The world of e-commerce is continually evolving, presenting retailers with complex challenges. Rising inflation, the rising cost of living and high energy prices have impacted consumers’ online spending. Shoppers are reconsidering their spending, while retailers are trying to reduce their business risks and looking for ways to expand their service offerings.
Global e-commerce turnover is projected to grow 8.9% this year and reach $8.1 trillion by 2026. However, consumers are still on guard, so even such prospects do not automatically ensure success. Despite the challenges, retailers must overcome fear, uncertainty and doubt, recognizing that challenging times offer opportunities to innovate and adapt.
Given the dynamic nature of e-commerce, retailers must recognize the importance of electronic payments and incorporate them into their strategy. By expanding payment options, building brand loyalty and embracing new technology, retailers can find successful solutions in today’s and tomorrow’s e-commerce ecosystem, keeping shoppers coming back again and again.
Comprehend the Modern E-Commerce Customer
Understanding the individual consumer can be a challenge. Because of a multitude of factors, including personal preferences, shopping psychology and purchase history, data is required for effective analysis and decision-making.
In light of rising average retail prices and declining purchasing power of consumers, most of whom intend to use economic models in the coming half year, it is critical for retailers to understand the consumer mindset and adapt their payment strategies accordingly.
Almost half (49%) of Gen Z are concerned about the current economic situation and are cutting back on spending, compared with only 43% of millennials, according to PWC’s 2023 report. Generation X and Boomers approach the issue from different perspectives, with 47% and 37%, respectively, expressing concern and cutting spending.
In the context of reducing consumer spending on secondary needs, it is important for retailers to increase the number of successful transactions. To provide a quality shopping experience, retailers must offer a variety of payment methods and partner with different service providers. A personalized checkout process is key to encouraging consumers to buy.
Embrace a Wide Array of Payment Alternatives
Surprisingly, despite the plethora of modern payment methods, many retailers limit themselves to a minimal set of available payment options. This is a low-entry barrier approach that forces consumers to look for those brands that offer more flexible and convenient payment options.
Many payment service providers now offer their own APIs, forcing retailers to negotiate with each of them to add a new payment option to the checkout. This, along with coding and integration issues and the fact that most providers only offer payment with no additional infrastructure to improve the checkout process, creates a challenge for retailers.
However, with an average online shopping cart abandonment rate of more than 69%, retailers should strive for as much variety in payment options as possible to avoid losing customers to competitors.
A diversification and expansion approach to payment includes offering options such as digital wallets, Open Banking, Buy Now Pay Later (BNPL), and considering cross-border payment alternatives so that customers can use the payment methods most appropriate for their region.
Incorporate Loyalty into Your Payment Strategy
It’s especially important for retailers to build loyalty into their payment strategies. Brand loyalty is not just a fashion trend; it plays a key role in attracting repeat purchases from customers over the years. Therefore, retailers can significantly increase their bottom line and strengthen their brand loyalty by linking it to payment transactions and loyalty programs.
Around the world, we’re already seeing revolutionary partnerships and offerings in this area. According to Research and Markets, the impact of loyalty and rewards programs is growing, especially in Asia-Pacific. There is also great interest in loyalty and rewards programs in India, China, Indonesia and Singapore. And in Latin America, with the accelerated digitalization of payment systems, there is growing interest in rewards programs.
To incentivize and support customers in a challenging time, retailers should explore linking and applying loyalty and rewards programs by analyzing their payment systems and applying appropriate technology to make it feasible.
Leverage Technology and Payment Orchestration to Foster Innovation
There’s a saying: “If you create it, they will come. This statement is relevant to retailers looking to incorporate all of the payment methods consumers rely on, as well as incorporating loyalty and rewards programs into payments. To identify, add new payment options and mitigate shopping cart abandonment, retailers should look to the cloud, specifically cloud-based payment orchestration (POP) platforms.
Cloud technology has come a long way in the past few decades. What was once unattainable, such as hosting full payment platforms and orchestrating them, is now a reality. Cloud-based payment orchestration (POP) platforms offer retailers the opportunity to eliminate the need for large mainframe servers or legacy systems because everything runs in the cloud.
Retailers using POPs can immediately connect their systems and add new payment relationships and methods without having to negotiate with a PSP because everything is available in one place. Process automation becomes more controllable, as retailers can try new payment types and route them to optimal endpoints based on transaction amount or geographic location. What’s more, combined with the right POP, retailers can analyze customer behavior data to create hyper-personalized offers based on a customer’s purchase history and preferred payment method.
Simply put, POPs eliminate all the complexity associated with expanding and offering customers the payment options they demand today and in the future. They enable retailers to adapt and innovate regardless of challenging times. Fear, uncertainty and doubt go away as consumers are empowered to pay and buy despite the challenges – and it’s a strategy everyone can support to triumph in e-commerce.
