Some retailers can expect to make up to 50% of their annual revenue during the six weeks of 'peak sales season'.
Starting on 11 November this year with Singles Day into the triumvirate of Thanksgiving, Black Friday and Cyber Monday of Cyber Week in late November, all the way through to Christmas Day, the peak season sales window can make or break a retailer's year.
What should online retailers be aware of as they prepare for this year's peak sales season? Four ecommerce experts share their views.
Focus on the impacts of the macroeconomic environment
Tyler Heun, Director, Sales Leader, North America, Checkout.com
The world looks very different from how it did 12 months ago. There is double-digit inflation, rising interest rates, and a deepening cost-of-living crisis across major economies. The obvious conclusion to reach given these factors is that squeezed customers will have less money to spend and be less likely to spend what they have. Data provides evidence of that.Salesforce estimates 51% of consumers will purchase fewer holiday gifts this year, putting $1.4 trillion of retail revenue under threat.
Retail will also need to manage the operational impacts of inflation and rising costs. The average hourly wage in the US increased by 5.1% between February 2021 and February 2022 alone—and retailers will need to calculate how much of this they can pass on to their customers while remaining competitively priced. At the same time, the UK's gap between manufacturing input and output prices is now at its highest point since 2015.
Stock levels are another issue. The legacy of COVID lockdowns, the war in Ukraine and other problems mean retailers must plan early to ensure they have enough stock in the right places. Equally, they must avoid generating demand for products they can't stock or distribute efficiently—or when this is the case, set realistic expectations with the customer. We're already hearing of some online retailers experiencing higher chargebacks than usual because of delays in shipping goods to customers.
There's a lot for retailers to consider against this challenging backdrop. Most crucially, retailers must take every possible step to leave no sales on the table. That's why an effective payment strategy is more vital than ever this peak season.
Retailers need to focus on several areas. One is on the experience and making it as easy as possible for shoppers to complete their transactions. Acceptance is another. Consumers are extremely sensitive to false declines—when their transaction is incorrectly rejected—and will likely abandon their purchase. So, retailers must work to improve their authorization rates to minimize the risk of this occurring. The final area is payment cost. With margins tightening, any increase in the cost of payments is a pain that retailers will feel directly on their balance sheet.
Get on top of fraud
Úna Dillon, VP of Global Expansion and Advocacy at the Merchant Risk Council
Card-not-present fraud is increasing. Over 30% of retailers say they've experienced first-party misuse, account takeover fraud and identity theft in the past year.
When it comes to first-party misuse (also known as "friendly fraud" or “chargeback fraud”) and the resulting chargebacks,
Some retailers are more at risk than others. Examples include those selling high-value goods that are easily resold, gaming retailers that have seen a sudden influx of new customers and gambling sites where disgruntled players try to recoup their losses improperly through the payment card dispute channels.
The link between sales volume and fraud means retailers must be on the ball when peak sales season hits. For starters, more fraud equals lower profit: on average,
At the same time, regulation puts card issuers under more pressure to dispute payers’ chargeback requests without investigating cases in the first instance. Consequently, they are taking a more punitive approach to retailers with high levels of fraud and chargebacks. Shoppers are also becoming sensitive to fraud and scams, putting more value on trust at the checkout.
So, the priority for retailers during peak season should be to ensure risk tolerance and fraud prevention strategies are fully refined and implemented. They must also stay vigilant, leveraging data to track payment flows and using tools to identify fraudulent patterns.
Keep the customer front and center
Maxime Colas, Director, ecommerce Sales, Europe, Checkout.com
When retailers fight harder for every dollar, every marginal gain matters—and they're harder to achieve as customers' expectations rise. Consumers want to pay with a method of their choice—on a device of their choice—and be confident their personal and financial data is safe while not being inconvenienced by security checks.
There are a lot of moving parts to consider. Access to a broad range of payment methods is crucial. So is understanding which methods are most appropriate for specific scenarios—partly about customer preference, but also about approval rates and cost—and the ability to switch these on, where and when required. Before that, data is key to understanding payment preferences across different markets and demographics. It is also key to personalizing checkout experiences and automating each customer's optimal payment methods to maximize conversion.
Retailers also need to contend with Strong Customer Authentication requirements this peak season. While all retailers selling in the EEA and UK are compliant with the rules, many are yet to optimize their SCA strategy and use of exemptions. These businesses risk forcing customers through a more arduous authentication flow than needed, jeopardizing the sale.
Retailers whose payments are not set up for this level of customer-centricity and agility still have time before November but will need to work with a payments partner to get what they need.
Maximize the value of seasonal shoppers
Rohan Shah, Co-founder and CRO, Extend
This holiday season, merchants must be laser-focused on making the most of every customer touchpoint.
The top merchants are dominating the market by continuing to innovate on the experience they provide, with value-added services that:
- Maximize the value of each transaction
- Create post-purchase touchpoints to keep customers engaged
- Improve the customer shopping experience
Two common examples are loyalty programs and frictionless returns management but don’t overlook the benefits of offering customers product protection. As customers spend less in response to the macroeconomic environment, they think a lot more about extending their product's life cycle or protecting themselves in case anything goes wrong.
Retailers might be surprised how much value it can add to the bottom line, especially during the holiday season. Based on internal data, we see revenue from protection plan sales more than 22% higher during Q4, with a 20% higher attach rate.
Peak season success is all in the preparation
Despite the challenges of this year's peak sales season, there are plenty of opportunities for well-prepared retailers.
Rising prices could see shoppers spending earlier to beat inflation. Others will have saved their money and ring-fenced this, especially for peak sales season. Also, retail is not uniform, and neither are consumer attitudes. What some consider a discretionary spend, others will see as essential. While some will retreat from big purchases, others will be unwilling to forgo a product they had planned and budgeted for and save elsewhere if necessary.
So, retailers should go into peak sales season with optimism, but only if they have prepared thoroughly. The key is to focus just as much on ensuring customers can complete their purchase as on offering the deals that bring them to the digital storefront.