Three-quarters of consumers in Europe and the UK say the future of retail is digital and 30% are actively looking to try new digital payment methods in the next 12 months.
And 61% of consumers say bricks and mortar retail must invest in online if it wants to survive, while a sizeable 97% of e-commerce CEOs believe the industry must innovate business models to stay relevant, profitable and resilient in the months ahead.
These findings came from The New State of Retail report, produced by Checkout.com, a company helping e-commerce businesses modernise their payment processing. The study, which questioned 550 e-commerce retailers and 10,000 consumers across 16 European countries, explained how digital payments can cut costs, unlock more revenue and deliver the new experiences that customers demand.
With this research in mind, Retail Gazette and Checkout.com hosted a virtual roundtable alongside several retailers and senior industry figures.
The event brought together digital, e-commerce, technology and payments leaders from a diverse section of the sector. Retail decision makers from businesses such as Chrono24, Muscle Foods, Studio Retail, The Fragrance Shop, Walgreens Boots Alliance, and Yumi International joined the conversation.
Topics ranged from challenges around the online checkout to frustrations about international bank settlement times, with a common theme prevailing that retailers need access to more of the right type of data in order to thrive in the future.
Retail power pay
According to The New State of Retail report, 30% of consumers want to try new payments methods, 60% of consumers will abandon a purchase if they can’t pay their way, and 43% of e-commerce merchants lost revenue because they couldn’t offer local payment methods in countries where they saw a surge in demand during the pandemic.
The roundtablers were in agreement that offering a comprehensive choice of payment options is crucial to retail success in the modern age.
Ian Harrison, Chief Digital Officer at The Fragrance Shop, said: “We identified we needed additional options at the checkout, but we were afraid of cluttering it.
“But when we did, we really saw the benefit and it turned out to be a real conversion driver. Having credit and debit card options alongside PayPal, as well as mobile payments such as Apple Pay, and buy now pay later (BNPL) providers including Clearpay and Zip has helped us – especially online.”
He added: “The great thing with BNPL is the variety of split payment options on offer, so offering these services to our customers has been an added conversion lever.”
Christoph Emminger, Head of Transaction Products at luxury watch online marketplace Chrono24, said: “It’s important to understand that customers act in different ways – Americans, Asians, and Europeans all have different ways to shop and this will remain, so for retailers selling internationally it’s crucial to have payment options and other e-commerce tools that meet the needs of each market.”
According to Checkout.com’s report 59% of retail merchants don’t see their true payment costs and 40% say they have been significantly hurt by interchange fees in the past 12 months.
It all suggests merchants, in general, must continue assessing the market to find the right technology that helps gain access to relevant data and ensure they continue to operate in an optimal manner.
A challenging time
Retailers are battling several different forces right now, macroeconomic factors beyond their control and operational pressures caused by the pandemic are two, but the sector has been undergoing some serious structural change for years now.
Online retailers like Boohoo and Asos have acquired legacy retailers such as Debenhams and the Arcadia brands, in recent months, taking them online-only. But the multichannel players that continue to operate are dealing with a significant shift to digital shopping, and are working out the best way to operate with multiple sales channels.
Office for National Statistics figures show online accounted for around one-fifth of all retail sales in the UK before the coronavirus pandemic, but this is now much closer to one-third following the crisis. For some multichannel retailers, it’s much more of an equal blend between the two.
All of this entails flexibility in thinking and business models, as well as the need to be open to change.
Explaining how The Fragrance Shop has faced a challenging market head on, Harrison said: “We embraced innovation in the pandemic, launching a fragrance matcher, enhanced gifting, a membership scheme, and ship-from-store capability to take the pressure off the warehouse – and the crucial thing was we unveiled new features both in store and online to keep all departments aligned.”
During the roundtable, as was the case when Retail Gazette and Checkout.com hosted a similar event in-person in February 2020, retailers discussed the challenges of legacy systems. Old tech that has held the business together for years is often something that holds retailers back today – it’s a common complaint from the industry.
“Banks slowing things down is a real challenge for us – it’s difficult to explain to our merchants why a settlement can often take so many days,” explained Emminger.
“Sometimes the watch can arrive with the customer before the merchant has received payment – so international bank settlement times would definitely be an area of improvement required.”
He added: “It’s crucial to work with a best of breed approach and involve different payment providers like we do – this allows the entire process to be optimally adapted to local conditions and requirements.”
And for others, the c-suite within their business is often resistant to change – another factor in stopping retailers progressing at the rapid rate their digital teams would argue can be achieved with a more modern mindset.
Encouragingly that is starting to dissipate in many parts of the industry – retail leaders have seen the growth of digital and are now committed to getting the most from it. Several rountablers said their respective c-suite teams are becoming increasingly supportive of introducing new solutions and fresh ways of thinking.
Payments continues to be a part of the innovation agenda as businesses look to provide the seamless and smooth online shopping experience consumers desire.
The Hut Group (THG), Heals and The Cotswold Company are three retailers that have opted to implement Checkout.com’s e-commerce payments since the pandemic began.
THG uses the tech to support its proprietary Ingenuity e-commerce platform, which it offers to third-party brands wishing to modernise digitally, while the latter two invested in online payments tech following greater digital demand last year.
Moshe Winegarten, Senior Vice President of Commercial at Checkout.com, said more retailers are looking to upgrade their online checkouts because they know it’s hugely important for conversions to offer frictionless transactions and an array of payment tools.
“Online as a percentage of total retail sales is only going in one direction – up – so retailers are keen to invest in the modern tech to prevent legacy infrastructure stopping them reach their potential,” he explained.
“Our research and the roundtable prove to us that the best retailers have recognised this fact and are putting the plans in place to take action. It’s crucial brands leave no data hidden away in complex systems, including their payments stacks – they need tech that gives access to all the information required to thrive in this evolving landscape.”
Download The New State of Retail data report conducted by Checkout.com on 550 ecomm retailers and 10,000 consumers across 16 European countries. This explores how digital payments can cut costs, unlock more revenue and deliver the new experiences that customers demand.