Late to the Game or First to the Party? How Omnichannel Retailers Can Compete on Payments this Season

As we approach the final shopping days of the 2023 holiday season, merchants are gearing up for another strong year of e-commerce sales growth signaling a potential turning point for traditional brick and mortar merchants. With sales volume continuing to shift online, merchants who swiftly adopted e-commerce and omnichannel solutions to serve customers during the pandemic will be ripe to transition their ecommerce strategies into a more established state.

According to the U.S. Department of Commerce, e-commerce sales in Q2 2023 increased 7.7% compared with the year prior while non-ecommerce sales grew 2.1%.¹ Additionally, the National Retail Federation reports that over the 5-day Thanksgiving holiday, the number of online shoppers totaled 134.2 million, up from 120.2 million in 2022.² With all retail sales – including online – poised to surge in the fourth quarter³, what should merchant payment professionals be focused on in preparation for the holiday shopping season?

Perform a Cost Data Health Check

Many businesses, who have been the backbone of the brick-and-mortar economy for decades, were catapulted into a major shift during the global pandemic. To continue serving homebound customers, these businesses rapidly extended their operations to online shopping environments. The dynamics of this hurried expansion are akin to companies launching in new, emerging countries, aiming for a minimum viable product to serve customers as quickly as possible. Oftentimes, this means implementing a solution just to get launched regardless of the cost. But, as sales volumes grow in these environments, cost has an increasing impact on profit and loss statements and must eventually be addressed. For many merchants who launched and/or grew ecommerce sales during the pandemic, a cost audit to determine potential areas of optimization may be timely. In an engagement with a large international apparel retailer, CMSPI identified 25 basis points of improvements worth $20 million in revenue by performing a cost health check.

Review Your Data on Payment Method Performance

Now that the economy has re-opened and customers have the flexibility once again to shop online, in-store, or even through their home devices, consumers have more choices than ever of where and how to purchase goods. Understanding the cost and performance of existing payment methods is critical for merchants when determining where and how improvements can come into play. The first place to start is to bring all your data into a central place and analyze where volume and cost are rising the most to see if there are ways to mitigate those increases through partner discussions, contract re-negotiations, payment method acceptance diversification, or other operational efficiencies.

While mitigating costs is important, this should not be approached in a silo. Selecting and retaining high performing payment methods that have low customer friction and low fraud are critical components to any strategy. Data-driven insights and relationships with partners are key to garnering a strong understanding of payment solutions and actionable insights that drive positive outcomes. For example, working with the aforementioned apparel retailer, an adjustment to their processor set-up yielded a 20% increase in payment approval rate in one of their core international markets. While some aspects of a set-up can be managed and improved in-house, it is important to have strong working relationships with partners given their support and prioritization of your request can be critical in making timely, impactful changes.

Scrutinize Your Customer Experience and Payment Page Set-up

It is important to align with internal stakeholders on what may be next. Environments enabled as short-term options to get solutions launched for customers may not offer the most optimal long-term framework. Evaluating whether your technical integrations and set-ups meet your ongoing and future business and customer experience needs is critical. If there are areas that need improvement, the next step is exploring existing partner solutions to determine whether building or buying technology is the best approach to sustain your long-term strategy.

It is also valuable to understand how your customers want to pay so you can assess the time, resource, and architecture needed to enable new payment methods if and where it makes sense to do so. Insights into costs and conversion rates – as outlined in sections one and two above – are important data points to ensure new payment methods perform well for both the customer and the merchant. A seamless customer experience will keep customers coming back. And, once again, this all comes back to having actionable data insights.

Key Takeaway

As digital sales continue to grow, building long-term, data-driven acceptance strategies will be a differentiator for business growth and performance. For merchants aiming to optimize their digital acceptance environment this holiday season, the first step is to gather data to understand potential areas for improvement and then begin to action those opportunities.

CMSPI looks forward to providing more insights in the new year on becoming an optimized omnichannel merchant.