The six weeks of "peak season" in November and December can account for as much as half of a retailer's annual revenue. So, it's no exaggeration to say that what happens over that period, which includes Singles Day, Thanksgiving, Black Friday, Cyber Monday and Christmas, can make or break a retailer's year.
Peak season is when every aspect of the business must operate at optimum performance, especially payments.
But that's not always the case. During our years working in payments, we've spoken with many retailers who've told us stories of mass payment failures, increased fraud and rising payment costs that have ruined their businesses' peak season plans.
In nearly every case, most issues would have been avoidable if they had spent time before peak season ensuring they had a finely-tuned payment stack ready for the spike in sales. Here are some steps retailers can take to avoid these issues and ensure payments are an enabler of business success this peak season.
Retailers see higher activity than usual throughout peak season, but there are always moments where demand skyrockets: usually when marketing launches its showpiece deals in the market. These moments are critical. There is little room for error in the team responsible for payments; a system outage could be catastrophic.
It's possible to minimize the risk of this nightmare scenario occurring if the team responsible for payments is included in discussions around peak season early.
Considerations include ensuring enough people are working at the high-demand moments to monitor the systems and be proactive in solving any issues. Retailers should also inform their payment providers when these spikes in demand will occur to ensure adequate support is available.
Understanding where sales will occur is equally vital, as payment behavior varies dramatically from market to market. So, if the business plans to sell into a new market or ramp up activity somewhere, it needs to answer some important questions.
If the answer is no to any of these, data showsthere's a big risk customers will not complete their purchase. But if the payments teams have enough time to prepare—and a payments solution that enables them to make changes quickly—they can optimize the online checkout for whatever markets the business is targeting.
Key takeaway: Involve the teams responsible for payments in peak season planning as early as possible.
Spikes in transaction volumes during peak season risk amplifying any payments issues that may have gone unnoticed for the rest of the year. So, in the lead-up to peak season, it makes sense for retailers to dive into their payments data to ensure there aren't issues hiding beneath the surface.
Trends to look out for include patterns with issuing banks incorrectly declining transactions, instances of common decline codes related to authentication increasing, strange activity stemming from specific markets and so forth. Retailers must leave no stone unturned and work with their payment partners to solve diagnosed issues.
A firm understanding of payments data will also aid retailers when peak season arrives. With a baseline established for what's "normal," retailers can quickly spot anomalies and proactively investigate why these are happening to maximize a payment's chances of success or to detect fraud and minimize false declines.
The data retailers should study include core metrics like authorization, chargebacks and fraud rates, as well as conducting a payment fee analysis. They should also review the reliability and latency of their systems at different times throughout the year. Finally, it's advisable to conduct a detailed BIN analysis to understand which cards are most frequently accepted and where consumers are domiciled to optimize payments for performance and cost in these markets.
Key takeaway: Use data to weed out any lingering issues and establish a performance baseline to spot anomalies during periods of increased demand.
2022 is the first year Strong Customer Authentication (SCA)rules will be operational across Europe during peak season. The enforcement of these rules potentially poses a big challenge for retailers who haven't yet spent the time doing more than simply becoming compliant with the regulation.
That's because while the data shows that customers welcome the additional security layers, retailers must strike a balance between offering this security and creating too much friction. Given that many retailers are still working to strike this balance, we suggest focusing on this in the build-up to peak season.
Areas to consider include refining SCA exemption strategies, ensuring transactions are automatically retried through 3DS when soft declined and clearly communicating the steps consumers must take to authenticate at checkout.
Key takeaway: Ensure the business uses all the tools at its disposal to build an authentication flow that offers security without adding unnecessary friction at the checkout.
With the cost of doing business rising—and the inability to easily pass these costs onto consumers—many retailers are taking a hard look at where they can spare expenses. One untapped area of opportunity is payments.
For most ecommerce merchants, the cost of accepting payments is one of the most expensive line items on the balance sheet. Yet, many are unaware of what to do about it because they're working with providers who offer bundled pricing, which charges a flat fee per transaction. This may make sense in some instances, but most retailers benefit from the more granular view of payment pricing offered by the Interchange++ (IC++) pricing structure.
Armed with this data, retailers can take a much deeper look at what they're being charged for their payments and take action to reduce these charges. This will include comparing the costs of different payment schemes, issuers and third-party processors to find ways to lower fees using local acquirers and bank settlements.
Key takeaway: Get a granular understanding of payment pricing to identify areas for cost savings.
At peak season, the number of transactions flowing through a payment processor multiplies substantially; not all can cope with this demand and will struggle under pressure.
There are a few steps retailers can take to avoid this issue. The first is to stress test their systems to understand their capacity levels. They shouldn't be simply testing for the doomsday scenario of a total outage, but also ensuring that latency doesn't cause timeouts.
If unsatisfied with the result, retailers can explore bringing onboard a secondary payments provider that can act as a backup should their primary provider have issues.
Key takeaway: Consider deploying a secondary payments provider for redundancy when transaction volumes spike.
There's a lot retailers can do to ensure their payments are performing heading into and during this peak season. However, the reality is there are limitations to what can be achieved, depending on what payment providers are currently used.
That means the big question for retailers is: "Do I trust that our payments provider can help us reach our goals this peak season?"
If the answer is no, it's not too late to make a change.
See how Checkout.com stepped in just before Black Friday to empower Freshly Cosmetics to meet its goals and learn more about how Checkout.com partners with merchants in the build-up to and during the peak season to ensure they're successful.