How well do you know your shoppers
Fabian Rodriguez: Hey everyone. In today's episode of The Honey Buzz Cast eCommerce Industry Trends and Insights, PayPal's VP of Digital and In- Store Marketing, Jason Test, chats with the Research Director at Worldwide Payment Strategies, IDC about a recent IDC survey designed to uncover how well merchants understand their consumers. 10,000 consumers and 500 merchants across five countries were surveyed for this study that focused on topics like security of shopper payment data, multiple payment options at checkout, and most trusted payment methods. This episode is packed to the hilt with concrete consumer insights, buckle up.
Barbara Call: Welcome I'm Barbara Call, Senior Director of Content Strategy for CIO Marketing Services, and I'll be your host to moderator for today's webinar titled How Well Do You Know Your Shoppers? Insights from an IDC Survey. And brought to you by CIO, IDC, and PayPal. I have two speakers joining me today. First up is Jason Test, Vice President Digital and In- Store Commerce at PayPal. Welcome Jason. Tell us a little bit about yourself.
Jason Test: Yeah. Hi, thanks so much for having me. Again, my name's Jason Test and I am at PayPal responsible for bringing a lot of the new innovation to market to our merchant partners. So I have a really fun job. We have over 30 million merchant partners globally and we continue to innovate and bring new solutions that help drive sales, lift loyalty and conversion. And I am here from Southern California in Orange County.
Barbara Call: All right, great. Nice to have you. And my second speaker is Aaron Press Research Director, Worldwide Payments Practice at IDC. Welcome Aaron. Tell us a little bit about yourself.
Aaron Press: Oh, thanks Barbara. And it's a pleasure to be here. As you said, I am the Research Director of Worldwide Payment Strategies and IDC Financial Insights. And I really focus across the payments landscape looking at both bank centric, and in this case merchant centric payments, really helping our clients to understand what is the latest and really how to be successful with their payment strategies.
Barbara Call: All right. Nice to have you, Aaron. So let's kick things off by talking about the study. Aaron, what can you tell us about the methodology of the study?
Aaron Press: Well Barbara, I think this is a really interesting study, kind of a unique project. Working with PayPal, we conducted two separate surveys, one of 10,000 consumers across multiple geographies and another of 500 merchants across those same geographies. And you can see here, those were US, Australia, Germany, France, and the UK with samples in every one. And so that really helps us get to some global and regional differences that we will highlight. But the really interesting part about this is we asked a very similar set of questions to both consumers and merchants, and the goal there was to uncover some gaps to see what were the differences and perceptions about what, for example, merchants thought was important versus what consumers think is important, and helping to understand whether or not merchants really are satisfying customers as they think they might be, if their priorities are the same. And ultimately the goal is to figure out how merchants can do a better job of satisfying their customers and ultimately increasing conversion and revenue.
Barbara Call: So the survey found that some shoppers share many of the same priorities as retailers regarding what's essential for a better shopping experience. Those include product catalog, customer experience, security and trust, flexible payment choices. So Aaron, what can you tell us about the key findings here?
Aaron Press: Well Barbara, as you mentioned, there's definitely some alignment, which is great. Looking at some of the key points that we're calling out here, security, no surprise that's a priority for both groups. Everybody wants their information to be secure. And for a merchant in particular, they do not want to make the news for having a breach, so security's really important. Payment choice, also very important. And we expected that to be a priority for consumers, and it turned out to be important for merchants as well. So it's encouraging that we see that level of understanding and alignment. And then for payment methods, what I thought was interesting was that credit and debit cards and digital wallets, both of which have really long track records, are still the gold standard. That is what merchants and consumers both trust the most. So I don't know Jason, what are your thoughts? How does this align with what you've seen?
Jason Test: Yeah, I think that makes total sense. And I would just add a couple of things. First of all, providing that frictionless customer experience is really all about ease, convenience, and trust. And for most consumers, it really starts with trusting the merchant and the payment process. When you think about personal information and all that information that consumers are entrusting to the merchant during that checkout process, that their personal information is handled and secured properly, that's a significant concern for shoppers and something merchants really need to care about. And add that to the growing demand that consumers have for merchants to provide a simple, fast, and frictionless checkout experience, and I think merchants have a real challenge in balancing those two expectations. I would also layer in the consumer expectation of choice. Today's consumers are not only looking for an easy checkout experience, but also expect to have choice. They want to checkout the way that they want to checkout. And merchants really need to think about how to modernize their checkout experience around providing that choice to their shoppers, anticipating different ways that consumers are going to want to pay. I think that's critical. And then you mentioned digital wallets, right? Think about the emergence of digital wallets. What we're seeing in our data is that shoppers increasingly want the ability to checkout with a digital wallet where they've already stored their personal information and all of their preferred payment choices. And I'd say for a merchant enabling those payments becomes incredibly important for us. We're seeing that our digital wallet has seen significant growth around the globe. It's currently installed in about 50% of our user base. And we think there's a lot of upside to that just based on the trends that we're seeing. And consider that consumers on average have more than 50 apps on their phone, but only use about eight of them on a daily basis. So solutions like digital wallets will become increasingly popular for the ability for shoppers to centralize and manage all aspects of their financial lives as they look to streamline the technology that they use.
Barbara Call: It's very interesting because there's some critical disconnects in the survey as well. So here's an example. Most retailers feel they've done enough to build trust among shoppers that their e- commerce site is safe and secure, but less than half of the consumers trust e- commerce sites to keep their payment data safe. Aaron, what are those major points of disconnect?
Aaron Press: So it's not surprising concerning how common it is for consumers to have their credentials misused despite the best efforts of merchants. Consumers are still, however, shopping online. Even though they may not be fully trustful, they appreciate the convenience. But it may be impacting their decisions about where to shop and crucially how to pay. So it's important for merchants to give them some assurance that their payments are secure, but also that they have the ability to use the payment method that they trust the most.
Barbara Call: And Jason, what are your thoughts here? How can retailers turn these areas of disconnect into opportunity, or even brand differentiation, or maybe another advantage?
Jason Test: I think what comes to mind for me is the power of the data that merchants have at their fingertips. I think merchants really need to leverage data to create more relevant shopping experiences that engage the shoppers end to end. And also think about data in the context of risk and fraud, which is a major challenge and continues to grow. Stored credentials and trusted payment sources can increase safety and improve the customer experience. So it all comes back to the data. There's a lot of fraudsters out there, and if retailers can harness the power of the data that they have on their shoppers, they can improve authorization rates, reduce fraud and chargebacks, all of the things based on the knowledge of the shopping patterns. And the bottom line is consumers won't shop on your website if they don't feel secure. This is an area that is important to us where we play a big role for our merchant partners. When shoppers land on a website and PayPal is visible as a payment option, the shopper's more likely to go ahead and finish the checkout because of the trust that they have in PayPal. And we see that time and time again, and definitely evident in our data. They know that first of all, it's going to be an easy and fast experience because they know that PayPal already has all of their information. And the checkout process is going to be one that's very familiar. It's going to be easy and quick, but also trust that the data is being handled the right way and that we've got their interest at heart. So I think really it comes back to just harnessing the power of that data.
Barbara Call: So it's interesting, the data also showed some of shopper's biggest frustrations and concerns may be surprising to retailers. And here's one example. The top rated frustration was not knowing the final cost before getting to the checkout page. So Aaron, let's talk about the full list of top frustrations. And did these findings surprise you?
Aaron Press: To be honest, I think a lot of the frustrations are fairly intuitive. And what they really come down to is customer experience. We're all online shoppers, at least I think. As an online shopper myself, at any rate I can definitely relate to a lot of these. From a payments perspective, I think it's really interesting that consumers put payment experiences so high on the list. And I think it's interesting for us to see really the empirical evidence that came out of the survey that payment type choice is really important to consumers. So I don't know. Jason, what are you hearing from your customers in terms of frustrations and concerns?
Jason Test: Yeah, thanks Aaron. And in my role, I get to speak with a lot of different merchant partners and get to hear what's on their mind. And one thing I hear a lot is the ongoing challenge with cart abandonment. And that's a real problem for retailers. In fact, the average cart abandonment rate is nearly 70%. So if you think about it, most shoppers who get deep into the buying process actually leave without making a purchase. And that's very frustrating for many merchants who are trying to solve this problem, and really any chance you have to keep someone from leaving before completing that purchase should be a priority. One thing we've seen is that shoppers expect to know the final cost of the product before checkout. And that's one important consideration. It sounds kind of minor, but it's really important to consumers. Shoppers don't want to be surprised when they get to the checkout page and find out that they'd have to pay an additional amount for shipping and handling and even state and local taxes. We hear this from merchants all the time and many are taking steps to optimize their checkout and prompt shoppers to provide their shopping postal code earlier on in the shopping journey. By doing this merchants can show the total cost of the product or service before the checkout page. And then earlier I talked about taking friction out of the process. And in my experience, I see that shoppers get very frustrated by some of the checkout experiences they encounter, like when you're prompted to enter your username, your password, what's your first name, last name, shipping address, billing address, shipping choice, enter your loyalty number, and now start adding the payment information. And, oh, can you also confirm your payment information and make sure you're not a fraudster? And now finally get to the point where you press that payment button. And I call that the press and pray moment of truth, when you've entered all this information, put in all this effort, and press that button to process the payment, and then you pray that nothing goes wrong and that the payment goes through okay. And that's a lot of friction you've introduced for the customer. And shoppers are smart and savvy, and they know there's a better way to check out, and they expect it. So what can merchants do? First, I think retailers can start by optimizing their checkout experience. This means reducing the clutter on your checkout page and only including relevant communication and payment methods. That means doing away with unnecessary popups like surveys or a call to sign up for a newsletter. All of that can wait for later. Really understand your objective and be single- mindedly focused on that objective, which is to help the consumer complete the transaction. You don't want to add unnecessary steps or distractions. And while you want a variety of payments, too many options can actually be overwhelming as something that we've seen and can create unwanted friction. So just being smart and choiceful while providing plenty of choice with the payment options that you know your consumer base is looking for. Another practice I've seen have great success for merchants is by bringing the buy now button right to the product page instead of making the potential buyers take the extra step of adding the product to the cart. The easier the experience, the fewer steps that consumer has to take, the better the experience, the more likely you'll get a conversion. And a buy now button is an incredible advantage and a great way to mitigate the cart abandonment problem.
Barbara Call: Thank you, Jason. So Aaron, back to you. Let's talk about some of these essential features for shoppers.
Aaron Press: Yeah. Once again, I think the data is showing us that customer experience is really important, whether it's about payments or about returns, which I think you could even argue are part of the payment experience, and of course checkout. Right. And one thing that we also thought was really interesting was in the data there appeared to be some small disconnects between what merchants thought was really important and what this data is showing us may not be all that critical. But when you really dig into it a little further, you can see that merchants are really onto something. For example, I call out buy now pay later. You're seeing only 13% of shoppers say that's essential, but a much larger portion of merchants said that they thought that was really important. That might at first glance seem like a real disconnect, but if you as a merchant understand that 13% of the shoppers coming to your site see that you don't have a buy now pay later option and they leave, that's huge. Think about what a merchant will do to get an additional 13% lift, even if only half of that converts, so that's really important. So those apparent data disconnects I think really call out some real power that merchants can leverage in order to increase conversions and reduce abandonment, to Jason's point earlier. So Jason does this jive with what you hear your customer saying?
Jason Test: Absolutely. And I already talked a bit about how merchants have shared how important it is that they offer choice in payment options and clearly show the different payment methods available to their shoppers. But one area that I would add is think about the returns process and the role that plays for consumers in their shopping journey. Shoppers want an easy and convenient way to return items that they later decide they don't want. And that's a huge factor in making the purchase in the first place. Consumers want that peace of mind that if they buy something, that it's going to be super easy for them to return it. And really that's become the expectation and in some ways table stakes for the merchant. And what about in person returns? If you think about it for eCommerce merchants, it's now important to have an in person return option. And I think that's become an expectation for shoppers. And one of the companies that we recently welcomed into the PayPal family is called Happy Returns. With Happy Returns, we can now provide this in- person return service for our eCommerce merchants as we now have relationships with brick and mortar locations where shoppers can easily and quickly return items that they purchased online. And with Happy Returns, we have a pretty large footprint. It's, it's more than 5, 000, we call them return bars, return bar locations that are within a 10 mile radius of about 78% of Americans. And if you think about it, in some ways the return process is broken for both retailers and consumers. It's often frustrating and time consuming for the consumer, and it's incredibly expensive for merchants, which is why it's quickly becoming a thing of the past. And I saw a stat recently that 84% of shoppers will avoid a retailer if they've had a bad returns experience. 84%. That's incredible to think about the psychology involved in what returns means in terms of where you'll buy. And according to the National Retail Federation, the total 2021 rate of returns rose to 16.6% of sales, which is up from 10. 6 a year prior in 2020. And that rate's going to get even higher. So the rate of returns is growing pretty rapidly. And with Happy Returns, the return is super easy for the shopper. And essentially the shopper can simply print out a QR code from the merchant site, take the loose unpacked items and the QR code, and simply drop them off at the return bar, at one of the different locations that we have all throughout the country. And it's that simple. This is becoming table stakes for eCommerce merchants to enable that in person return process. I also noticed the ability to use incentives and rewards tops the nice to have list for consumers. A big part of providing a frictionless checkout experience involves savings. It not only helps the consumer save money, but it really drives conversion because consumers know that they're getting a deal if they go ahead and move forward today in that purchase process. And as part of our shopping suite with another company in our portfolio called Honey, we enable merchants to provide the right incentives to the right shoppers at the right time, in a way that can be quickly and seamlessly applied at checkout. And that helps build loyalty with the shoppers. They're going to want to come back to shop if they know that there's deals to be had, especially in the economic environment we're in today.
Barbara Call: So Aaron, let's talk about the investment priorities for merchants based on the survey.
Aaron Press: Well, I know it sounds repetitive, but the things that make the customer experience better are the most important places to invest. That's what the data really calls out. It's the basics. It's things like product mix and inventory visibility, but also of course, the payment and checkout experience. And these aren't even all investments necessarily. And I think Jason called this out earlier, a lot of these are just small strategic changes that just provide more or better information to the consumers, things that really help smooth the customer journey and ultimately end up in conversion.
Barbara Call: All right. And Jason, how do you think retailers can improve their eCommerce experiences?
Jason Test: Yeah. And we've touched on several ways and I'd come back to my earlier point on data. We see that 30% of merchants have prioritized leveraging customer data to help make the shopping experience seamless. And they're a hundred percent in that approach, as you can tell by my passion for it. But quite frankly, I'm surprised the number isn't bigger. The amount of data, the number of insights you can lean on, and of course, as a partner to our merchants, we have a tremendous amount of data and shopping insight that we can help merchants inform their eCommerce strategy. Thinking about the end to end shopping journey, the more data you have about shopping preferences, the more you can engage shoppers early in that shopping funnel. And you can leverage that data to put, for example, the right incentives and the right messages in front of those shoppers, which is what we're doing with our digital wallet, actually. And then you want to take those shoppers on a journey that leads the shopper all the way through the buying process. So I think the data's huge and we use it in every step of the buying journey. Another way that we use it is, of course, on the risk and fraud side that we talked about earlier. Retailers can really improve their authorization rates, they can reduce fraud and chargebacks, all those things based on the knowledge of the shopping patterns, and we're helping our retailer partners with that.
Barbara Call: So one thing we've seen is some regional differences in terms of trusting payment types. Jason, have you seen this?
Jason Test: We've already established the importance of choice and that retailers need to offer shoppers the ability to check out in the method they prefer. And this often varies by geography, by the way. In Germany, we see that nearly 80% of shoppers won't shop with a merchant if their preferred payment method isn't there. 80%. But where this can really get tricky is where retailers have an international presence, where you have to reconcile multiple different currencies and navigate different regulations, and that's where working with a global payments partner like PayPal can really make a big difference.
Barbara Call: Aaron, what do you think retailers can learn from the survey results?
Aaron Press: Well, one of the reasons we ran this study internationally in the way that we did was precisely to suss out just these differences. And the data you see here is really only scratching the surface. And I think merchants need to understand that if they want to maximize their success across markets, they have to localize the experience. And this is especially important as you're thinking about expanding internationally if you're not already there. Knowing in advance that you need to think about not just localizing the product mix, or localizing the way you describe things, but localizing that entire experience end to end, including of course the payment experience. We've known for a long time that, you call out here the differences between preferences in Germany versus France or the US versus the UK in terms of payment type and in terms of the strength of the conviction that different cultures have as far as the payment types they prefer and how strongly they feel about that, and how willing they are to be flexible about their payment type. These things can vary. And once again, these really small differences can make really big differences in the success of your business.
Barbara Call: Thank you, Aaron. So the survey also showed there's generational differences. So Jason, what are your thoughts here?
Jason Test: Yeah, every generation has different preferences when it comes to payments. But at the end of the day, they all want the same thing. They all want something that's simple, and safe, and fast. Another common thread in the report shows the use of digital wallets across generations. During the pandemic, just as an example, we saw a rise in what we call silver tech coming onto our platform. And we also continue to see rise in millennials and Gen Z on the platform. And millennials and gen Z now make up more than half of the nation's total population at this point. So engaging that audience needs to be a top priority.
Barbara Call: Aaron, any thoughts to add?
Aaron Press: I think similar to geographies, geographies equal culture and generations equal culture. And cultural differences really matter in terms of success. I can tell you just in a personal anecdote, my kids are not that far apart in age, but they have really different payment preferences. I should say they're old enough to pay for things themselves. But my oldest is much more traditional prefers credit and debit cards. I have one in college who prefers to use a digital wallet and things that wrap around it. And you can just imagine then breaking that down along geographic lines as well. So really it comes back to the original point, understanding your end customer and their preferences from across the entire buying journey is really important to making those incremental improvements and ensuring success.
Barbara Call: All right. This has been great. Thank you. So what advice or recommendations would you offer our listeners? Jason, let's start with you.
Jason Test: Yeah, I think it's pretty clear that the retail landscape today has changed a lot and it's not one anyone would've recognized just a few years ago. Consumers have a completely different expectation of retailers, not just in terms of product and inventory offerings, but as it relates to the shopping experience itself. And for retailers to remain competitive, I think they have to adapt to how shoppers want to shop. New shopping habits, new shopping expectations. The shopping journeys have become very fragmented. Shoppers have lots of different ways, both online and offline, how they want to engage throughout that shopping journey. So I think retailers really need to think about putting in place technologies that create a better experience. And when the shopping experience offers peace of mind, that the consumer is getting the best available price, returns are going to be hassle free, that their payments are fast and secure, those are the experiences that bring shoppers back.
Barbara Call: Thank you. Aaron, anything to add?
Aaron Press: Well, I certainly can't disagree with anything Jason has said there. One thing I might want to add is this environment is not getting any easier. There is more complexity coming, there is more innovation coming. And you can really be hamstrung by choice, by options, by technologies. But when you get right down to it, it always comes down to what is the best customer experience. And I think we need to understand that customers like what they like. And here we went to a lot of trouble to get a lot of data to uncover these things, and I think ultimately, honestly looking at the data in this survey and understanding what it is that your customers are really looking for, you can narrow down the choices that you need to make, simplify, frankly, your environment overall, and still end up being more successful in the end.
Barbara Call: Thank you both. Thanks to both my speakers. Jason Test is from PayPal. Aaron Press from IDC. For more information, be sure to visit the resources area under console. For CIO, IDC and PayPal, I'm Barbara Call.
Fabian Rodriguez: Thanks for listening to this episode of the Honey Buzz Cast eCommerce Industry Trends and Insights. To learn more about how Honey can help grow your business, reach out to honey- partner- support @ paypal. com and be sure to follow us on Apple Music, Spotify, or wherever you listen to podcasts.
In today's episode of The Honey Buzz Cast eCommerce Industry Trends and Insights, PayPal's VP of Digital and In- Store Marketing, Jason Test, chats with the Research Director at Worldwide Payment Strategies, IDC about a recent IDC survey designed to uncover how well merchants understand their consumers. 10,000 consumers and 500 merchants across five countries were surveyed for this study that focused on topics like security of shopper payment data, multiple payment options at checkout, and most trusted payment methods.
Highlights of today's episode include:
- The IDC Survey: How well merchants understand their consumers
- Providing a frictionless customer experience
- Trust building and disconnects in the survey
- Understanding objectives and eliminating unnecessary steps and distractions
- Essential features for shoppers
- Investment priorities for merchants
- How retailers can improve their e-commerce experience
- What the survey tells us about regional differences
- Generational differences in payment preferences
- Advice for listeners on consumer expectations