Around the globe, and to no surprise of the average consumer, the e-commerce environment has grown in popularity and preference.
Locally, e-commerce payment transactions totalled 477 million transactions worth $56 billion in Canada – totals that are up 13 per cent in volume and 20 per cent in value from 2019. And this shopping channel preference is not expected to slow down.
Canadians are embracing financial technology and digital transformation for convenience. This means more digital and mobile communication options and contact-free transactions and payments. So much so that almost half of consumers actively seek out businesses that provide alternatives to speaking on the phone, such as text and chat.
From a payments perspective, Canadians want speed and security through trusted channels. With a 71 per cent increase in the number of accounts who have reported at least one case of credit card fraud – a stat 2x higher than that of ID theft in Canada – this is a valid concern.
Whether a merchant is just starting their Shopify store or has been managing one for years, it can be challenging to keep up with changing consumer preferences while remaining cost-effective. Costs to maintain an e-commerce store can be tens of thousands each year, including fees for a domain name, website host, inventory and payment processing, but investments in catering to a changed consumer will establish stronger customer loyalty and increased revenue potential.
While keeping up with the latest technology sounds daunting and expensive, merchants can meet these consumer needs and drive down costs. To get started, here are 8 areas to evaluate for managing e-commerce costs.
- Evaluate advertising spending: Marketing efforts are typically the first impression someone has of a business. Building awareness through paid advertising can be a great tool to extend reach to potential customers and drive sales. But to best serve your e-commerce channel, it’s important to understand where your audience consumes their news and entertainment – and meet them there.
- Focus on customer experience: Ease of doing business is top of mind for consumers. In fact, 60 per cent said it’s a top reason they repeat their business and 57 per cent said it’s a top reason they refer friends and family. From the moment someone enters an online store to the moment they checkout, the process must be seamless and friction-free.
- Offer more payment options. While digital payments are gaining in popularity, credit cards currently remain the primary payment option for e-commerce in Canada, accounting for 59 per cent of e-commerce purchases. And with each credit card use comes a large price tag – over $9 billion annually – to merchants for interchange or processing fees. If Canadians were given more options to pay, merchants could help reduce the reliance on credit card use and decrease this annual expense.
- Consider alternative payment options. Alternative payment options such as prepaid, PayPal or e-transfer, offer Canadians more choice at checkout and can easily be integrated into e-commerce platforms to reduce merchant costs. The cost to the online retailer is less because of lower transaction fees and/or more conversions can push the cost of acquisition down. An option like DirectPay, which can now be integrated on Shopify platforms, allows customers to pay for online transactions directly through their bank, would also help Canadians avoid credit card debt, manage their finances and feel more secure about shopping online.
- Optimize shipping costs. We love free shipping, which some refer to as the ‘Amazon Effect’, but this may not be financially feasible for every online merchant. And if it’s not, it should at least be fast. Based on each industry, there is likely a break-even point for online consumers and fee testing could be worthwhile. For example, instead of always offering free shipping, perhaps a tiered cost model would still be acceptable amongst your audience, where free shipping is offered once a spending range is reached.
- Go digital. Many business capabilities can be digitized. From chat and mobile communications to payments to channel revenue technology, going digital will better meet Canadians’ needs – both as customers and employees. As working from home continues to gain preference momentum, the right tech solutions can protect against burnout by increasing efficiency. Among business respondents with line of sight into investments, nearly 75 per cent reported purchasing technology in the past 12 months to help their teams work more efficiently. This could include website chat functionality, payment processing or CRM.
- Invest in a secure checkout. According to a recent survey by Leger group commissioned by DirectPay, only 10 per cent of consumers are very comfortable sharing their credit card details with online merchants. This is because payments security is important to Canadians, which reaffirms the need to expand payment options outside of credit cards. Customers who feel secure will have the confidence to make an online transaction, reducing cart abandonment and keeping merchant costs down from fraud.
- Ensure the return process is clear and simple. Returns are inevitable, but one way to reduce the amount of profit loss is a reasonable and easy-to-understand return process. Consider including return labels in the box and encouraging customers to reuse packaging for shipping items back. In addition to environmental benefits, this will help reduce time and effort from other business functions – think customer service, IT, packaging, shipping – who are often engaged to support when their time could be better spent elsewhere.
E-commerce retailers have an opportunity to lower costs while still meeting Canadian service and payments expectations. While there is not a one-size-fits-all formula, understanding how your customer prefers to interact with the business – via advertising, communications and payments process – is critical to success. By investing in key business functions and monitoring consumer trends, merchants can find a better balance between everyday e-commerce costs and necessary loyalty tactics.
Robert Hyde is the CEO of DirectPay by Payment Source.