eCommerce Payments Optimization as a Merchant Growth Strategy
In the majority of developed markets, store-based retail sales are shrinking while eCommerce and mCommerce grow at 10- 20% annually. Consequently, merchants are focused on digital commerce growth opportunities more than ever before.
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.
The new white paper, “Fast-track merchant growth paths in eCommerce,” discusses the five key merchant growth paths, and is supplemented by use cases and best practices. Download it from www.aciworldwide.com/merchantgrowth.
Related blog posts
The Art of Open Banking, Part 2: On the March
In the first part of my talk with @digitalbankguru (aka Mark Ranta) and @Lui_Zurawski (aka Lu Zurawski), we discussed plans that best prepare an organization for Open Banking, and in this second chapter, we explore some use cases for delivering value.
What Makes Latin America An Attractive Market for Cryptocurrencies? [¿Qué Hace a Latinoamérica un Mercado Atractivo para Las Criptomonedas?]
Cryptocurrencies are one of today’s hottest topics – seemingly in every corner of the globe. Bitcoin continues to be the most popular – and certainly the most well-known – though digital currencies have been blossoming at an unprecedented pace recently. There are currently more than 16 million Bitcoins in existence, and it is expected that there will be more than 22 million by 2022. Worldwide acceptance is growing, with over 9,800 businesses registered on the Coinmap website, compared to 2013 when there were only 133 businesses registered.
The Art of Open Banking, Part 1: Laying Plans
I recently had a great discussion with @digitalbankguru (aka Mark Ranta) and @Lui_Zurawski (aka Lu Zurawski) on what it takes to be ready for the revolution in Open Banking. It was a truly global discussion, with stories from North America, Europe and Asia; the conversation part philosophical treatise and part strategy roadmap. Following is a summary of the first part of our wide-ranging discussion on preparing for the Open Banking era.
How 'Mega Trends' Are Shaping Payments in India
In a previous blog post, I wrote about the impact of demonetization in India and the staggering growth of new digital payment types. Building further on this, I want explore some of the “mega trends” in payments, and how India is embracing the opportunities presented by these trends.
Bringing Home the Payments Bacon (And Other ‘Sizzles’ Such as PSD2, GDPR, AI and Big Data)
Mark, we’ve closed out another hectic Money20/20; my eyes are still dry; my throat is still sore; I still reek of cigarettes; I’ve eaten a lot of bacon on a stick (thanks to Zelle, a great group of people and a great partner)! So for the most part, this year’s event has been another win. And I haven’t even referenced the many terrific sessions during the week (well, I guess I just did).
What Do Open APIs Mean for Banking Business Models? PSD2 Points of View
As the January 2018 deadline creeps closer, PSD2 – and by association instant payments and open banking – is the hot topic in the payments industry. The impact of PSD2 will be felt beyond Europe’s physical borders, as it brings open banking to the fore. As with any global issue, ideas around how best to address the challenges of open banking are fragmented, and opinions differ between retail and corporate banking.
One Year Later: How Demonetization Has Impacted India
This month marks the first anniversary of demonetization in India, and it has undoubtedly changed the country forever. When I visit India, I increasingly see micro-transactions conducted via mobile phones. Cash is still used, but I see less and less of it with each visit. We are in the middle of a true paradigm shift – and India is poised to become a global leader in new types of payment acceptance.
Three Ways to Build Your Business Case for Real-Time Payments
In the UK, faster payments are well established, and we have seen new innovations as well as new businesses being built since May 2008. In Singapore, which went live in 2014 with its Fast and Secure Transfers (FAST) scheme, we are starting to see similar innovations. And we can expect similar seismic shifts in payments innovation for years to come, as Instant Payment schemes in Europe and Real-Time Payments in the US go live, ubiquity increases and real-time payments become the new normal.
Security, the New Payments Ecosystem and the Need to Educate the Consumer (Or Ask Them to Unclog Your Sewer!)
When it comes to any payments ecosystem, you must remember that we are talking about MONEY. More importantly, people’s money (like yours and mine). In any conversation in this space, secure is something that is assumed. A consumer simply won’t use a new system if they don’t believe it is secure. Unless of course it’s free Wi-Fi. As we have seen, folks are willing to do almost anything to get free access on their devices, even agreeing to clean toilets! (This was a real thing… one hotspot operator added it to their Terms of Service fine print). When we talk secure, it’s important that we keep this in mind: secure is not just a piece of the Hierarchy of Payment Needs, it’s an integral part of it, which is why it sits directly on top of the foundations. Without this layer, the whole ecosystem collapses.
Three Reasons Why Corporate Banks Must Invest in New Security Measures
The New Payments Ecosystem brings great opportunities, if banks can mitigate the new risks and threats that arise. Real-time and open payments enable a wealth of new revenue streams; however, the potential for growth must be balanced against maintaining payments security. They cannot break the bank.