Digital shopping is reaching new heights during the ongoing pandemic. Some recent reports have noted that online consumer spending for U.S. retailers rose 44.4 percent year over year in Q2 as the health crisis kept many shoppers from heading to brick-and-mortar storefronts. Another study claims that the pandemic has pushed eCommerce’s adoption five years ahead of predictions and anticipates the sector will expand 20 percent by the end of this year.
This growth has understandably made online shopping a high priority for retailers aiming to grab consumers’ attention, but it also means that eCommerce is becoming fiercely competitive. This is especially true for smaller businesses with fewer resources and less-established brand recognition than the familiar behemoths that dominate the eCommerce world. Small- to medium-sized businesses (SMBs) seeking to appeal to digital shoppers still face many of the same challenges they do when operating physical stores, including convincing customers that they can match the speed, convenience and affordability larger players offer.
Consumers may be shopping online more often, but they are also abandoning their carts at the first hint of friction. Some reports state that as much as 75 percent of online shoppers regularly ditch their purchases at the critical moment, for example, citing unforeseen costs as one of the top reasons they do so.
SMBs and other smaller retailers competing in the digital environment must therefore find ways to engage customers from the moment they access sites all the way through checkout. The following Deep Dive will explore why offering flexible payment methods such as installment payment plans can help smaller retailers stay in the game.
Keeping Commerce Competitive
Standing out from the crowd is a necessary part of running a successful retail business but it's becoming harder to accomplish as more commerce goes global as well as digital. Expanding online connectivity means consumers can purchase goods from around the world or from local boutiques with the same ease. They have been taking advantage of these seamless shopping opportunities during the pandemic, too, encouraging significant changes in purchasing behaviors that have persisted for months. One early August report found that 49 percent of consumers were shopping online whenever possible, for example, while 78 percent stated they had changed how they paid for daily purchases as well.
Customers’ digital migration has sparked a similar shift among SMBs, with recent PYMNTS data finding that 66.4 percent of these companies expected to rely more heavily on eCommerce once the pandemic has dissipated. Other recent PYMNTS research found that 50.1 percent of SMBs have improved their eCommerce portals to create smoother experiences for consumers.
Retail’s digital shift means SMBs must do more than offer standard eCommerce experiences — they must also provide unique benefits to consumers who are redefining where as well as how they buy their items. Supporting innovative payment methods can keep customers engaged, but today’s consumers are asking for more than just speed and digital capabilities. Many also seek payment options that are tailored to their specific financial needs, which is where methods such as BNPL come into greater play.
The Flexibility Benefit
Consumers have long prized affordability, and the COVID-19 crisis has redoubled its importance. Retail spending figures have only tentatively returned to their prepandemic levels in recent months, and July reports indicated growth of only 1.2 percent month over month rather than the 2.3 percent industry professionals anticipated.
Recent reports have found many U.S. consumers leery of credit as concerns over existing debt and current financial hardships grow, and other studies revealed that U.K. credit card spending had dipped 44.7 percent year over year in May. Shoppers are also wary of shipping and other fees added on to the typical online order, with 56 percent of customers in one recent study stating they abandoned their carts because of hidden costs.
The economic environment is making it essential for retailers — especially SMBs — to accept payment methods that grant customers flexibility. Options such as buy now pay later (BNPL) could help entice more shoppers by letting them stretch payments for purchases out over time.
Consumers are more receptive to payment options that offer some financial breathing room, particularly in this economic climate. Data shows that installment payments have been growing steadily more popular for years, but the pandemic has given them a significant boost. One 2019 survey revealed that 27 percent of shoppers with access to installment plans used them whenever possible, for example. Australian-based BNPL provider Afterpay reported a 219 percent jump in its U.S. customer base year over year as of June.
Businesses migrating online need to ensure they are keeping customers’ changing shopping needs firmly in mind. Leveraging BNPL’s flexibility and preexisting popularity with consumers could give SMBs making the switch to eCommerce a distinct competitive advantage.