With 1.6 billion people shopping online in 2016, spending more than USD 2 trillion annually, and with cross-border spending expected to hit USD 1 trillion by 2020, the opportunities for merchant growth have never been so significant, varied and fast. Payments, and the role they play converting shoppers into buyers, are becoming increasingly central to these growth trajectories. Savvy merchants know that payments are integral to a great shopping experience, and understand that payment can often be the differentiator. Eager to capitalize on the USD 2.2 trillion global ecommerce opportunity, merchants need to carefully determine which growth path to pursue, and how to tackle the specific payment challenges that each growth path entails.
Digital commerce as the primary driver of retail sales
The rules of engagement between merchant and consumer are fundamentally changing, becoming more digital and more open. Shoppers purchase goods and services at home, at work, or on the go, in lieu of buying from physical shops. Before purchase, shoppers learn about products through online review sites, and afterwards they use social media to praise or disparage them. And to complete purchases simply and securely, shoppers have a growing number of payment methods and mobile wallets to choose from. This is digital commerce, and it is the primary driver of retail sales growth in most markets around the world.
Digital commerce has been a growth opportunity for retailers and brands for more than two decades, but today’s demographic shifts and unparalleled advances in smartphone technology have created new opportunities. Millennials, the generation of digital natives who do not remember a world without the internet, are now the largest segment of the US population and comprise 24% of the European Union’s citizens. Plus, more people now live in cities, automobile ownership is decreasing in developed markets, high-speed internet connections are becoming ubiquitous, and smartphone penetration is still rising.
The net result is that digital commerce is growing 10% to 20% annually, while in-store sales remain flat, or are even shrinking by as much as 5% per year in some markets. As a consequence, retailers are focused more intensely on growth through digital. But not every merchant has the same starting point, motivation, or resources, so growth strategies vary widely.
A framework for evaluating merchant growth strategies
Together with First Annapolis, ACI Worldwide published a whitepaper that identifies five key growth paths and establishes a framework for understanding the opportunities that come from digital channels. Although winning strategies are highly specific and no two merchants should expect the same success with the exact same approach, evaluating common growth scenarios, and analysing how successful merchants have mastered the accompanying payments challenges, can provide fresh insights for merchants and their payment providers alike.
Merchants and acquirers are turning to their solution providers to enable them to pursue these growth trajectories, and the question for those solution providers is then whether they have the tools and technology to enable their merchants to grow – any which way they choose.
Five merchant growth strategies
Going online for the first time: Merchants expanding into digital channels encounter many new requirements; from customer experience and logistics to cash management. These merchants must balance the trade-offs between time to market and ease of enablement with control and cost.
Diversifying channels: Optimization is a seemingly endless journey for online merchants, given that the customer experience can always be better, conversion rates can always be higher, and fraud can always be lower. Operational complexities are magnified when merchants expand into non-direct distribution channels and business models in which enablers, intermediaries, and aggregators alter the requirements.
Expanding internationally: Although cross-border expansion is comparatively easier in digital commerce than traditional physical commerce, it is still challenging. Competing for foreign consumers requires marketing and operational adaptation catered to local shoppers. The benefits of cross-border expansion are undeniable, however, as only China, the US, and the UK markets represent more than 10% of total global ecommerce.
Investing in mobile: Mobile is currently the priority for many businesses because nothing else is driving more commerce growth today. Principles gleaned from traditional ecommerce extend to mobile, but merchants must adapt the customer experience and operating model in order to thrive.
Expanding to POS: Ultimately, the lines between channels are blurring, as brick-and-mortar merchants continue to venture online, while ecommerce merchants increasingly open storefronts. It is challenging for these omni-channel merchants to offer shoppers a consistent and seamless experience because payment services are still too often divided between online and POS.
ACI Worldwide and First Annapolis will host a joint webinar on Thursday, 20 October to discuss the different strategies merchants are pursuing to drive growth through digital channels. Sign up for the webinar and hear from Markus Rinderer, as well as Jip de Lange, Senior Consultant from First Annapolis, and The Paypers’ Melisande Mual.
About the author
Markus Rinderer serves as SVP at ACI Worldwide, driving the development of the company's omni-channel merchant retail strategy. Previously, he served as CEO and founder of PAY.ON, a leader in ecommerce payment gateway services, which was acquired by ACI in 2015.
About the company
ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. Through a comprehensive suite of software and SaaS-based solutions, ACI delivers real-time, any-to-any payments capabilities and enables the industry’s most complete omni-channel payments experience.
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