Clues to Diagnose 7 Profit-Killing Features on your eCommerce Site
by Commerce Partner Marketing Team
posted on 01-08-2020
There are several suspects that come up time and again including friction in the checkout funnel, sales tax management, fraud, payment processing inefficiencies, lack of alternative payment options, international growth complexity, and poor omnichannel experiences.
Let’s dive into each area to help you uncover clues of profit-killing aspects that could be lurking in your eCommerce business.
1. Friction in the checkout funnel
Almost 70 percent of items that people add to their online carts are never purchased. That’s a revenue loss of approximately $260 billion. Much of this is due to friction in the checkout funnel. Reducing this friction—especially on mobile—is key to recapturing lost opportunities. Here are some questions to ask to uncover signs of friction in your checkout funnel:
- How many steps are in your checkout process? 25 percent of shoppers abandon a cart because the checkout process is too long or complicated. The average checkout flow contains 23.5 form elements or 15 form fields, but most sites can reduce this to just 6-8 form fields.
- Do you offer optional account creation or guest checkout? Don’t force customers to create an account in order to complete a purchase. Guest checkout eliminates the friction of making customers create an account in advance.
2. Sales tax management
In the U.S. alone, merchants are confronted with a complicated web of tax jurisdictions and constantly evolving rules and rates. Slipping into non-compliance is easy and the consequences are costly—merchants are liable to pay 10 percent 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 in multiple regions or states with different tax rules? Many states throughout the U.S. have their own sales tax. Given that these taxes constantly change, remaining compliant is a resource-intensive task for merchants. Fortunately,
exist today that simplify tax filings.
Do you manually calculate your taxes? Tax calculation can be a cumbersome task. For merchants, automated solutions provide a single-source of tax guidance that can offer detailed and high-level visibility of their tax accounts.
Do you handle your tax filings in-house or with the assistance of an accounting service? The former typically saves merchants significantly on accounting fees but can end up costing more in the long run if they file incorrectly. Hiring accountants can ensure merchants stay compliant, but often comes with a hefty price tag for their services. Automated tax solutions help merchants file correctly at a significantly reduced cost compared to traditional accounting services.
3. Fraudulent transactions and false declines
Efforts to mitigate the risk of fraud are necessary but costly—online merchants spend an average of 8 percent of their annual revenue on preventing and managing fraud. The cost is justified, however, since for every $1 stolen by order fraud, merchants lose another $2.56 to lost labor, lost productivity, and chargeback penalties. 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 percent range.
- 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.
4. Payment processing inefficiencies
Complicated checkout processes account for nearly 39 percent of U.S. shopping cart abandonments. 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:
- What forms of payment do you currently offer to your customers? More payment options on an eCommerce site can significantly decrease shopping cart abandonment and increase average order values (AOV).Does your payment processor consolidate your payments infrastructure? As merchants grow and expand their operational footprint, their payment environment becomes increasingly complex with varying payment methods, regulations, bank/acquirer relationships, and currency types all adding to the complexity. Merchants should look for a payment management platform that can consolidate all their global payment requirements—and scale with them as they grow.
5. Lack of alternative payment options
Customers expect brands to deliver a wide range of alternative payment methods, including point-of-sale financing. This is especially popular among Millennial and Gen Z shoppers who enjoy mobile shopping and are wary of credit card debt. As a result, point-of-sale financing is expected to account for 55 percent of online transactions in 2019. Here are some questions to ask to identify if consumer credit could be a good option for your customers:
- Do you sell products directly to consumers? Point-of-sale lending is especially suited for retailers who sell directly to consumers (B2C). This form of payment offering can help retailers close sales on items worth $200 or more—items that many consumers wouldn’t purchase instantly. By offering retail financing, merchants can help consumers acquire items on demand without the burden of heavy credit card fees.
- Through which channels do you typically acquire your customers? Retail financing can incentivize shoppers to visit your store. Merchants who use financing as part of their retargeting strategy see a 20 percent sales conversion on their marketing emails.
- Are your payment options listed on your eCommerce website? Before shoppers can take part in your financing offering, they need to know it exists in the first place. Make financing options highly visible throughout your entire website, beginning with the homepage. Offer terms and financing programs tailored to your products, your order values, and your customers.
- Do you sell to younger audiences like Millennials and Gen Zs? Installment payment methods are popular with Millennial and Gen Z shoppers as they provide easier access to higher-priced items. Installment payments also increase their overall experience with a brand, helping to forge deeper connections for brand loyalty and repeat business.
- Does your eCommerce store offer a mobile app? Alternative payment methods help deliver a frictionless buying experience on mobile with no redirects, no account sign-up, no interest or late fees, and no credit checks. Merchants can meet consumer demand for payment simplicity and increase their mobile conversion rates by up to 68 percent.
6. International growth complexity
Cross-border eCommerce will account for $1 billion—or one quarter of the global market by 2020. And that’s just business-to-consumer commerce; cross-border business-to-business eCommerce is thought to be four to five times larger. However, before merchants rush to expand globally, they need to consider how international shoppers want to pay for goods or services. Here are some questions to help you strategize your international expansion:
Do you tailor the checkout experience to suit local payment preferences? Integrate seamless payment methods that adjust based on country and local currency and make it easy for global customers to pay with credit cards, Apple Pay, Google Pay, Alipay, and other local payment methods.
Do you use local acquiring and do you factor the costs into your profitability? With local acquiring, merchants can avoid some operational costs by processing locally to avoid transfer fees and currency exchange costs.
Do you implement risk and anti-fraud rules based on local profiles? Cross-border fraud risk is different than local risk so ensure you’re
based on the local scenarios.
7. Poor omnichannel experiences
Omnichannel customers are actually valuable—they spend an average of 4 percent more every time they shop in the store and 10 percent more online than single-channel customers do. Therefore, merchants should ensure their cross-channel experiences are seamless. Here are some questions to diagnose and alleviate poor omnichannel experiences on your site:
Do you offer omnichannel experiences like buy online, return in-store? Optimizing and/or introducing omnichannel experiences in-store can result in significant revenue uplifts.
Do you monitor the in-store experience for both the customer and the employee? If the in-store engagement is simple and enjoyable then both employee and customer are more likely to be repeat users and promoters of omnichannel services such as buy online, ship to store or buy online, pickup in-store (BOPIS)—driving incremental online conversion and average order value.
Do you have the right technology in place to ensure great omnichannel experiences? Merchants must
that integrates instore points of service to eCommerce, order management, and CRM. Once all these components are connected in real-time, the merchant can ensure seamless omnichannel processes for the store employee and an engaging in-store customer experience.
Interested in diving deeper into any of these suspect areas? Magento’s latest eBook, The Mystery of Who Killed Mr. Profits, is set against the backdrop of Magento’s Annual Masquerade Ball. During the Ball, Mr. Profits is murdered, which spurs Detective Magento into action. Join him as he investigates each of the suspects to identify the guilty party.
Topics: Digital Transformation, Corporate Marketer
Products: Magento Commerce