Interviews, insight & analysis on Ecommerce

The 3 key ecommerce trends of 2021

By Nikhita Hyett, MD, Europe at BlueSnap

The ecommerce landscape has evolved significantly over the last year – accounting for 21.8 percent of all retail sales in the UK. Multiple lockdowns and store closures prompted businesses to invest in their online infrastructure and presence. And consumers grew accustomed to the convenience of buying goods and services online. 

As we look back at this year, it’s clear that three key ecommerce trends emerged: growth in cross-border shopping, buy now pay later (BNPL), and subscription business models.

Rise in cross-border shopping

Last year saw a 57% year-on-year increase in UK cross-border ecommerce sales. And while the growth may not be as strong in 2021 due to Brexit uncertainty, the overall trend is still positive. 

Hence, retailers want to create ecommerce experiences that make consumers around the world feel like they’re shopping locally. Retailers are investing in payment processors that are able to detect a URL’s native country and serve payment pages in the customer’s language and currency – increasing sales conversions. They are also offering other payment options such as cash vouchers that may be more common in international markets. 

To localise global shopping, and increase authorisation rates, it is important that businesses localise language and currency on their sites. Without this, customers are left guessing what the total cost they’re spending will be. This uncertainty creates friction in the purchase journey and can lead to lost sales and decreased loyalty. To avoid this, it’s imperative that online checkout pages automatically convert the purchase price to the correct local currency. Merchants that sell in local currencies reap the benefits, seeing a 12% increase in sales according to BlueSnap data.  

Our recent global cross-border study found that 68 percent of companies that sell to international customers are processing payments in the country or region where their business is headquartered, rather than where they have a local entity and their customer is located (cross border). 

This can result in dramatically lower payment authorisation rates. The research showed that 41 percent of companies had payment authorisation rates of 70 percent or less, meaning businesses could be losing more than 30 percent of their international sales. 

But there is a solution here. Businesses with high volumes of cross border sales can work with a payment provider that can localise their payments. As in, match the shopper country with the acquiring country. This will result in higher authorization rates – and lower fees.

The proliferation of Buy Now Pay Later

Today, 49% of online shoppers aged 25-34 in the UK reported using BNPL services.

As the pandemic continues to put pressure on consumer spending power, BNPL options will continue to boom in 2022. Appetite is particularly ripe among young shoppers as we head into the holiday period and we’ve already seen digital banks like Monzo and Revolut gearing up to cater to the growing demand. 

While consumer protection remains a hot topic of debate, what’s less often talked about is what this trend means for merchants. Retailers are being seduced by the promise of higher conversions and average order sizes. 

And while BNPL helps customers spread their cost and buy goods and services that they might not have otherwise, it’s important to note that not all customers are eligible to use this payment method. 

Unlike a credit card, where all the checks have taken place prior to the purchase (in order to issue a card in the first place), with BNPL an instant credit check takes place at the time of purchase. This is what they call a “soft credit check”. Along with this, they check your previous shopping history and a few other pieces of information. This is important – and required for “responsible lending”. However, if part of the information they need is not available, and there is no history of the customer on their records, they will fail the checks and the payment will fail. 

What this ultimately means is that higher conversions are not a given. In fact, expect authorisation rates with BNPL to be lower, and in some cases significantly less, than your Visa and Mastercard authorisation rates. Some customers that fail the checks may then decide to shop elsewhere.

As a business, BNPL may seem like a great payment method to offer your customers, especially when you work with a provider that can fund you the full amount upfront – meaning the instalment payments don’t impact you at all. So when it works, it is great. But with banks and retailers alike racing to offer point of sale lending options, it’s vital that merchants fully consider the risk and rewards involved when accepting installment payments.

The adoption of subscription models 

The pandemic forced many businesses to pivot and innovate, which resulted in a boom in the subscription business model. Globally, the subscription ecommerce market size is expected to hit $478.2 billion by 2025, as more consumers choose subscriptions over their monthly shopping lists. The benefits of a subscription service extend beyond consumers to merchants themselves. The model provides them with regular cash flow, rich data points and greater customer insights to better track consumer habits and product interests. 

This is a sector poised for growth. Currently, 65% of UK households are signed up to a regular subscription service, with the UK subscription industry worth an estimated £323 million annually. For consumers, subscriptions are also much easier to manage – especially when those payments are made using a card. Features like Account Updater ensure that expired or changed card details are automatically updated. 

The shift to network tokenisation means customers don’t need to re-enter their information and sellers don’t miss out on payments. Companies can also take this further by teaming up with the right technology and payment partners, to simplify their backend processes. For example, all-in-one platform providers can enable firms to split monthly payment transactions internally within departments.

The future of ecommerce

Forecasts show that by 2024, ecommerce will make up 32.1 percent of all retail sales in the UK. British consumers are increasingly growing accustomed to purchasing their goods and services online. And they will continue to expect easy and convenient payment options in the future. As such, subscription business models, buy now pay later, and cross-border sales will continue to grow in 2022 and beyond. It is imperative that businesses are equipped with the right payment solutions as this trend is here to stay

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