper may become confused when the receipt names the intermediary rather than the merchant, or it may be unclear who is liable for a chargeback among the many partners involved in a purchase.

The key takeaway for merchants is that scaling and optimizing their eCommerce operations requires highly capable payment solutions, and they should take the time to carefully evaluate vendors and what they offer, before partnering and pursuing this path to growth.