Adapting to the new COVID-19 retail landscape

By Mike Goodenough, General Manager, EMEA, Ingenico ePayments  

The retail landscape has undergone a dramatic transformation during the COVID-19 outbreak. Millions of people flocking to the internet to shop while physical stores were closed, hugely bolstering eCommerce sales. Despite this initial spike in online sales, there are still a number of obstacles that businesses must maneuver as the virus starts to abate.

Now that countries across the globe are beginning to emerge from lockdowns, businesses are starting to focus on recovery, and we are heading into the new normal. When doing this, they shouldn’t lose sight of what is currently taking place in the macro- and micro-environment. With this in mind, let’s take a look at some of the residual challenges left over from the lockdown and some of the new challenges that we face going forwards.

What main challenges are being faced by cross-border online businesses?

The way consumers are choosing to pay has drastically changed during the pandemic. Following lockdowns and with social distancing in place, they’re visiting their favorite stores online or in-app. Online businesses should be well aware of this and should be offering customers’ preferred payment methods if they want to maintain or increase conversions.

What’s more, uncertainty stemming from the pandemic has meant that many consumers are avoiding high-value items. Cross-border merchants must be prepared for and adapt to these trends by optimising online channels and adjusting category strategies.

Another challenge is insufficient stock and rising logistics costs. Due to lockdowns and border restrictions, production has decreased, it’s been difficult to import goods, and costs in cross-border logistics have surged. As a result, businesses are having to contend with inventory shortages and it’s critical that they re-estimate lead times and swiftly remove sold-out listings to avoid refunds and chargebacks due to stock shortfalls and delivery delays.

The industry as a whole may also be losing traction when it comes to sales, as current trends suggest that the pandemic is leading to a slow-down in cross-border eCommerce. Consequently, many merchants are facing cash flow issues. To combat this, they should consider how to shorten payment settlement cycles, while reducing the cost of payment processing and improving conversion rates.

Is this the same for domestic businesses?

Some of the challenges that local merchants are facing are extremely similar to what’s being experienced by cross-border businesses. For example, it’s absolutely essential for them to optimise their online sales channel, quickly pinpoint any disruption to supply, as well as the impact the virus is having on existing inventory.

Furthermore, during the pandemic, home deliveries and click-and-collect orders have surged in domestic markets. As a result, merchants have had to quickly adopt new online business models, with payment experiences that are frictionless and locally relevant.

How have these changes developed as the virus has progressed?

Mike Goodenough

Different issues are being faced during different phases of the outbreak. In countries around the world, soaring cancellation and refunds often occurred in the first 2-3 weeks, when cash flow issues were also likely to arise for merchants with weak balance sheets.

Over the longer term, restrictions and lockdowns have caused supply chain issues and stock shortages, resulting a higher risk of unnecessary chargebacks as delivery timeframes are pushed out – leading to unhappy customers. When this is combined with a drop in cashflow, it’s integral that businesses ensure that they don’t breach chargeback thresholds.

Furthermore, timely adjustments of multi-currency pricing are essential when combatting the high volatility of different foreign exchange (FX) markets, which are fluctuating depending on what stage of the outbreak a country is at.

What tools and strategies can we use to mitigate the COVID-19 risk?

The best way to reduce the impact of cancellations and refunds is to be proactive and anticipate them in advance. Return policies should be reviewed and made easily available to consumers to avoid unnecessary chargebacks. Merchants can also offer cardholder credit or a voucher for future use as an alternative to a refund. Yet, for those cases where refunds are necessary, automated reporting systems will help reduce the burden of reconciliation for merchants.

In addition, FX guarantee services, along with multi-currency pricing (MCP) solutions, have proven to be highly beneficial for businesses aiming to combat FX volatility, minimize currency-induced friction, and reduce shopping cart abandonments.

Heading towards the future

With increased online activity, the digitalisation of all payments has become more prevalent during the outbreak and will likely stay that way afterwards. As we move into the future, businesses should maintain this stance, as social distancing will likely continue after lockdowns are eased and customers will continue to gravitate towards contactless and digital payments to prevent the spread of the virus. It’s important that businesses embrace and adapt to these changes.

The ability to offer frictionless, real-time payments that a relevant to customers’ needs will be essential to all business in the future. What’s more, they should now be optimising online channels, updating refund strategies and adopting the tools necessary to recover from virus and help the economy do the same.