Uniﬁed commerce - Adyen

2019 Retail report

© Copyright 2019 451 Resarch. All rights reserved.

Unified commerce Capitalizing on a $1.2 trillion North American retail opportunity

A B O U T T H E AU T H O R S

J O R DA N M C K E E R E S E A R C H D I R EC TO R, C U STO M E R E X P E R I E N C E & C O M M E R C E

Jordan McKee is a Research Director for Customer Experience & Commerce, and also leads 451 Research’s coverage of the payments ecosystem. He focuses on digital transformation across

the commerce value chain, with an emphasis on the major trends impacting payment networks, issuing and acquiring banks, payment processors and point-of-sale providers. His research helps vendors and enterprises assess the key implications of emerging technologies driving the digitization of the end-to-end shopping journey.

S H E RY L K I N GSTO N ER E S E A R C H V I C E P R E S I D E N T & G E N E R A L M A N A G E R - VO C U L

Sheryl Kingstone leads 451 Research’s coverage for Customer Experience & Commerce, which covers the many aspects of how customer experience is a catalyst for digital transformation.

She oversees the company’s coverage of a variety of customer experience software markets spanning ad tech, marketing, sales, commerce and service.

2CO M M I SS I O N E D BY A DY E N

About this paperA Black & White paper is a study based on primary research survey data that assesses the market dynamics of a key enterprise technology segment through the lens of the “on the ground” experience and opinions of real practitioners — what they are doing, and why they are doing it.


B L A C K & W H I T E | U N I F I E D C O M M E R C E

Table of ContentsKey Findings 5

Methodology 6Survey Methodology 6Revenue Analysis Methodology 6About 451 Research’s Global Unified Commerce Forecast 7

Unified Commerce Will Separate the Winners and Losers in the Next Chapter of Retail 7Figure 1: Connected Customers Create the Basis for Change in Retail . . . . . . . . . . . . . . . 8

Unified Commerce: A $1.2 Trillion Opportunity in North America 9

Figure 2: Unified Commerce: A $1.2 Trillion North American Opportunity . . . . . . . . . . . . . . 10

Digital Consumers Still Value the In-Store Shopping Experience 10The Business Impact of Out-of-Stock Items: $172bn . . . . . . . . . . . . . . . . . . . . . . . 10

Figure 3: Many Retailers Lack a Strategy for Addressing Out-of-Stock Issues . . . . . . . . . . . . 11

The Business Impact of Long Lines In-Store: $134bn . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 4: Shorter Checkout Lines Can Drive Customer Loyalty Across Verticals . . . . . . . . . . . 12

The Business Impact of Lack of Preferred Payment Options In-store: $87bn . . . . . . . . . . . . 13

Figure 5: Lack of Preferred Payment Options Remains a Sticking Point . . . . . . . . . . . . . . . 13

Online Retail: The Checkout Experience Is a High-Stakes Battleground 14The Business Impact of False Positives: $76bn. . . . . . . . . . . . . . . . . . . . . . . . . . 14

Figure 6: False Positives and Rising Fraud Rates Challenge Retailers . . . . . . . . . . . . . . . . 15

The Business Impact of a Lack of Preferred Payment Options Online: $99bn . . . . . . . . . . . . 15

Figure 7: Catering to Global Payment Methods is Key to Cross-Border Commerce . . . . . . . . . . 16

The Business Impact of Friction at Checkout Online: $124bn . . . . . . . . . . . . . . . . . . . 16

Figure 8: Improving the Checkout Experience is Critical . . . . . . . . . . . . . . . . . . . . . . 17

Cross-Channel Touchpoints Must Be Converted from Minefields to Goldmines 17The Business Impact of Lacking Cross-Channel Buying Options: $207bn . . . . . . . . . . . . . . 18

Figure 9: Enabling Cross-Channel Buying Drives Loyalty Across Verticals . . . . . . . . . . . . . . 19

The Business Impact of Lacking a Contextual Commerce Purchasing Experience: $98bn . . . . . . . 19

Figure 10: Contextual Commerce Platforms Must Be Converted into Purchasing Channels . . . . . . 20

The Business Impact of Cross-Selling and Recommended Products: $66bn . . . . . . . . . . . . 20

Figure 11: Personalized Recommendations Can Be Leveraged to Increase Sales . . . . . . . . . . 21

The Business Impact of Personalized Offers: $118bn . . . . . . . . . . . . . . . . . . . . . . . 21

Figure 12: Enabling Location-Based Offers Drives Engagement and Conversions . . . . . . . . . . 22



Unified Commerce Requires Customer-Centric Innovation 23Commitment to a Digital Transformation Strategy 23

Figure 13: Progress of Digital Transformation Initiatives by Country and Vertical . . . . . . . . . . . 23

Figure 14: Upgrading Applications to Optimize Customer Experience: Top Goals . . . . . . . . . . 24

Converting the Store Into a Strategic Asset 25Figure 15: In-Store Experience Maintains the Edge Over Online as Preferred Shopping Channel . . . 25

Figure 16: In-Store Excellence Helps Build a Strong Omni-Channel Presence . . . . . . . . . . . . 26

Embracing Contextual Commerce 27Figure 17: Contextual Commerce Presents Increased Engagement Opportunities . . . . . . . . . 27

Prioritizing Payments 28Figure 18: Retailers That Prioritize Payments Are More Advanced in Many Critical Areas . . . . . . . 29

Personalizing the Journey 29Figure 19: Personalization and Engagement Drive Loyalty . . . . . . . . . . . . . . . . . . . . 30

Conclusions 31



Key Findings• Creating positive shopping experiences – which amount to $296bn in potential additional sales

annually – and addressing negative shopping experiences – which amount to $887bn in abandoned sales annually – together create the basis for the $1.2 trillion unified commerce opportunity across North America.

• In-store experiences remain an integral part of consumer shopping, with nearly two in five (37%) shoppers stating that they strongly prefer to shop in a physical store, compared with 32% who strongly prefer digital shopping channels.

• In the past six months, two in five shoppers have been unable to use their preferred payment method with a retailer in-store, prompting them to abandon their purchase entirely.

• 55% of consumers reported they have made a purchase as a direct result of a retailer offering a cross-channel buying option in the past six months.

• Retailers are expecting more than a third of sales (34%) to be online within three years, up from roughly a fifth today, highlighting the ever-rising importance of prioritizing frictionless digital shopping experiences for consumers.

• With 60% of shoppers preferring to pay with a credit or debit card for online transactions, false positives leading to declined purchases are a major concern for retailers and shoppers alike, and ultimately have a direct impact on consumer satisfaction, loyalty and sales performance.

• While 36% of consumers say they frequently use social media to shop, only 20% say they use social media to purchase, highlighting a gap where retailers should leverage social touchpoints to convert shoppers into buyers.

• The lead offenders for online checkout friction are lengthy payment forms that require manual data entry, with one in two shoppers having abandoned an online purchase at the payment stage for this reason.

• Personalized shopping experiences exert a positive influence over customer purchasing behavior, with three in five (57%) shoppers claiming to have made at least one additional purchase as a result of a personalized offer they received in the past six months.

• 69% of retailers currently have a formal digital transformation strategy in place, or are in the planning stages.

• In-store ranks as the channel that retailers are least satisfied with from a sales perspective, bested by e-commerce, m-commerce and even social media. This sentiment has in part led 69% of retailers to state that they anticipate the rate of brick-and-mortar closures to increase over the next three years.



MethodologySurvey Methodology

In Q1 2019, 451 Research surveyed 1,506 consumers aged 18 and above across North America. The survey was designed to better understand their shopping experiences, preferences and behaviors, as well as to learn about their expectations for retailers and their shopping desires. The survey was fielded evenly between males and females with a high school-and-above education level and included 8% of respondents with an annual personal income below $35,000; 21% at $35,000-49,000; 30% at $50,000-74,000; 21% at $75,000-99,000; and 20% with a personal income above $100,000. Broken down by country, the sample included the US (73%) and Canada (27%). This North American consumer study was conducted as part of a broader global survey that also included the UK, Germany, Spain, France, Italy, the Nordics, Hong Kong, Singapore, Australia, New Zealand and Brazil.

We simultaneously ran a survey with 451 business-to-consumer (B2C) retailers that operate across the same countries covered in our consumer survey. The survey explored their current and planned implementation of a wide variety of digital transformation initiatives designed to enhance operations and customer experience. The sample included retailers across seven verticals and comprised 17% fast fashion, 14% luxury brands, 8% beauty, 17% hospitality, 12% quick-service restaurants (QSRs), 15% grocery and 17% general retail (e.g., electronics, furniture and bookstores). Respondents included a mix of executives, directors and managers from various parts of the retail business, including e-commerce, customer experience, omni-channel, product management, retail operations, commerce/ payments and risk/fraud. Business size also varied: 37% of respondents were from retailers with annual revenue under $50m; 38% from retailers with annual revenue of $50-500m; 21% from retailers with revenue of $501m-5bn; and 4% from retailers with revenue over $5bn. Broken down by country, the sample included the US (56%) and Canada (44%). This North American retailer study was conducted as part of a broader global survey that also included the UK, Germany, Spain, France, Italy, the Nordics, Hong Kong, Singapore, Australia New Zealand and Brazil.

Revenue Analysis Methodology

We took data from the North American consumer survey showing the frequency that shoppers in different markets encounter both positive and negative shopping experiences and the subsequent impact it has on their behavior (e.g., abandoned cart, increased spend) and paired it with average ticket, consumer spending and market size data from 451 Research’s Global Unified Commerce Forecast. This created the basis for a modeled global analysis to determine the volume of abandoned sales that occur annually as a result of poor shopping experiences, as well as the volume of net new sales derived annually as a result of positive shopping experiences.



About 451 Research’s Global Unified Commerce Forecast

451 Research’s Global Unified Commerce Forecast is an annual market sizing, segmenting and forecasting of multi-channel commerce across 60+ countries. Based largely on data collected directly from payments and commerce stakeholders, it delivers quantitative insight into the evolution of consumer spending patterns across purchase channels and provides a five-year view into the overall retail transaction volume and sales growth.

Unified Commerce Will Separate the Winners and Losers in the Next Chapter of RetailNow more than two decades after the emergence of e-commerce, the pace of digital evolution in retail only continues to accelerate as the influence of new sales channels and connected devices is driving consumers to research, shop and buy in different ways. The resulting landscape is a complex one for retailers to navigate, and it requires new competencies to effectively respond to consumer needs.

The connected customer is at the root of all change in retail. Today, 93% of consumers own a smartphone, and according to 451 Research’s Global Unified Commerce Forecast, mobile devices are set to eclipse desktops in terms of transaction volume for the first time this year. Other connected devices are setting the stage for change in commerce as well. Consider that 30% of consumers now own a smart speaker, with this number rising to 36% of those earning over $150,000 (see Figure 1).

While new shopping channels have traditionally taken years – if not decades – to fully develop, consumers today are increasingly digitally savvy and are eager to leverage the tools developing around them to reach their desired goods or services. More than two in five (42%) shoppers surveyed describe digital technology as essential to their daily lifestyle, with 53% of consumers aged 18-34 stating the same.

https://clients.451research.com/reportaction/95914/Toc



Figure 1: Connected Customers Create the Basis for Change in RetailSource: 451 Research

Connected customers are asking more from retailers than ever before. They expect to be rewarded for their loyalty with an experience that transcends the shopping journey. These demands aren’t going unnoticed, with 84% of retailers having seen a rise in consumer expectations. Our research continues to show that demands for an experience are oriented around three pillars:

• Convenience. Consumers want fast and easy experiences. They want to shop when, where and how they want, in a manner that allows them to reach their desired goods or services in the most efficient way possible. Retailers must identify and address points of friction and roadblocks that stand in the way of consumers pursuing their ideal shopping journey.

• Context. Consumers expect to be treated as individuals and are seeking out experiences tailored to them. Whether through tactics like informed product recommendations or customized offers, retailers that incorporate context to drive personalization strategies will be rewarded with stronger customer relationships.

• Control. Consumers want to engage with retailers on their own terms, including through more-natural mediums like messaging apps and social networks. Further, they expect the ability to pay using their preferred method while having the assurance that their data is secure. Retailers must put their customers in the driver’s seat of the journey, allowing them to engage and transact in their preferred manner.

of consumers own a smartphone

of consumers earning over $150k own a

smart speaker

of consumers aged 18-34 consider digital

technology as essential to their daily lifestyle

93% 36% 53%



Shopping experiences predicated on convenience, context and control will separate winners from losers in the next chapter of retail. To execute, retailers must strive to create a single view of the customer by unifying siloed systems, leveraging data across channels and allowing digital technologies to permeate all touchpoints. This is the essence of a unified commerce strategy, which is a prerequisite for winning customer loyalty in the age of the experience.

Unified Commerce: A $1.2 Trillion Opportunity in North AmericaToday’s shopping journey is characterized by multiple points of friction that not only dissatisfy North American shoppers and negatively impact loyalty but leave significant revenue on the table. This is often a result of discontinuity between sales channels, resulting in information and process siloes that prohibit customers from receiving the personalized, fluid experience they desire.

To remain competitive, forward-thinking retailers must focus on streamlining the path to purchase by building retail experiences that put the customer at the center of each interaction. This notion is at the heart of unified commerce – a strategy for creating a cohesive shopping journey across sales channels by maintaining a single view of the customer.

Retailers committed to unified commerce must also commit to digital transformation. Digital transformation is required to fully embrace a unified commerce strategy, which our analysis shows is effectively a $1.2 trillion opportunity in North America (see Figure 2). To capitalize, retailers must allow digital technologies to transcend, interconnect and personalize shopping channels to satisfy customers’ rising expectations. Ultimately this will create the basis for recovering missed sales opportunities and driving revenue growth.



Figure 2: Unified Commerce: A $1.2 Trillion North American OpportunitySource: 451 Research

EXPERIENCE REVENUE

OPPORTUNITYREVENUE

OPPORTUNITY

Out-of-stock items $172,396,847,585 Revenue to reclaim

Online checkout friction $123,779,099,123 Revenue to reclaim

Long lines $134,246,068,320 Revenue to reclaim

Lack of cross-channel buying option $95,729,786,880 Revenue to reclaim

Lack of contextual commerce purchase experience $98,347,398,240 Revenue to reclaim

Lack of payment options in-store $87,129,063,840 Revenue to reclaim

Lack of payment options online $99,095,287,200 Revenue to reclaim

False positive $76,284,673,920 Revenue to reclaim

TOTAL REVENUE RECLAIM OPPORTUNITY $887,008,225,109

Cross-channel buying $111,435,455,040 Revenue lift

Cross-sells $66,257,577,055 Revenue lift

Personalized offers $118,166,455,680 Revenue lift

TOTAL REVENUE LIFT OPPORTUNITY $295,859,487,775

TOTAL OPPORTUNITY $1,182,867,712,885

In the next section, we quantify the revenue impact of addressing negative shopping experiences – which amount to $887bn in abandoned sales annually – and creating positive shopping experiences – which amount to $296bn in potential additional sales annually – to detail the business case for a unified commerce strategy. Further, we offer guidance for retailers to address these areas through the creation of more satisfying and profitable shopping experiences.

Digital Consumers Still Value the In-Store Shopping Experience

In-store experiences remain an integral part of the consumer shopping experience, with nearly two in five (37%) North American shoppers stating that they strongly prefer to shop in a physical store, compared to 32% who strongly prefer digital shopping channels. However, regardless of channel preference, shoppers in the digital age are motivated by similar expectations surrounding the shopping experience. In particular, they’re focused heavily on efficiency, convenience and fulfilling a need for instant gratification. Retailers that work to evolve their brick-and-mortar presence to complement and cater to these preferences, instead of viewing their physical stores as a sunk cost, will be positioned to satisfy shoppers and ultimately lift sales.

THE BUSINESS IMPACT OF OUT-OF-STOCK ITEMS: $172BN

Out-of-stock items weigh heavily on purchase abandonment and loyalty, with nearly nine out of 10 North American shoppers having chosen to leave a store and not make a purchase in the past six months due to an item they wanted being out of stock. Our analysis shows this resulted in $172bn in up-front abandoned sales over the past year. Consumers’ high likelihood to abandon purchases as a result of out-of-stock items reflects their strong desire for instant gratification while demonstrating their need for immediate fulfillment.



From the consumer perspective, 39% of shoppers claim the ability to order and pay for out-of-stock items and have them shipped to their home would encourage them to shop more in-store, while 52% say that the ability to check if an item is available online before going to a retailer would increase their loyalty. By leveraging cross-channel technologies that extend the in-store shopping experience to fulfill consumer demand for instant gratification, retailers will be able to improve satisfaction and build loyalty, while ultimately recapturing lost opportunity. Currently, however, only 28% of retailers offer the ability to order and pay for out-of-stock items in-store and ship to the home (e.g., endless aisle; see Figure 3). Encouragingly, we do see retailer focus and effort being channeled here, since customer fulfillment emerged as the top overall priority for retailers this year.

Figure 3: Many Retailers Lack a Strategy for Addressing Out-of-Stock IssuesSource: 451 Research

THE BUSINESS IMPACT OF LONG LINES IN-STORE: $134BN

A common point of in-store friction is long lines. We found that six out of 10 North American shoppers have opted to leave a store and abandon their purchase(s) due to a long line, resulting in $134bn in initially abandoned sales annually. Of those that left, only two in five resolved to still purchase from the same retailer afterward, either through a different sales channel or at a later date.

US consumers are the most likely to not make purchases at all when confronted with significant wait times, demonstrating how efficiency creates allure for in-store experiences, particularly when serving shoppers within these demographics. Efficiency created by shorter queues can do more than preserve sales; it’s also shown to directly influence consumer satisfaction: 84% of shoppers report feeling somewhat or very satisfied with their in-store experience when there are short or nonexistent lines. Grocery, general retail and fast fashion rank as the top verticals where shorter queues would increase shopper loyalty (see Figure 4).

9 in 10shoppers have left a store & NOT made a purchase in the last six months because an item they wanted was out of stock

3 in 10of retailers offer endless aisle today



When looking through the consumer lens, we see that one in four shoppers would be more willing to shop in-store if they could pay automatically upon exiting as a replacement to a traditional queue, while 29% say that no queuing at all to ensure quick purchases would encourage them to shop with one retailer over another. This demonstrates that retailers who prioritize efficiency and implement queue-busting technologies (e.g., mPOS, self-checkout) will reap the biggest rewards in terms of increased foot traffic, sales and consumer loyalty. The majority of retailers, however, are proving slow to react. While 58% agree that reducing queue time in-store is important, execution is another story, with only 27% seeking to improve operations to effectively reduce lines this year. Additionally, the rollout of technologies to combat queuing remains in the early stages, with only 26% of surveyed retailers now offering mobile point-of-sale (mPOS) checkout, and 29% having deployed a kiosk/self-checkout experience.

Figure 4: Shorter Checkout Lines Can Drive Customer Loyalty Across VerticalsSource: 451 Research

33%

35%

18%

19%

11%

15%

8%

40%

General retail

Grocery

Beauty

Fast Fashion

Luxury

Hospitality

QSR

Would not increase my loyalty



THE BUSINESS IMPACT OF LACK OF PREFERRED PAYMENT OPTIONS IN-STORE: $87BN

In the past six months, nearly two in five (37%) North American shoppers have been unable to use their preferred payment method with a retailer in-store, prompting them to abandon their purchase entirely, resulting in $87bn in abandoned sales on an annual basis.

Our survey revealed that Canadian consumers are more frequently denied use of their preferred payment method, with 42% having experienced this at least once in the past six months, compared with 36% of consumers in the US. Offering easy-to-use payment options generates a positive consumer impact, with nearly three in 10 (27%) shoppers reporting that the ability to use a contactless card would greatly improve their in-store experience, and one in four claiming contactless digital wallet acceptance would do the same. However, as shown in Figure 5, just 25% of retailers see offering more non-cash payment alternatives as a key initiative this year, while more than three in five (62%) retailers currently support some contactless payment acceptance. In order for retailers to drive better in-store experiences, focus should be given to extending the variety of payment methods offered to satisfy the different preferences of consumers.

Figure 5: Lack of Preferred Payment Options Remains a Sticking PointSource: 451 Research

37% 25%of consumers have been unable to use their preferred payment method with a retailer in-store

over the past six months

of retailers see offering more non-cash payment alternatives

as a key initiative this year



Online Retail: The Checkout Experience Is a High-Stakes Battleground

Across our analysis of North America, retailers are expecting more than one-third of sales to be online within three years, up from roughly one-fifth today, highlighting the ever-rising importance of prioritizing frictionless digital shopping experiences for consumers. Whether online or in-store, consumers’ desired shopping experiences are driven by universal expectations of convenience, context and control. However, building consumer loyalty and satisfaction online brings additional considerations, with an increasing consumer focus on fraud and security. With progressively digitally driven consumers, retailers must increase agility and responsiveness in order to overcome numerous points of friction impacting consumer purchasing behavior, satisfaction and loyalty.

THE BUSINESS IMPACT OF FALSE POSITIVES: $76BN

In the past six months, 34% of surveyed consumers have abandoned a purchase after their credit/debit card(s) were falsely declined in suspicion of fraud during a legitimate transaction, and one in five consumers have encountered this experience four or more times over the same period. These ‘false positives’ have resulted in $76bn in forgone sales annually. With 79% of shoppers preferring to pay for online transactions with a credit or debit card, false positives are a major concern for retailers and shoppers alike, and ultimately have a direct impact on consumer satisfaction, loyalty and sales performance.

Nearly half of surveyed consumers reported that better security and/or fraud protection would encourage them to use card payments more, showing how retailers can reclaim erroneously declined sales by enhancing their fraud management capabilities. However, just 57% of retailers say they are adequately prepared to fight fraud; the same percentage say they feel they are managing and limiting false-positive declines effectively. This is concerning given that 58% of retailers say that the level of fraudulent transactions at their organization has increased since last year (see Figure 6). US and Canadian retailers alike reported significant spikes in fraud, with 64% and 52%, respectively, noting an increase.

Encouragingly, an increasing proportion of retailers are looking to artificial intelligence and machine learning (AI/ML) technologies to mitigate risk. These technologies can be used in conjunction with fraud tools like 3D-Secure 2.0 and behavioral analytics to spot transaction abnormalities and suspicious behavior while preserving the customer experience. Three in 10 retailers surveyed stated that the best application for AI/ML within their business would be for fraud protection and security.



Figure 6: False Positives and Rising Fraud Rates Challenge RetailersSource: 451 Research

THE BUSINESS IMPACT OF A LACK OF PREFERRED PAYMENT OPTIONS ONLINE: $99BN

As with the lack of preferred payment methods offered in-store, North American consumers confront online retailers that don’t accept their preferred payment method with a similar degree of frequency. We found that 40% of shoppers reported they have abandoned at least one online purchase due to the unavailability of their preferred payment method in the past six months, resulting in $99bn in initially abandoned sales on an annual basis. The most common vertical where shoppers have abandoned a purchase due to a lack of preferred payment method is in fast fashion.

Although the overwhelming majority of retailers, 92%, find it important to offer all payment options that consumers are interested in using, in reality they tend to support only a handful of payment options and limit their payment mix to traditional methods like cards. For instance, only 26% of retailers offer a form of purchase financing and/or payment installments.

Lack of preferred payment methods is especially an issue for cross-border shoppers. Globally, we find that 53% of consumers have made an online purchase with a retailer in another country, including 36% of North American consumers, underscoring the cross-border nature of e-commerce. Retailers must be conscious of the unique payment preferences of international shoppers, who often prefer to utilize popular local-country payment methods such as Alipay, Giropay or iDEAL. Today, just 45% of North American retailers view offering additional global payment methods catered to international shoppers as a very important initiative for their business (see Figure 7).

34%of consumers have abandoned a purchase after a false-positive transaction decline in the past six months

58%of retailers say the level of fraudulent transactions at their organization has increased since last year



Figure 7: Catering to Global Payment Methods is Key to Cross-Border CommerceSource: 451 Research

THE BUSINESS IMPACT OF FRICTION AT CHECKOUT ONLINE: $124BN

Friction at checkout is frequently encountered by consumers, with seven out of 10 North American shoppers surveyed reporting having abandoned an online shopping cart at least once in the past six months due to difficulties in completing a purchase, resulting in $124bn in annualized sales that are initially abandoned.

The lead offenders for online checkout friction are laborious payment forms that require manual data entry, with one in two shoppers having abandoned an online purchase at the payment stage for this reason. The solution is simple: Retailers must employ checkout options that reduce the number of steps required to complete the transaction. We find that 30% of consumers assert that fast and convenient payment options (e.g., digital wallets) would lead them to shop at one retailer over another. Similarly, 30% of shoppers state that the ability to complete an online/in-app purchase in one click would significantly increase their loyalty to a retailer. Today, just 34% of retailers offer a one-click shopping experience online, with the luxury vertical leading in adoption at 39%.

Encouragingly, we are seeing evidence that many retailers are prioritizing the online checkout experience moving forward. Improving checkout experience ranks as the number one digital technology initiative for retailers this year (see Figure 8), and offering new digital wallet options to shoppers ranks as a top-2 retail priority for 2019.

53%

45%

of consumers globally have made an online purchase with a retailer in another country

of retailers see offering more global payment meth-ods that cater to international shoppers as a very important initiative for their business



Figure 8: Improving the Checkout Experience is CriticalSource: 451 Research

Cross-Channel Touchpoints Must Be Converted from Minefields to Goldmines

Consumers don’t think in terms of sales channels; they think in terms of convenience. All too often shoppers begin their journey in one channel and attempt to complete it in another, only to encounter a broken process preventing them from obtaining their desired good or service. As the lines between physical and digital shopping experiences continue to blur, retailers must break down the silos separating their in-store and online operations to enable shoppers to complete a purchase in the manner that is most convenient for them.

Creating an interwoven, personalized shopping experience requires a commitment to bridging – and often modernizing – technology systems and processes. For instance, if a retailer’s e-commerce platform is unable to communicate with its point-of-sale software, important insights on a shopper’s cross-channel behavior will be missed, creating a broken experience and missed engagement opportunities. Unifying the journey is about more than simply ‘keeping up with the times.’ Allowing shoppers to easily move between sales channels creates numerous points of opportunity to more meaningfully engage and ultimately boost sales and drive loyalty.

1

2

3

Improve checkout experiences

Upgrade applications for optimizing customer experiences

Use Internet of Things

RETAILERS TOP DIGITAL TECHNOLOGY INITIATIVES FOR 2019



THE BUSINESS IMPACT OF LACKING CROSS-CHANNEL BUYING OPTIONS: $207BN

Two in five North American shoppers surveyed reported abandoning a purchase over the past six months due to a lack of cross-channel buying options (e.g., buy online and pick up in-store; ship-to-home), resulting in $96bn in annual sales that retailers have been unable to capture. Gen Y shoppers abandon purchases due to lack of cross-channel options with the most frequency, with 29% abandoning four or more purchases in a six-month period.

Underscoring the power of cross-channel experiences, they can also help to drive net new sales by encouraging shoppers to make a purchase they may otherwise have not. We found that 55% of consumers reported to have made a purchase as a direct result of a retailer offering a cross-channel buying option in the past six months, resulting in $111bn in new sales annually. Through removing missed sales opportunities and driving new ones, the annual business impact of supporting cross-channel buying options is a combined $207bn.

As shown in Figure 9, retailers across a variety of verticals can benefit from the stickiness of cross-channel purchase options. In our survey, 60% of consumers said convenient cross-channel shopping experiences would encourage them to shop with one retailer over another. Our global study also revealed the impact that cross-channel options have on loyalty is stronger in North America than in any other geography.

Retailers remain in the early stages of implementing cross-channel shopping experiences, with just 31% offering the ability to buy online and return in store, and only 35% offering the ability to buy online and pick up in-store. This is concerning because revenue is being left unclaimed by not providing the shopper with the purchase and procurement option of their choosing. Fortunately, we found that optimizing the consumer journey across multiple channels, demonstrating a strong focus on the cross-channel sales opportunity, is a top-three priority for North American retailers this year.



Figure 9: Enabling Cross-Channel Buying Drives Loyalty Across VerticalsSource: 451 Research

THE BUSINESS IMPACT OF LACKING A CONTEXTUAL COMMERCE PURCHASING EX-PERIENCE: $98BN

With the proliferation of smart speakers, voice assistants, and social and messaging platforms, retailers have multiple new opportunities to engage with consumers in the channels where they spend much of their time. Unfortunately, many retailers are missing out on such opportunities given that 49% of surveyed shoppers reported having encountered an advertised product or service (such as on social media) that they were interested in, but then not made the purchase because too many steps were required to find the product/service. According to our analysis, this resulted in $98bn in missed sales over the past year.

Consumers are invested in and responsive to contextual commerce experiences that enable them to act on an impulse and buy in the moment. But while 36% of shoppers say they use social networking frequently to shop, only 20% say they use social networking to actually purchase, highlighting a gap where retailers should leverage these touchpoints to convert shoppers into buyers (see Figure 10). Retailers can clearly incentivize consumers to utilize new channels by offering discounts/special offers, since 33% of consumers surveyed stated that discounts or special offers would encourage them to use social media shopping experiences, while 26% said this would incentivize them to utilize third-party messaging apps to purchase, and 34% said it would encourage them to use smart speakers to shop.

27%

21%

17%

15%

12%

N/A

N/A

49%

37%

26%

21%

22%

13%

11%

8%

39%

43%

23%

27%

30%

17%

N/A

N/A

33%

General retail

Grocery

Beauty

Fast Fashion

Luxury

Hospitality

QSR

Would not increase my loyalty

Pay in-store for any items and have them delivered to my home

Purchase an item online/in-app/over the phone and pick it up in-store

Buy online / in-app and return in-store



While 56% of retailers say that social media marketing and commerce is of growing importance to their business, only 24% of retailers seek to leverage selling opportunities across new social channels this year, and just 23% currently offer smart-speaker shopping experiences. Luxury retailers and grocery stores are out in front, with 33% currently enabling purchasing via smart speakers.

Meanwhile, 61% of retailers assert that they are currently satisfied with their sales performance on social media, indicating that many may be resting on their laurels instead of innovating around the purchase experience. Retailers should focus on speed and simplicity with their contextual commerce strategies, utilizing technologies like digital wallets and payment tokenization to create intuitive and secure payment experiences that don’t redirect the shopper to a third-party app or website.

Figure 10: Contextual Commerce Platforms Must Be Converted into Purchasing Channels Source: 451 Research

THE BUSINESS IMPACT OF CROSS-SELLING AND RECOMMENDED PRODUCTS: $66BN

Over the past six months, 49% of surveyed consumers have increased their intended spending on at least one purchase as a result of cross-selling or being recommended a complementary product, resulting in $66bn in additional sales annually for the retail industry. Often, the increase on ticket size is significant, with nearly two in five consumers increasing their spend by at least 50%.

Recommending and cross-selling products is a strategy designed to increase the ticket size of a purchase by selling related and adjacent items. As shown in Figure 11, three in five shoppers reported feeling satisfied when a sales assistant was able to offer recommendations based on purchase history, rising to two in three consumers aged 24-38. This indicates a key opportunity for retailers to

36% 20%of shoppers use social networking frequently

to shop

of shoppers use social networking frequently to

purchase



not only lift sales, but more meaningfully engage with consumers and improve in-store satisfaction. Additionally, we found that 43% of shoppers believe that receiving product recommendations and/or information to make a purchase via a chatbot would increase their online shopping frequency.

Retailers remain in the early stages of adapting, however. This is particularly the case in-store, with only 21% of retailers currently equipping store associates with mobile applications to provide customers with personalized recommendations based on past purchases. We find luxury retailers are the most advanced with the capability, with 31% currently having deployed this experience. Advancements in AI and ML should serve as an important driver for this capability going forward. We found that one out of four retailers view AI/ML functionalities for enhanced product recommendations and offers as the top application of the technology for their business.

Figure 11: Personalized Recommendations Can Be Leveraged to Increase SalesSource: 451 Research

THE BUSINESS IMPACT OF PERSONALIZED OFFERS: $118BN

Personalized shopping experiences exert a positive influence over customer purchasing behavior, with 57% of North American shoppers claiming to have made at least one additional purchase as a result of a personalized offer they received in the past six months, resulting in $118bn in additional annualized sales. Consumers aged 24-38 have been most prone to act, with 61% claiming to have made a purchase thanks to a personalized offer.

Aside from driving sales, personalization also contributes to higher consumer satisfaction, with four in five shoppers asserting they felt satisfied upon receiving tailored discounts and/or coupons delivered to their mobile device when near or in a store. For Canadian shoppers, that figure rises to 82%.

3 in 5shoppers report feeling satisfied when they receive recommendations from sales associates based upon their purchase history

1 in 5retailers currently equip store associates with mobile apps to give customers personalized recommendations



Once again, this reflects consumers’ desire for relevant, convenient and contextual experiences reaching them within their preferred channels.

We also find that personalized offers can drive cross-channel buying behavior, with 47% of consumers that prefer to shop in-store stating they would be encouraged to shop more online if they were offered personalized discounts/coupons. Additionally, 54% of shoppers feel that tailored promotions/coupons would increase their loyalty to a retailer, underscoring the relationship-building impact of personalization.

While 57% of retailers are experiencing a significant increase in shoppers using their mobile phones in-store for coupons, payments and product info, only 26% foresee the implementation of location-based technologies as a key digital technology initiative for their business (see Figure 12). This highlights a gap in readiness for implementing one of the key ingredients for delivering personalized, contextual experiences. Looking ahead, we recommend that retailers refocus on proximity-based marketing to convert nearby foot traffic into sales opportunities.

Figure 12: Enabling Location-Based Offers Drives Engagement and ConversionsSource: 451 Research

80%

26%

of shoppers feel satisfied receiving personalized discounts and/or coupons directly on their mobile device when in or near a store

of retailers see implementing location-based technologies as a key digital initiative this year



Unified Commerce Requires Customer-Centric Innovation Technology isn’t the only input required to capitalize on the $1.2 trillion North American unified commerce opportunity. To execute, retailers must commit to several overarching strategic priorities that are critical to delivering the satisfying, interconnected commerce experiences that shoppers desire. We recommend a steadfast focus on the following five initiatives.

Commitment to a Digital Transformation Strategy

To adapt and thrive, retailers must have a well-organized approach to digital transformation that permeates the organization from the C-suite through to the frontline sales associates. This requires rethinking the role of technology, processes and people and how each of these components can evolve to better serve customers.

When looking at progress in digital transformation, North American retailers are leaders, with 69% reporting that they either have a formal digital transformation strategy in place, or they are in the planning stage. US retailers lead Canadian retailers, with 38% already executing against a formal digital transformation strategy (see Figure 13). Among verticals, luxury and grocery are the leaders with 51% of retailers in each market executing against a formal strategy.

Figure 13: Progress of Digital Transformation Initiatives by Country and VerticalSource: 451 Research

38%

34%

33%

32%

US

Canada

Formal Strategy Planning Stage

51%

51%

37%

36%

33%

25%

8%

22%

27%

36%

33%

27%

45%

43%

Luxury

Grocery

General Retail

Hospitality

Fast Fashion

QSR

Beauty



In conjunction with the growth of digital transformation in the North American retail sector, retailers’ top initiatives for 2019 underscore their continued appetite for evolution (see Figure 14). Improving customer fulfillment options and offering shoppers new digital wallet options are the top goals. Thanks to increasing consumer demand to shop and discover how and when they wish, retailers with a consistent brand presence across channels are best positioned to build customer loyalty and win business. However, maintaining a consistent experience across channels alone is not enough. Once the initial purchase decision has been made, providing the most convenient and flexible path to purchase is vital. Underscoring this realization, retailers have deemed optimizing the customer journey across multiple channels as their third most important initiative, followed by improving operations to reduce queuing.

Figure 14: Retailers’ top priorities focus on delivering improved experiences Source: 451 Research

Considering the importance of retailers’ top initiatives to their long-term success against the backdrop of ongoing digital transformation efforts, unsurprisingly a growing focus on partners has emerged. Digital transformation roadblocks are often found within a retailer’s legacy systems or partner ecosystem, which can often throttle the pace of innovation and adaptation. This is demonstrated in retailers’ appetite to upgrade applications for optimizing customer experiences, which ranks as a top-2 IT priority for retailers globally. The message is clear that retailers must ensure that their partner ecosystem continues to act as a catalyst for – and not a prohibitor of – digital transformation by enabling them with the digital platform required to address their top initiatives.

Improve customer fulfillment options

Offer shoppers new digital wallet options (e.g. Apple Pay, Google Pay)

Optimize the customer journey across multiple channels (web, mobile, store, call center)

Improve operations to reduce queuing

RETAILERS' TOP PRIORITIES FOR 2019

1

2

3

4



Converting the Store Into a Strategic Asset

In an increasingly digitized shopping landscape, it is easy for retailers to view brick-and-mortar stores as a liability rather than an asset. However, as shown in Figure 15, it is clear that shoppers still value and desire the store and physical product experience. In demographics like Generation X, the preference for in-store experiences is especially prominent.

Figure 15: In-Store Experience Maintains the Edge Over Online as Preferred Shopping Channel Source: 451 Research

Despite consumers’ appetite for brick-and-mortar shopping experiences, in-store ranks as the channel that retailers are least satisfied with from a sales perspective, bested by e-commerce, m-commerce and even social media. This sentiment has in part led 69% of retailers to state that they anticipate the rate of brick-and-mortar closures to increase over the next three years. North American luxury retailers and fast fashion retailers stand out as those most likely to anticipate an increase in store closures.

While the proliferation of e-commerce and m-commerce undoubtedly requires retailers to reimagine their storefronts, the trend of ‘digital native’ businesses opening physical locations should be seen as a testament to the vital role of the store in the shopping experience. In fact, 73% of retailers say they are concerned by Amazon opening its own stores. In this changing landscape, retailers must adapt by connecting stores into their broader digital strategy to enhance the value they can provide.

37%

37%

39%

38%

37%

38%

33%

32%

31%

35%

32%

35%

29%

28%

North America

United States

Canada

18-23 (Gen Z)

24-38 (Gen Y)

39-53 (Gen X)

54-72 (Boomer)

Physical Store Online



As shown in Figure 16, shoppers want digital technology to permeate the in-store shopping experience and serve as a bridge between channels. By focusing on improving back-end procurement, point-of-sale and personalization technology, forward-looking retailers can create dynamic links between their digital and physical channels. Practices including click-and-collect and buy-online/return-in-store actively enhance the symbiotic relationship between online and offline, while capabilities such as endless aisles and queue-busting through utilization of mPOS can serve to create brick-and-mortar visits that are more shopper-oriented and as smooth as an online experience. The ability of retailers to foster this complementary relationship between channels will create a divide between winners and losers in coming years.

Figure 16: In-Store Excellence Helps Build a Strong Omni-Channel Presence Source: 451 Research

60%

40%

52%

see convenient shopping experiences across in-store and online as a reason to shop at one retailer over another

would choose to shop at a retailer that offered loyalty points tied to a mobile app over one that does not

feel that the ability to exchange or return an online/in-app purchase in-store would significantly increase their loyalty to a retailer



Embracing Contextual Commerce

While the physical store continues to be a highly relevant touchpoint, shoppers are increasingly looking to new channels of engagement, such as social media and smart speakers, to assist their purchase journeys (see Figure 17). These contextual environments are creating the basis for a fundamentally new era of commerce, where consumers can move from impulse to purchase in a single interaction.

Figure 17: Contextual Commerce Presents Increased Engagement Opportunities Source: 451 Research

Many shoppers are already comfortable leveraging emerging platforms to research brands, but only a limited number of retailers are capitalizing on this opportunity to convert them into buyers. For instance, only one in five surveyed retailers currently enable purchases on social media. Implementation rates are also low when looking at smart-speaker integrations. Although half of smart-speaker owners have used these devices to shop, only 23% of North American retailers currently enable purchases on them. US retailers are out in front at 28% adoption, compared with 16% in Canada.

Contextual shoppers are a critical audience for retailers to win over: consider that shoppers who utilize social media are on average more brand-loyal than the typical shopper and enjoy shopping more. To succeed in this new arena, retailers must make it easier for shoppers to fulfill impulses by streamlining

54%

57%

46%

of smart speaker owners have used their devices to shop

of consumers use social media to shop

of consumers use third-party messaging apps to shop



the path to purchase and ensuring that their interactions are relevant and timely. This includes adopting technologies like payment tokenization to increase interoperability and security within these new environments, in addition to layering in machine learning to enhance the relevance and accuracy of customer interactions.

Prioritizing Payments

While payments act as a fundamental enabler of new commerce experiences, they can also serve as a top contributor to friction. Retailers can’t afford to make investments in strategies that drive shoppers to the checkout page, only to lose them to a laborious payment form or a false-positive transaction decline. As a result, retailers must commit to simplifying payment acceptance and offering more options at checkout.

A fast and flexible payment experience can not only drive up conversion rates but breed stronger customer relationships. The availability of fast and convenient payment options such as digital wallets are a top-three factor that consumers say would lead them to shop with one retailer over another. Further, 30% of surveyed shoppers feel that the ability to complete a transaction in one click would increase their loyalty to a specific retailer, while 46% say that contactless payment acceptance would improve their in-store payment experience.

Retailers must also consider the way in which offering global payment methods like Alipay, Giropay or iDEAL can open them up to the cross-border commerce opportunity. Beyond satisfying one’s customer base, a forward-looking payments strategy can open one’s business to new client segments such as young and foreign shoppers. Today, just 45% of North American retailers see offering more global payment methods that cater to international shoppers as a very important initiative for their business.

Our research has revealed that retailers who prioritize payments (e.g., those who say it’s very important to offer cutting-edge payment options and ensure they offer all options the customer wants to use) are significantly more advanced than payments pessimists (e.g., those who say it is it’s not at all important to offer cutting-edge payment options and ensure they offer all options the customer wants to use) across multiple fronts (see Figure 18). Consider that nearly 44% of Payments Prioritizers have formal digital transformation strategies, compared with just 6% of Payments Pessimists. Payments Prioritizers are also considerably savvier at preventing fraud, with 77% prepared to combat the issue, compared with just 38% of Payments Pessimists. Further, Payments Prioritizers are more likely to be on the leading edge and have familiarity with next-gen technologies like AI and ML.



Figure 18: Retailers That Prioritize Payments Are More Advanced in Many Critical AreasSource: 451 Research

Personalizing the Journey

In the face of growing consumer demand for speed and convenience across the shopping journey, retailers must not lose sight of personal touch. Understanding and addressing individual customer needs is paramount in delivering a shopping experience that resonates with as many shoppers as possible. As such, pulling in context and converting it into personalized intelligence is essential to fostering a memorable shopping experience that adds value beyond the product or service.

While the rise of new commerce channels (e.g., social, third-party messaging apps) may initially seem to add complexity to the process of curating individualized content and recommendations, it also expands the number of touchpoints on which retailers can act. To best take advantage of this scenario, retailers can mine the data emanating from these touchpoints and utilize it to target content and offers. We find that this is a top application for Ai and ML, with ‘customer service and support recommendations’ and ‘social network analysis’ ranking as the number one and two use cases for the technology, respectively.

Payments Prioritizers Payments Pessimists DIGITAL

TRANSFORMATION

NEW TECH ADOPTION

FAMILIARITY WITH AI/ML

FRAUD

39% have a formal digital transformation strategy

16% have a formal digital transformation strategy

22% consider themselves early adopters at the leading edge

12% consider themselves early adopters at the leading edge

83% are familiar with AI & machine learning

66% are familiar with AI & machine learning

73% are prepared to combat fraud

24% are prepared to combat fraud

54% currently offer one-click purchasing online

9% currently offer one-click purchasing online

ONE-CLICK PURCHASING

IMPLEMENTATION

41% currently offer Mobile POS in-store

6% currently offer Mobile POS in-store

MOBILE POS IMPLEMENTATION



Utilizing intelligence to drive personalized content is becoming increasingly crucial to fostering strong customer relationships, as over half (54%) of surveyed consumers say that promotions and coupons tailored to them would significantly increase loyalty to a retailer.

Personalized experiences are critical in brick-and-mortar retail as well (see Figure 19). Consider that 41% of shoppers say that engaging in-store experiences would increase their loyalty to a specific retailer, with grocery topping the list as the vertical best positioned to see a positive impact. Crafting personalized experiences based on past purchases and preferences is enough to increase loyalty for 56% of shoppers. Again, utilizing data to drive personalization is key for successful execution across both areas. For instance, analyzing transaction data to serve up targeted offers in categories where a shopper is predisposed to make a purchase can significantly enhance the value of a loyalty program, while utilizing in-store sensor data (e.g., beacons, Wi-Fi) to dispatch a sales associate to a shopper lingering near a product display can spark a timely and informed sales discussion.

Figure 19: Personalization and Engagement Drive LoyaltySource: 451 Research

56%

41%

54%

feel that personalized experiences based on past purchases and preferences would increase their loyalty to a retailer

say that engaging in-store experiences would increase their loyalty to a retailer

say promotions and coupons tailored to them would significantly increase loyalty to a retailer



ConclusionsConsumers expect to be able to shop how, when and where they want while dictating the terms of engagement with a retailer. Unified commerce is about delivering on these expectations by creating convenient and contextual shopping experiences that place the consumer in control.

With $1.2 trillion in North American sales at stake, the business case for implementing a unified commerce strategy is blatant, but executing is easier said than done. Retailers must begin by mapping out their current customer journey and identifying all existing friction points. Ultimately, any area where the shopper’s momentum is obstructed creates an opportunity for abandonment and behavior change. Even seemingly minor pain points like missing payment options, a long line or an out-of-stock product can have an outsized impact on customer loyalty, not to mention near- and long-term revenue.

Unified commerce is as much a mind-set and strategic shift as it is a technological effort. From executive leadership to IT through to frontline sales associates, a commitment to customer-centric digital transformation is paramount. Often, this necessitates new competencies and new capabilities. Retailers must align with partners that can enable them to bridge internal information siloes and implement process changes to adapt more fluidly to market demands. Ultimately, partners that can help increase customer visibility across touchpoints and implement approaches to better convert impulse and desire into sales will be fundamental to any successful unified commerce strategy.

About 451 Research451 Research is a leading information technology research and advisory com-pany focusing on technology innovation and market disruption. More than 100 analysts and consultants provide essential insight to more than 1,000 client or-ganizations globally through a combination of syndicated research and data, advisory and go-to-market services, and live events. Founded in 2000 and head-quartered in New York, 451 Research is a division of The 451 Group.

© 2019 451 Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss le-gal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such.

451 Research shall have no liability for errors, omissions or inadequacies in the informa-tion contained herein or for interpretations thereof. The reader assumes sole respon-sibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

NEW YORK1411 Broadway New York, NY 10018 +1 212 505 3030

SAN FRANCISCO505 Montgomery, Suite 1052San Francisco, CA 94111+1 212 505 3030

LONDONPaxton House 30, Artillery Lane London, E1 7LS, UK +44 (0) 203 929 5700

BOSTON75-101 Federal Street Boston, MA 02110 +1 617 598 7200

Uniﬁed commerce - Adyen

Documents

Transcript of Uniﬁed commerce - Adyen