Online has become the channel of choice. Brick-and-mortar has keenly felt the impact of COVID-19 restrictions. Sales in UK physical stores were all but wiped out during the national lockdowns. Even when stores were allowed to reopen, the tightening of restrictions, including the mandatory wearing of face coverings and strict occupancy levels to allow social distancing, hit consumer confidence and kept shoppers away. And while footfall plummeted 64.5 percent toward the end of 2020 compared to 2019, according to the BRC-ShopperTrak Footfall Monitor, ecommerce sales across Europe have increased dramatically during the pandemic.
Data from Astound partner Signifyd, which tracks ecommerce transactions across thousands of merchants and millions of consumers globally, showed that by the fourth quarter of 2020, European ecommerce sales were registering 35 percent higher than their year-ago levels. For some verticals, such as home goods and decor, for instance, the increases have been even more dramatic. That category was up 176 percent year-over-year in the fourth quarter. Meanwhile, data from True Fit’s Fashion Genome, which analyses data from 17,000 brands and 180 million shoppers, showed that in November total UK online fashion orders were up 363 percent.
And this upward trajectory of online sales is something Astound’s clients have also experienced—from Boohoo Group, who reported a 45 percent revenue increase in the three months to May 31, to Halfords, who also saw a 160 percent increase in online orders over the summer as it grew its ecommerce channel.
Rising ecommerce demand has created new online shopping behaviours. Online retailers are seeing existing and first-time customers buying in new ways and in higher volumes than they did a year ago. And consumers are saying they intend to stick with their new habits even once the pandemic has passed. Our own report, “COVID-19 and the Consumer,” points to this long-term shift, while a recent study from Signifyd showed 57 percent of shoppers would shop more online a year from now than they did a year ago.
“With the opportunity this surge in online presents, it’s important that retailers carefully consider how their ecommerce platforms support shoppers and deliver enhanced customer experience,” says Terry Hunter, CEO of Astound Commerce UK. “And key to that is carefully examining the buying journey and identifying and remedying any areas of friction to ensure sales opportunities aren’t lost.”
Revenue leakage, where friction in the shopping journey causes abandoned purchases and lost sales, can occur at any stage of the buying process—everything from poor user experience to overly conservative payment gateways, fraud management, two-factor authentication, and inventory issues.
Research from Astound partner Tribe shows that poor online experience causes the average shopper to abandon 10 percent of their planned purchases; clearly, addressing abandoned sales from revenue leakage is an opportunity that retailers can’t afford to squander.
The good news is that putting a stop to lost sales due to unnecessary friction in the shopping journey is well within a retailer’s control. There are steps merchants can take to optimise their sales funnels. And while retailers aren’t oblivious to lost sales and damaged customer relationships, the issues often don’t get the attention they deserve.
Silos make it difficult to see where revenue is leaking. The lack of attention that issues around revenue leakage often suffer from stems from the fact that it’s hard for any one team to see all the holes in the buying journey.
Retail teams often work in silos, relying on walled-off data, all of which makes the picture hazy and disjointed. By collaborating and sharing data across departments—from marketing to payments and fraud management, and across customer support, operations, and finance—means an integrated and unified view can be built.
One of the major causes of friction resides at the point of payment, with retailers having to balance a tricky trade-off: ensuring that their payments solutions meet the necessary security requirements to keep customer data safe, while ensuring that the mechanisms that keep payments secure don’t become overburdensome and add friction into the buying journey.
And the story becomes more challenging with the addition of Strong Customer Authentication (SCA), which came into effect in most of Europe starting 31 December, 2020, meaning UK retailers selling into Europe will need to comply.
Seamless SCA is the next thing retailers need to prevent revenue leakage. Retailers will want to be well versed in the series of exemptions that will ease the way for customers buying from affected regions. And they’ll want to work hard to keep their fraud rates low to increase the flexibility they’ll have to exercise exemptions.
Finally, they’ll want to have a seamless solution in place that can differentiate between transactions eligible for exemption and those that aren’t. Based on that conclusion, the dynamic system should automatically direct the exempt orders down a friction-free path to payment, while directing those that require SCA down the 3-D Secure rails to eliminate delays in approval, minimise customer friction, and maximise authorisation rates.
Ensuring that the SCA process runs smoothly is vital to avoiding another point of potential revenue leakage.
How can retailers tighten up online buying journeys to prevent revenue leaks?
- Break down internal barriers to sales. Removing organisational barriers that prevent retailers’ customers from completing a sale is the critical first step. Data and communication silos must be removed so all teams have a clear and unified vision of the buying funnel that encourages collaboration.
- Build a revenue leakage dashboard. Provide a comprehensive view of the buyer’s journey to help identify and plug holes. With a dashboard in place, retailers need to establish a revenue-leakage benchmark. Retailers need to know where they stand in comparison to others in the same space; taking factors like their sector, basket size, and brand maturity into consideration.
- Prioritise where to plug the gaps. Identify where the biggest leakage problems are and go to work on those. Next, optimise that trouble spot, measure improvements, and test effectiveness of those changes; then move to the next problem and repeat the cycle again.
Address revenue leakage to grow customer lifetime value. Stemming revenue leakage means ecommerce retailers can operate without being overly cautious and fearful. In an age when data breaches and cyber theft are so prolific, it’s understandable that retailers would be tempted to place barriers between themselves and customers. But, treating customers like criminals when it comes to fraud management only leads to shoppers penalising retailers in return—voting with their feet and abandoning their purchase. Finally, marrying the right ecommerce platform with the right design, user experience, and risk management practices can stem revenue leakage and preserve lifetime customer value—giving retailers the confidence to serve more-legitimate customers in the way they want to be served. Nothing could be more important as the shift to online commerce accelerates.