A guide to ecommerce for retailers

What the future holds in store for bricks and mortar remains to be seen, but one thing is certain: retailers can no longer afford not to make ecommerce part of their equation.

According to our 2022 Retailer’s Handbook, which surveyed 9,000 consumers and 500 retailers across 8 countries, 81% of consumers now say the future of retail is online, up from 75% in 2021. 

What’s more, a third believe cash will be dead within five years, highlighting the urgent need for retailers to adopt digital payment methods. Indeed, 62% of retailers said integrating digital payment technologies would be key to protecting revenue in the coming year.  

The pandemic has, rightly, been identified as the catalyst for this rapid shift in shopping preferences. But our uncertain economic times are giving people new reasons to shop online, with 33% of consumers saying that they do so to find the best value for their shrinking budgets.

The ecommerce landscape presents challenges for online retailers, but there are riches and rewards on offer for those who embrace the latest technologies, adapt to changing consumer preferences, and take the time to fully optimize their operations. 

Whether you’ve yet to dip a toe in or you’re already fully immersed in the world of ecommerce, this article will serve as your guide to the current state of online retailing and how you can best position your business to succeed. 

Optimizing payments is a source of growth for ecommerce retailers. Our research finds that those merchants focused on improving their payments performance by optimizing authorization rates capture more revenue and grow faster than their peers.

Despite this, only 30% of ecommerce retail merchants consider payment optimization to be a strategic priority for the business. That's 70% of senior ecommerce executives who are overlooking a significant source of revenue.

Types of ecommerce retail models

Ecommerce is a useful term, but it disguises the true scale and scope of the online retailing world. There are many models, each catering to different needs and requiring different tools, including: 

B2B

Business-to-business (B2B) refers to any retail model that involves businesses who trade with other businesses. Wholesaling is probably the most obvious example of B2B ecommerce, where a merchant buys products at trade prices from a wholesale website to sell on to consumers at retail price, but B2B ecommerce also includes subscription software platforms like Salesforce or Hubspot. 

B2C

Business-to-Consumer (B2C) is an ecommerce model where businesses sell products or services directly to individual consumers via the internet. This is perhaps the most commonly recognized form of ecommerce and encompasses a broad range of online retail activities, including fashion, consumer electronics, groceries, and more. It can be conducted directly through a brand’s website or through an intermediary such as Amazon. 

D2C

Direct-to-Consumer (D2C) ecommerce is when a brand sells products directly to consumers through an online channel, bypassing traditional retail intermediaries such as wholesalers, retailers, and marketplaces like Amazon. This approach enables businesses to have complete control over their brand, marketing, and customer experience. Subscription platforms like Netflix and Spotify are D2C models. 

C2C

Consumer-to-consumer (C2C) ecommerce refers to an online business model where individuals can trade, sell, or buy goods and services directly with each other. For example, websites like eBay, Etsy, and Craigslist allow consumers to list items for sale and purchase items from other individuals, and platforms like Facebook Marketplace can facilitate C2C transactions. Peer-to-peer marketplaces like Airbnb could also be classed as C2C ecommerce. 

Why is payment performance important for ecommerce retailers?

When discussing payments performance, it’s the authorization rate that matters. This metric tracks the number of payments initiated by customers that are successfully authorized by their issuing. It's vital because no authorization equals no sale, which equals no revenue.

Improving the authorization rate by just a percentage point or two can have a sizable impact on revenues. And with our research revealing that only 31% of ecommerce retail merchants have an acceptance rate of 90% or more, there’s clear evidence that many have room for improvement.

Failing to improve payment performance has other consequences as well. For example, if a merchant has a low authorization rate, many legitimate customers will likely have their payments rejected wrongly. This is what’s known as a false decline.

Customers don’t like false declines. Thirty-three percent of consumers told us they’d been permanently put off shopping on a site because their payment was incorrectly declined.

And to make matters worse, the vast majority say they head to a competitor’s site. In the UK, France and Germany alone, $4billion is handed over to competitors when payments fail every year — and that doesn't account for all the wasted time and effort spent marketing to the customer.

Learn more: How to avoid ecommerce fraud

Benefits of ecommerce for retailers

Ecommerce offers businesses a number of key benefits over traditional bricks and mortar retail, including:

• Reduced overheads - running an ecommerce platform typically incurs fewer overhead costs compared to a brick-and-mortar store because expenses for renting physical space, utilities, and in-store staff are significantly reduced or eliminated. This enables you to offer more competitive prices to your customers
• Higher revenue - the global reach and around-the-clock availability of ecommerce stores can lead to higher sales and revenue. You can also take advantage of upselling and cross-selling opportunities, using data analytics to personalize offers and boost sales
• Invest more in customer service - the savings from reduced overheads and resources from higher revenue can be channeled into enhancing customer service. With features like chat support, FAQs, and personalized recommendations, you can provide a more interactive and satisfying shopping experience for your customers
• Boost brand awareness - ecommerce platforms offer various digital marketing opportunities, including SEO, social media marketing, and email campaigns. These strategies can significantly increase brand visibility and attract a larger customer base
• Global reach - ecommerce breaks down geographical barriers, allowing you to reach a global audience. You can easily adapt to different markets, offering your services in multiple languages and currencies, and allowing customers to use their preferred local payment methods, increasing your overall market share and revenue
• Scale quickly - traditional retail often requires significant time and resources to expand. In contrast, because you’re not bound by physical parameters, you can scale quickly to accommodate growth. Whether it's adding new products, entering new markets, or implementing new features, ecommerce is generally more agile than bricks and mortar
• Greater convenience and flexibility - ecommerce platforms provide both retailers and customers with convenience and flexibility. For retailers, inventory management becomes easier, with real-time tracking, sales promotions can be launched quickly, and customer behavior can be monitored through data and reporting functions to inform continuous improvement of your services

Learn more: Top 10 KPIs for ecommerces

Barriers to successful online ecommerce for retailers

The lack of focus on payments performance doesn’t usually exist because ecommerce leaders are ignoring the problem. Instead, it exists because many aren’t getting the data and support required from their payments partners to understand there is a problem — let alone do something about it.

Most strikingly, 70% of ecommerce merchants do not receive raw response codes on failed payments. This is a huge issue. Response codes are critical data points that tell merchants exactly why a payment has failed. Without access to them, merchants are operating in the dark, unable to understand where to focus their efforts to drive performance improvements.

Even when merchants have access to the data, many will need support from payment experts to help unpack and interpret it. But most are neglected by their payments partners, with 71% of ecommerce retailers telling us they’re not receiving any consultative advisory and strategic support.

Here are some other barriers to success for online retailers:

Shipping and supply chain management

Managing logistics, such as inventory management, warehousing, and shipping, can be complex and costly. Fulfilling orders in a timely and cost-effective manner, especially when selling internationally, requires a robust logistics infrastructure.

Payment and fraud risks

While online payments offer convenience, they also expose retailers to various risks, including fraud, chargebacks, and non-compliance with security standards. Effective fraud prevention mechanisms are essential, but can be challenging to implement.

Payment technology challenges

Ecommerce relies on a complex web of integrated systems and third parties to quickly and securely process payments, including processors, gateways, and fraud detection software. If any element in the chain fails or isn’t up to scratch, it can negatively impact acceptance rates and, ultimately, revenue. 

Highly competitive

The ecommerce space is incredibly competitive, with numerous businesses vying for attention from consumers. Trying to emerge from the shadow of established giants like Amazon or niche market leaders can be a daunting task, requiring significant investments in marketing and customer acquisition.

Regulatory and compliance issues

From data protection laws like GDPR to security standards like PCI DSS, ecommerce businesses have to navigate a complex legal landscape, and failure to comply can lead to hefty fines and reputational damage.

Customer retention

While attracting new customers is a challenge in itself, retaining them is another hurdle. The online marketplace offers consumers a plethora of options, which makes brand loyalty even harder to secure. Effective customer engagement strategies, such as loyalty programs, are essential for customer retention.

International trade barriers

For retailers looking to expand globally, challenges such as customs, international shipping costs, and varying tax regimes can be barriers to seamless international ecommerce.

Best practices for ecommerce retailers

In an increasingly crowded and ever-changing ecommerce landscape, you need to give yourself every advantage if you want to stand out and provide exceptional value to your customers. 

Implementing the following measures can help to optimize your operations, drive sales, increase loyalty, and minimize the risks associated with online transactions. 

Offer secure payments

Maximizing the security of transactions is paramount for both protecting and gaining the trust of your customers. By offering a variety of secure payment methods, such as credit and debit cards, and digital wallets, and employing advanced security measures like biometric authentication, tokenization, and 3D Secure, you can cater to customer preferences while bolstering security.

Social commerce

Social commerce is the emerging practice of integrating shopping opportunities into social media platforms. This can be done through shoppable posts on Instagram or Facebook stores, which allow users to discover and pay for products within a few clicks without ever having to leave the platform. It provides a seamless shopping experience, helping to remove friction and improve conversion rates.

Loyalty programs

In a competitive market, it's essential to build loyalty with your customers, but without the face-to-face aspect of bricks and mortar, the nature of the game has changed. Online retailers can reward customers for repeated purchases or engagement with their brand with discounts and coupons, exclusive access to new products, or free merchandise. The advantage of a digital loyalty program is that this can be achieved at scale through email and social media marketing, and at relatively low cost. You can also use customer data to create highly targeted, and therefore more effective, campaigns, and to measure performance and refine your approach. 

Free shipping and returns

One of the biggest challenges in online shopping is the additional cost and effort required from your customers to receive and return their items. While it may increase operational costs, offering free shipping and returns can significantly improve conversion rates and customer satisfaction, which more than justifies the expense.

Display security information at checkout

Transparency is critical when it comes to transaction security. During the checkout process, clearly displaying security certifications, SSL encryption indicators, and other safety features can enhance customer trust by reassuring them that their data is being handled responsibly and securely.

Fraud prevention and monitoring

The criminal threat to online retailers is on a vastly different scale and often much more sophisticated than the garden variety theft faced by bricks and mortar stores. Fraud activities such as identity theft, false chargebacks, and money laundering present a very real and ever-present threat to ecommerce businesses. That’s why it’s essential to employ advanced fraud detection and monitoring systems that can flag suspicious activities in real-time and prevent fraudulent transactions.

Learn more: Protecting cardholders from rogue merchants

Unlock peak ecommerce performance with Checkout.com

Ecommerce leaders want to focus on the core of their business, which is retail. Payments may be crucial to unlocking monetary success, but merchants need the support of their payment provider to capture this value.

For this reason, every aspect of the payment technology Checkout.com builds delivers retailers ease, simplicity and actionable insights into their payments. It’s also why we firmly believe in bringing white-glove consultative expertise to retailers.

This combination of radical data transparency and our consultative service is what helps retailers like Farfetch, Shein and The Hut Group achieve optimal payment success, resulting in more sales, happier customers and greater revenue.

Get in touch to find out how we can support your business.

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