New generation of shoppers demand better payment and financing options, but retailers put off by perceived complexity. Checkout friction remains primary cause of abandoned baskets.
Abandoned shopping baskets remain a significant issue for UK retailers, with checkout cited as the primary point for consumers to fall out the shopper journey, according to data from global analyst house Ovum and leading European payments provider Klarna.
The research into the opinions of leading multi-channel retailers found that 52 per cent of retailers believe that friction in the online checkout is the biggest driver of basket abandonment. 40 per cent cited a lack of payment methods and 39 per cent suggested a lack of lending or credit options was stopping consumers completing the payment process.
For retailers, increasing the range of payment and financing options is the key route to ensuring more consumers make it through the checkout process, and lower the rate of basket abandonment affecting UK retailers. 98% of merchants agree that consumers want new and easier ways to pay online and 78 per cent of merchants say they would like to introduce consumer finance at the point of sale. But perceived barriers to increasing payment options persist - 85 per cent of retailers think that it is too complicated and expensive to offer consumer finance at the point of sale.
However, consumer appetite for more varied payment methods is strong. With the huge growth in mobile shopping, and high levels of interest in new forms of consumer finance, the UK is likely to see the emergence of new buy now pay later options in both online and mobile channels. Klarna’s consumer research supports this - it found that that 53 per cent of online shoppers are looking for new and easier ways to pay online, while 56 per cent of consumers said they would buy more online if there were more varied payment options available.
The influence of online is increasing
It’s crucial that retailers offer a smooth payment process with plenty of payment choice, especially given that more and more transactions are shifting online. Respondents estimate that almost two-thirds of retail sales (65 per cent) will take place online by 2019. Sales made on mobile devices soared by 350 per cent in two years, increasing from 1.8 per cent in 2015 to 8.1 per cent of total sales today amongst retailers surveyed. Retailers predict that by 2019, well over one in ten (12.8 per cent) of all retail sales (both in store and online) will be made on mobile and in preparation, 9 out of 10 retailers today are currently investing in mobile payment capabilities to stay competitive.
The new mobile millennial
This explosion in mobile shopping is being driven by digital natives, such as Millennials and Generation Z (18-34 year olds), which now account for over half of all online retail purchases in the UK. This compares to 30 per cent for generation X (35 – 50 year olds) and just 10 per cent for baby boomers (50 – 70 year olds).
Merchants are waking up to the importance of catering for this new breed of consumer - 90 per cent of merchants say that meeting the demands of millennials is driving investment in new payment technologies.
Fashion in particular is emerging as a major battleground to win millennial loyalty, with 95 per cent of retailers upping their investment in tech to meet their expectations.
Luke Griffiths, UK General Manager, Klarna, said, “This data shows that simple things such as a tricky checkout process or lack of payment options can turn off today’s consumers. But there is much to gain for retailers who get this right - consumers will spend more if the payment process is smooth and stress free.
“The majority of retailers still perceive online consumer finance as too complicated or expensive to offer. But today, it doesn't have to be. Retailers looking to provide the options consumers want in an easy to use format should consider Klarna’s Buy Now, Pay Later or Planned Payments for a smooth and simple way to offer modern consumer financing.”
Gilles Ubaghs, Principal Analyst with Ovum also commented, “The UK is amongst the most dynamic and competitive markets when it comes to online and mobile shopping. The fierce levels of competition, combined with an increasingly demanding customer base driven by millennials, is now leading to more experimentation in how we pay. It’s getting harder for retailers to stand out online - improving payments and offering new ways to finance purchases is undoubtedly becoming a critical component of the ecommerce landscape.”