December 5, 2019
There are so many things to consider in a fast-growing eCommerce business. Inventory management, shipping costs, fraud management, sales tax, customer experience—the list goes on.
Bad eCommerce practices, such as complicated checkout processes or fraud management that blocks genuine customers, can easily creep into a business. Therefore, it’s important to run regular diagnostics to identify common bad practices that, without proper management, can be detrimental. Let’s dive into each area to help you uncover clues of profit-killing activities that could be hiding in your eCommerce business.
1. Look for friction in your checkout funnel
Buyers are looking for frictionless experiences when shopping online, particularly when they’re shopping on mobile devices. Over 60% of all eCommerce visitors come from mobile, yet mobile still accounts for just 28% of eCommerce sales. This gap persists because of friction in the mobile experience. Here are some questions to ask to uncover signs of friction in your checkout funnel:
• Do you have a testing strategy to see what changes have a positive or negative effect on buyer behavior? Continuously test eCommerce sites to keep up with consumer behavior. Start measuring key performance metrics, including revenue per visitor (RPV), product detail page (PDP) view rate, and cart abandonment rate. Don’t forget that buyer behaviors change across device types, so be sure to test and measure effects on both mobile and desktop experiences.
• How many steps are in your checkout process? If your checkout process is convoluted, it creates friction for the buyer. Small changes, such as simplifying the cart header, auto-filling the ZIP code field, or collapsing the coupon field can have a big impact on conversion rates and revenue per visitor.
• Do you offer alternative payment methods to allow customers an easier way to checkout? For example, the PayPal Checkout button stack—which includes payment options such as PayPal, Venmo, and local methods—delivers higher conversion rates versus alternative payment routes in key global markets.
• Is your site optimized for mobile? Ensure your site is dynamic and adaptable to a wide range of screen sizes (including mobile). Use compact fields for less scrolling and a better customer experience.
• Do you provide a guest checkout? Remove unnecessary barriers to entry, such as login walls. Guest checkout eliminates the friction of making customers create an account in advance.
2. Ensure sales tax management is automated
Sales tax noncompliance really hits profits: Merchants are liable to pay 10% in late fees for not filing on time, and, in some states, they even face potential jail time. Here are some questions to ask to uncover signs of poor sales tax management in your business:
• Do you sell products or services that have varying taxability rules by state, and how are you handling that today? To become fully sales-tax-compliant, merchants should determine where they have sales tax nexus, verify whether their products or services are subject to sales tax, register for a sales tax permit, set up sales tax calculations on online shopping carts and marketplaces, report how much sales tax is collected in each state, and then file sales tax returns on time.
• How much time do you spend on tax filing and reporting? Tax preparation is a huge time-burden for many businesses, especially resource-constrained businesses in early growth stage. Automated tax solutions can simplify the reporting and filing process.
• Do you require the assistance of an in-house or external accountant to do your taxes? Many merchants rely on accountants (in-house or external) to handle their taxes. While these experts can help ensure merchants stay compliant and file on time, they also cost businesses a great deal in salaries or fees. Automated tax solutions, on the other hand, can do the work of these experts without the need for additional help.
3. Avoid false declines from fraud management
Efforts to mitigate the risk of fraud are necessary. However, lengthy manual reviews are time-consuming and traditional technology solutions are problematic as they often block legitimate customers—false declines cost eCommerce businesses over $330 billion per year. Here are some questions to ask to uncover signs of inefficient fraud management in your business:
• What is your current order approval rate—and how fast are approvals? eCommerce merchants should have an order approval rate in the high 90% range—and the approval should be fast.
• How much revenue are you losing to false declines? False declines account for the lion’s share of the total cost of fraud for U.S. retailers, and two-thirds of shoppers would stop purchasing from a merchant if they had an order falsely declined.
• What is your current chargeback rate? The average eCommerce merchant should have a chargeback rate below 0.9% (1.8% for high-risk industries, such as alcohol, tobacco, and firearms).
4. Remove inefficiencies from payment processing
Complicated checkout processes account for nearly 39% of U.S. shopping cart abandonments. At the heart of the checkout experience is the payment provider and processor. Here are some questions to ask to uncover signs of payment processing inefficiencies:
• Do you spend time worrying about how your customers pay you? Braintree offers merchants the comfort of knowing that they’re getting paid (usually in two days or less) without having to monitor payments continuously.
• What is your current transaction flow like? Does it involve manual work for the end consumer? Automated payment processing simplifies the checkout process and helps reduce cart abandonment by giving shoppers an easy way to buy what they want, with speed, across any device they use.
• What is your current transaction flow like? Eighty percent of shoppers are motivated to shop at a business if they have an easy to use website and checkout process. Checkouts that seem insecure or require a lot of manual work on the consumer’s side typically result in high cart abandonment for that eCommerce business.
• Do you apply comprehensive payment gateway best practices or just the basics? Most payment gateways authorize, capture, and settle transactions. However, to help your business grow, you should consider additional capabilities that will help you boost the efficiency of your sales processing and create better and more secure shopping experiences for your commerce customers.
5. Lack of consumer credit or flexible payment options
Sticker shock is a leading cause of cart abandonment. By offering a flexible pay-over-time solution, merchants can build consumer confidence, increase customer satisfaction, and increase cart conversion rates. Ask these questions to discover if point-of-sale financing could benefit your business:
• Have your customers inquired about flexible payment options or alternative payment methods? Millennials and Gen Z shoppers want transparent payment solutions that give them complete control over their spending. Merchants that use financing as part of their retail strategy see a 32% increase in sales and a 75% increase in average order value.
• How does your payments strategy fit into your overarching marketing strategy? Featuring alternative payment methods in social media campaigns, email programs, and retargeting can increase lift in return on ad spend (ROAS) by up to 70%.
• Does your store integrate with mobile payment apps? Alternative payment methods (such as Apple Pay and Amazon Pay) help deliver a frictionless buying experience on mobile with no redirects, no account sign-up, no interest or late fees, and no credit checks.
6. Poor international growth strategy
Poor international expansion approaches can eat into profits. High fulfillment costs are one problem, while cart abandonment due to unexpected shipping expenses is another. Another concern is how international shoppers want to pay for goods or services. All regions and the individual countries within them have local nuances and preferences that require thoughtful planning to achieve cross-border eCommerce success. Here are some questions to help you strategize your international expansion:
• Do you tailor the checkout experience to suit local payment preferences? A survey of 36 countries found at least 140 online payment methods in use today. Adapting your payment methods and currencies to the preferences of consumers in local markets can broaden your global reach, maximize your acceptance, and increase your bottom line.
• Does it make sense to establish a legal entity in a new country? Legal entity options, related costs, restrictions, and setup times will vary from country to country, so it’s advised to consult an expert familiar with target-country tax laws and processing requirements to determine the optimal entity type for your situation.
• Are your checkout experiences optimized for international revenue growth? The easier and more familiar the payment method, the more likely a conversion will happen. For example, Alipay and WeChat are common payment method in Asia, while SEPA and Sofort are popular in Europe.
• Have you adjusted your checkout experiences for international regulations around fraud protection? International regulations to protect consumers from fraud differ by country. For example, a new European regulatory requirement called Strong Customer Authentication (SCA) protects merchants and their consumers from fraud by requiring additional authentication during the payment process for most online transactions (such as two-factor or biometric).
7. Disjointed customer experience across online and offline channels
Consumer expectations for seamless, personalized, and omnichannel experiences are high. Nevertheless, a recent report found that only 27.5% of all U.S. retailers offer buy online/pick up in-store (BOPIS) options. Here are some questions to diagnose and alleviate poor omnichannel experiences on your site:
• Do you have a full picture of your omnichannel buyers’ behavior? Customer profile data should include purchase history from both online and in-store channels, giving you a holistic view of your customers so you can create truly personalized omnichannel experiences for them.
• Is your inventory syncing in real-time across all channels? Inaccurate data, limited stock, and slow replenishment are the biggest challenges when it comes to omnichannel operations. A strong inventory management system is crucial to effectively managing inventory and being prepared for online and in-person purchases, especially during seasonal rushes.
• Are your online and in-store payments providers consolidated? When choosing your payment processor and point of sale, think about how you run your business, what channels you have, and the data you receive from your back-end operations. When all of your channels are truly unified through your payments and POS, you'll get a holistic, data-driven view of how your customers shop.
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