As retailers adjust to the ever-changing landscape and shifting consumer spending behaviors due to COVID-19, getting the most out of every sale becomes a crucial strategy. Now, retailers not only need to drive shoppers to their e-commerce site, but once there, really need to maximize efforts to encourage greater sales, repeat shopping, and decreased cart abandonment.
Even before COVID-19 hit, card abandonment was a thorn in the side of e-commerce retailers. As a $3.4 trillion industry, global e-commerce could be exponentially bigger but not for the 68.3 percent of all items that consumers put into their virtual shopping carts, yet never purchase them. This lost opportunity costs e-commerce brands up to $4.6 trillion globally every year.
Consumers leave items in their carts for various reasons. Just think of the many touchpoints in the purchasing process where a customer could drop off: adding an item to the cart, being asked to log in, discovering the actual shipping and tax costs, entering billing information, entering shipping information, etc. Amazon.com has attacked this problem head on. The e-commerce giant revolutionized online purchasing in 1999 by introducing the one-click payment process. Since Amazon's patent expired in 2017, every other brand knows it must follow suit.
The one-click process represents the larger truth: brands must make it easy for customers to buy — especially now. Whether it’s the one-click buying option, transparency in the full cost of the transaction, or improving the user interface, brands are constantly seeking to improve the customer experience at checkout. With $4.6 trillion left on the table each year, they have no choice.
So what’s next?
E-commerce leaders are increasingly turning to installment payment options to address cart abandonment. Globally, installments represented $1.2 trillion in payment volume in 2017. Offering the option to pay across monthly installments not only boosts the customer’s buying power, but it also provides the flexibility and personalization shoppers increasingly need, giving them added control to split up payments that best fit their current budget needs.
Brands have optimized their sites for a simple purchasing process; now their customers can optimize their spending to fit their lifestyles and preferences.
Installment Payments Are on the Rise
By the end of next year, one in three e-commerce brands is expected to offer an installment payment solution to its customers. However, all installment payment solutions are not created equally. For one thing, many solutions actually add friction to the checkout process by requiring applications and separate approvals. These are the same providers that are extending new (and potentially harmful) loans to consumers, which ultimately carries reputational risk back to the merchant. Consumers should have choice, but as an industry, we also want to see consumers responsibly spending the credit they’ve earned, not incur excess debt.
Putting Installment Payments to Work Against Cart Abandonment
Discovering the full cost of shipping and other fees is the No. 1 reason consumers abandon their carts at checkout. To address this, many brands are committing to transparency throughout the process. Showing the total cost for an item upfront may have some brands on edge, but countering that with vastly reduced prices that represent installment amounts both cuts out the surprise and offers a clear incentive to purchase.
The ability to pay in installments also presents an engaging retargeting message. Exit pop-ups and emails give brands the ideal opportunity to remind their customers of the items they left behind while enticing them back with increased flexibility for their purchases.
And finally, an installment payment solution can help brands build loyalty and grow their core customer base — helping to offset revenue lost through cart abandonment. Retailers with a reputation for helping customers keep their spending in check and providing greater control over how they pay offer long-term value beyond free shipping and coupons.
The data is clear: customers buy more when they're given the option to pay on their own terms. Cart abandonment will never disappear, but as brands focus their attention on how to make it as easy as possible for customers to complete their purchase with responsible spending, they can’t afford to ignore the benefits of offering an installment payment solution. Especially in times of economic uncertainty, the brands that give consumers more flexibility in how they pay and greater control of their spend will be the ones that will get repeat sales.
Brad Paterson is the CEO of Splitit, a global payments company that’s reimagining the shopping experience with interest-free installment payments to help businesses grow and improve affordability and flexibility for shoppers.