The seismic impact of online retail and how it has reshaped the way we shop and pay cannot go unnoticed. The convenience of shopping from home at a click of a button has introduced new consumer habits and business operations. Frictionless payments remain integral to the customer experience, holding the key to unlocking opportunities for higher profitability at a time when margins are wafer thin for retailers.
With inflation squeezing the profit margins, topped by increased supply chain costs, optimising payment efficiencies could allow retail brands to preserve part of their revenue. In addition to these pressures, retailers are faced with the challenges of changing customer demand, emerging payment methods and new fraud threats, making an enhanced payments performance imperative. And yet almost all respondents (87%) from online retail businesses in the UK and Germany surveyed for our Great Payments Transformation whitepaper have reported substantial losses of revenue due to ineffective payment infrastructures.
This article examines what hinders online retail businesses from investing in optimising their payment systems. We'll also explore what is like working with a payment service provider (PSP) for online retailers as well as how and when they’re planning to enhance their payment agility for revenue growth and customer loyalty.
Stumbling blocks along the way of online retailers
As our research shows, handling data to optimise payment systems isn’t the forte of online retailers across regions. Precisely, less than a third (32%) state they’re analysing data to a good level, while more than three out of ten (33%) say there’s some room for improvement and only 17% admit there’s much room for improvement.
Compellingly, nearly four in ten (36%) of respondents are grappling with even getting adequate data to invest in new payment solutions, citing a lack of data or the availability of only poor-quality data as an obstacle to the optimisation of their payments performance. This was presented as the biggest impediment to investments, with a further third (34%) saying that the shortage of metrics and KPIs to measure impact and ROI is what holds them back from improving their payment systems. A shortage of in-house resources and skills is an equally prevalent barrier that blocks 33% of online retail businesses from realising financial opportunities.
Data appears to be a continuing struggle for payment leaders in the retail industry. Therefore, it comes as no surprise that almost a third (30%) of respondents stated that being able to get quality insights from payments data would be a key consideration for 2022 along with implementing new payment methods (34%) and finding the right payments talent (33%). Aside from the concerns around data, 31% of retail businesses said that analysing data to understand customer journey/pitfalls is one of the steps they’ll take to finesse their payment strategies.
How retailers can turn payments into a competitive advantage
According to BRC, inflation has spiralled to its highest since the early 1980s. As of May 2022, the Consumer Price Index (CPI) reached 9.1%. Retailers are under great pressure to cater to consumers and remain profitable by optimising efficiencies in their current setup. Yet, our research revealed that more than half of respondents (52%) have lost up to 10% revenue due to shortcomings with their payment systems . Even more crucially, over 35% of online retailers report losses between 11-25% due to the same reason.
Therefore, change is a necessity if payment leaders in online retail want to deliver maximum value to their organisation. When asked, many of our respondents demonstrated an appetite to change their payment strategies, thereby putting a halt to losing revenue and customers. Some of these drastic interventions include optimising payment routing (34%), identifying fraud in real-time (31%) and prioritising local preferred payments methods on the payments page (30%). Such changes are expected to be made promptly – namely, within the following 7-12 months for 38% of payment leaders in online retail.
The majority of our respondents (48%) anticipate an uplift of 4-6% in revenue in the next two years if they implement all the necessary updates for their payment performance optimisation. A further quarter (25%) is likely to witness 7-10% increase in revenue and 22% could boost their revenue by 1-3% if they update their payment infrastructure. Looking ahead at payment trends, a third (36%) of online retailers observe that digital wallets and buy now pay later (BNPL) will reign the payments landscape over the upcoming 12 months, closely followed by subscription payments (34%) and open banking (31%).
Furthermore, online retail is the sector with the least satisfaction regarding payment service providers; half of respondents (50%) admitted that they are likely to change their current payments partner. However, the priorities vary when it comes to the criteria that payment leaders in online retail consider when selecting a PSP. While nearly a third (29%) focus on integration options, payment routing capabilities and 1:1 support are critical for a quarter of online retailers (25% and 26% respectively).
How emerchantpay can help
As the research by BRC further shows, consumer demand is slowing down and limited to long-lasting goods over impulse buying, retailers acknowledge the urgency to prioritise payment efficiency and remain competitive. That's why it's crucial to work with an experienced PSP who understands your business model and needs, providing strategic one-on-one advisory and tools that can help you safeguard your revenue.
Without a strategic payment strategy to drive payment agility, online retail businesses are doomed to keep haemorrhaging significant revenue due to the pitfalls in their payment processes. The right payment service provider, however, can help retail brands maximise the value of their payment systems, providing the roadmap towards streamlined payments via the essential tools, data analytics and dedicated support.
At emerchantpay, we view optimised payments as a decisive performance output. This means that we leverage our 20 years of payment experience to support online retailers by developing a robust payments strategy that fits their business requirements. If you seek to move towards optimised payments, we can help you expedite the process through our effective solutions – from alternative payment methods to reporting and risk and fraud management – all via a smooth integration to inform your broader commercial goals and ensure sustainable growth.
Ready to optimise your payments for high performance and profitability? Contact our team of payment experts today and find out how today.