Today’s e-commerce ecosystem is rapidly shifting, leaving retailers on uneasy ground. Consumer online spending habits and patterns have transformed due to rising inflation, cost of living hikes, and high energy prices. Consumers continue to reevaluate their shopping habits, while retailers hedge bets against the cost of doing business and need to expand services.
While retail e-commerce sales worldwide are projected to grow by 8.9% this year and could reach as high as 8.1 trillion dollars by 2026, consumers continue to be wary, so even potential market promise doesn’t necessarily guarantee profitability. Regardless, retailers must overcome fear, uncertainty, and doubt (FUD) to realize that hard times open doors to innovate and adapt.
As the e-commerce landscape continues to evolve, it will be an absolute necessity for retailers to recognize the value of online checkout and make payments a part of their strategy. By expanding payment options, building brand loyalty, and using technology, retailers can bring about wins in today’s and tomorrow’s e-commerce ecosystem and keep consumers coming back to buy.
Understand Today’s E-Commerce Consumer
It can be challenging to understand every individual customer. Personal preferences, consumer psychology, purchase histories, and more create retail roadmaps, but combining those pieces requires data to drive decisions.
Since consumers’ purchasing power has decreased as average selling prices have risen, and nearly all consumers intend to adopt cost-saving behaviors over the next six months, retailers must understand the consumer mindset and adjust their payment strategy accordingly.
For example, a 2023 PWC report states that 49% of Generation Z is concerned with today’s economic woes and has taken action to cut back on non-essential spending, while only 43% of millennials are cutting back. Older generations, such as Generation X and boomers, are divided, with the former 47% and the latter only 37% concerned and reigning in their spending habits.
With consumers cutting back on non-essential spending, retailers need to close sales as every transaction counts. Retailers who want to take charge of the consumer buying experience should accept multiple payment methods and work with various service providers — as a personalized payment checkout experience is necessary to encourage and entice consumers to buy.
Adopt a Diverse Portfolio of Payment Options
Surprisingly, with so many advanced payment methods available, many retailers fail customers by limiting the number of advanced payment methods (APMs) they offer. This approach is a “bottom of the barrel” strategy, forcing consumers to seek brands that give them enhanced payment options to buy goods or allow them to pay how and when they want.
Many of today’s current payment service providers (PSPs) also have proprietary APIs, requiring retailers to negotiate with every provider individually to add one payment method to their checkout. Add to this coding and integration complexities, and that most PSPs only offer the payment method itself without the infrastructure required to enhance the customer checkout experience, and retailers are hard-pressed to scale.
However, when the average documented online shopping cart abandonment rate is over 69%, retailers must offer all the payment methods consumers demand to keep customers from going elsewhere.
A diversified and enhanced payment approach means offering options like digital wallets, Open Banking, BNPL, and even considering cross-border payment alternatives to enable customers to utilize payment methods that are local to their region.
Make Loyalty Part of Payments
Beyond offering advanced payment methods, retailers must also make loyalty a part of payments. Loyalty is far more than hype. For decades brand loyalty has correlated with keeping consumers coming back to buy. It represents a significant opportunity for retailers to capitalize on and increase brand loyalty when tied to loyalty schemes and payments.
Already more innovative partnerships and offerings have popped up across the world. According to Research and Markets, loyalty and reward programs are rising and gaining market share in the Asia Pacific region. Demand for loyalty and rewards programs has also grown substantially in India, China, Indonesia, and Singapore. Further, thanks to the rapid digitalization of payment systems, Latin America is seeing increased demand for rewards programs.
Retailers who want to incentivize and support customers during difficult times need to look at how they can tie and utilize rewards and loyalty programs by examining their payment stacks and using technology to make it all feasible.
Innovate Through Technology and Payment Orchestration
There is a saying, “If you build it, they will come.” It’s a phrase that is true for retailers looking to add all the payment methods consumers demand while enabling reward and loyalty schemes as a part of payments. To identify, add payment optionality, and mitigate cart abandonment, retailers should turn to cloud technology, specifically cloud-native payment orchestration platforms (POPs).
Cloud technology has come a long way over the last couple of decades. Things that once were impossible, like hosting entire payment platforms and orchestrating payments, are now possible. Cloud-based POPs enable retailers to eliminate the need to run big mainframe servers or outdated legacy systems, as everything is done in the cloud.
Retailers who use POPs can immediately plug in their systems and add new payment connections and methods without negotiating with PSPs, as everything is available in one place. Workflow automation also becomes more manageable as retailers can test new payment types and route them to their optimal endpoints depending on transaction value or geographical location. Also, when coupled with the right POP, retailers can see data around customer purchasing behavior to enable hyper-personalized offers based on purchase history and a customer’s preferred payment method.
Simply put, POPs take away any complexity to expanding and offering consumers the payment options they demand now and in the future. They empower retailers to adapt and innovate regardless of hard times. Fear, uncertainty, and doubt disappear as consumers gain the ability to pay and buy irrespective of hardships — and that’s a strategy anyone can get behind to win in e-commerce.