Looking back on 2023, it’s hard not to reference soaring inflation and the cost-of-living crisis in some way.
For retail and eCommerce businesses, the impacts of both of those have underscored a year where staffing shortages and supply chain challenges continued from the pandemic. However, it wasn’t all negative – we’ve seen merchants grow their businesses by diversifying inventory, expanding overseas and investing in eCommerce capabilities.
Over the coming 12 months, there are a few big questions facing retailers. Will inflation be reversed [after it rose again at the end of 2023]? Will interest rates be gradually lowered? Will consumer confidence return, driven by an increase in consumer spending? It is difficult to provide clear forecasts at such an early stage of the year.
However, based on the trends we saw at the tail end of 2023, there are a few initial projections that can be made for retailers to consider. Core to this is the role payments are playing across the retailer and eCommerce space.
Consistency, balance and adaptability
Consumer spending habits are always changing, adapting to the economic landscape. Recent Ecommpay data showed that 80% of consumers changed their spending habits in 2023 due to the cost-of-living crisis, with three in five having spent less as costs rose.
Across the retail landscape budgets were prioritised, meaning some saw spending increases in line with price hikes, with others losing out. This meant that crucial items such as groceries and health items became more important for consumers as they cut back on non-essential, often leisure-related, spending.
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During the 2023 festive season consumers displayed a willingness to either maintain or boost online spending. However, with the cost-of-living crisis putting significant pressure on consumers this year, retail businesses need to understand how to not only make the most of heightened consumer spending during the holiday periods, but also maintain adequate levels of spending during quieter times. Consistency, balance and adaptability are key to successful trading. Over-relying on big shopping dates to generate revenue is a risky, and unpredictable strategy.
2024 will likely see a more encouraging shift in consumer spending with data showing approximately two-thirds of shoppers planning on increasing or maintaining their online spending in the coming 12 months. This paints a better picture for the retail landscape than expected, and businesses will need to make sure they are making the most of this occurrence.
Catering to the payment needs of consumers
This anticipated uptick will be welcomed across the retail and eCommerce industries. With merchants undoubtedly keen to make the most of this renewed interest in spending, they cannot afford to provide a poor shopping experience which dissuades customers from completing transactions. However, one of the key problems businesses face is losing a customer at checkout due to a negative checkout experience, often caused by lack of payment options – almost three quarters (72%) of consumers would abandon checkout if their preferred method of payment was unavailable.
Payment options have become incredibly more diverse and developed in the last few years, enabling consumers to pay through a variety of different methods. This means that businesses need to have their finger on the pulse, understanding preferred payment methods across their key markets and checkout systems. A forecasted increase in consumer spending is great, but if the sale is not completed, it equates to lost revenue.
Sales conversion can be increased by over 30% simply by providing a seamless shopping experience that offers relevant payment methods across all brand channels. It reinforces the point that merchants need to offer payment via all major bank cards as well as popular regional payments, plus mobile wallet options, Open Banking, or BNPL.
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Identifying the right partners
The research shows the heightened importance consumers are placing on payment options when making their shopping decisions. It means that regardless of how big or small a retail company is, it must keep up with market trends in 2024 and provide the array of payment options in demand by their customers. This is where partnerships can help.
To ensure each customer’s checkout experience is personalised while the process still mirrors the wider shopping experience, retailers can engage with payment service providers (PSP). When engaging with a PSP, A/B testing on the layout and design elements of the payment page, the PSP can consult on the best strategies to keep customers on the payment page in case of declined transactions. The right partner will need to have the capabilities to analyse transaction history, risk factors, location, and more. With this insight, intuitive payment pages that strike the right balance can be delivered for the brand.
Personalisation isn’t all however, as payment security is paramount in the eyes of a consumer. With fraud cases on the rise, when asked which concerns may make a shopper abandon items at checkout security (47%) came out on top. This tells merchants that security is also integral when investing in customer experience and all Payment Card Industry Data Security Standard (PCI DSS) requirements should be adhered to, with regular updates, upgrades, and plug-ins offered.
Closing thoughts
British shoppers have made it clear about what they expect from retailers, demonstrated through their shopping habits and sentiment towards the shopping experience more generally. For retailers navigating so many unknowns in 2024, their focus needs to be on what they know will be key to improving their sales over the long-term, putting in place practices so that they are in the best position to withstand the unknowns, like inflation and consumer spending.
Payments need to be a priority. With online transactions and eCommerce platforms, the market is becoming a highly competitive space.
Overlooking the payments infrastructure in place puts retailers at a huge risk of losing customers and sales. An agile approach, aware of the latest market trends, is warranted.
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