E-commerce continues to evolve; therefore, it’s critical for e-commerce merchants to recognize the trends and be empowered to make better business decisions to drive sales. Some of the trends related to global online sales of digital goods and subscriptions are highlighted by 2Checkout, a digital commerce provider, in its Q1 2019 Digital Commerce Benchmark Report, which analyzed millions of worldwide transactions traveling through the platform between March 2018 and February 2019.
The report emphasizes the subscription-based revenue model is gaining steam within the digital goods and services industry, as companies shift from one-time purchases to a recurring revenue models. This trend is coupled with the diversity of local markets and buyer preferences. Therefore, whatever digital commerce platform a merchant is choosing to work with, it's advisable to select one capable of supporting global commerce with a local approach, as well as a variety of business, payment and subscription models.
Let’s look at the key trends from the report in more detail.
Subscriptions on the Rise
The growth in subscriptions continues steadily, with 77 percent of total online sales in the last 12 months coming from subscription-based products and services. This is a slight increase from 2018 (76 percent) and 2017 (75 percent).
Average Order Value Grows
The average amount customers spent within the last 12 months for software, SaaS and online services increased by $6 to $56 from the previous year. This is even more meaningful in comparison to data from two years ago, when the average order value (AOV) was $48. A widespread usage of commerce tools such as cross-selling in cart and on the "Thank You" page, up-selling, cart abandonment prevention, in-app tools and so on are potentially contributing to the increase in AOV.
Variations in Payment Methods
Credit cards such as Visa and Mastercard continue to be the most popular payment methods globally, with a slight gain from last year, now accounting for 70 percent of global online sales (compared to 68 percent in 2018), followed by PayPal at 20 percent (up one percentage point), and American Express, which saw a slight decrease from last year’s 7 percent to 6 percent. Local and regional payment methods aren't to be ignored and continue to hold a solid percentage of sales in several countries, including iDEAL in the Netherlands (44 percent), Alipay in China (43 percent), and Boleto in Brazil (14 percent). In order to be successful in foreign markets, U.S. sellers need to accommodate local payment preferences as part of the buying process. Consumers are more likely to complete their purchase if the shopping cart is displayed in their native language and their preferred payment method is listed as an option.
Top 10 Countries in Online Sales
Taking the lead in software, SaaS and online services purchases, the U.S. accounts for 49 percent of sales worldwide, followed distantly by the U.K. (6 percent) and France (5 percent). Germany and Canada share the fourth spot this year after Canada’s sales increased slightly year-over-year. The top non-English-speaking countries account for 20 percent of global software sales, a slight decrease from 22 percent last year.
Supplementary Revenue Sources
Merchandising tools and affiliate marketing are proven ways to boost online sales. Additional revenue was generated from promotions, influencing 33 percent of revenues, while cross-selling and upselling accounted for 15 percent of all sales, on average. Affiliate marketing continues to generate revenue increments for software sales, north of 20 percentage points.
Erich Litch is president and chief operating officer of 2Checkout, an all-in-one monetization platform for global businesses.