Find Money in Your Revenue Leakage Dashboard and Improve Buyer Journeys
Ed Whitehead, MD EMEA, Signifyd shares his expertise with us regarding how retailers can find money within their revenue leakage dashboard to improve their buyer journeys.
Combating revenue leakage will be a key topic at eTail Connect Spring 2020, taking place 25-26 February at Twickenham Stadium, UK. Download the agenda today to discover more about this exclusive event.
Retailers are facing a constant battle to gain and maintain loyal customers while keeping up with the relentless pace of retail and squaring off with industry giants like Amazon. Same-day delivery and one-click payments have led customers to expect more of retailers regardless of their size or the vertical they sell in. Consumers want a superfast, seamless shopping experience both in-store and online.
They also expect to be able to buy anywhere, anytime. And they expect to be able to pick up their purchases just about anywhere. The pressure is on and retailers must keep up with these demands.
As retailers strive to succeed in this rapidly evolving environment they are faced with new challenges. The need to orchestrate omnichannel commerce, for instance, raises new logistics and fraud-management challenges. In response, some retailers have added more friction to the buying process for customers, leading to the potential loss of sales.
So, what can be done to manage this problem in light of the changes taking place?
The scale of the problem
Retailers rightly measure success by sales. But, what about the sales that never happen, despite customers trying to buy? Retailers are leaving as much as 10% of potential sales on the table, while permitting revenue to leak out of the buying journey all along the way.
This happens because payment gateways, fraud management, two-factor-authentication and inventory issues among other factors introduce friction and degrade the customer experience. The result: sales slip and revenue leaks. So, to combat this, retailers must find ways to reduce friction and better meet consumers’ rising expectations.
Don’t let a fear of fraud stall sales
The good news? Most sales lost through friction in the shopping journey are within the retailer’s control. There are steps retailers can take to optimise their sales funnel. The problem is many retailers are not paying the attention they should to these trouble spots. That’s because it’s hard for any one team to see all the pressure points in the buying journey - because teams often operate in silos, making the picture hazy. By working together, those in marketing, payments, fraud management, customer support, operations and finance can break down the silos and form a more complete view of the buying funnel and it’s trouble spots.
In fact, revenue leakage occurs throughout an order’s life cycle. Consider this scenario which comes from my discussions with a broad range of retailers: Marketing attracts consumers to a retail website and a fraction of those go on to click ‘buy’. But, because of payment gateway rules governing transaction velocity and the like and the imperfection in some retailers’ fraud reviews, 10% or more of orders are declined in the authorisation and fraud-review stages. Unfortunately, some of those orders were in fact placed by legitimate customers.
Discover more speakers who will be sharing exclusive insights at eTail Connect Spring 2020, taking place in February at Twickenham Stadium, UK. Download the agenda today to find out more.
From there, some orders aren’t dispatched because items are out of stock, meaning another 1% or so of orders are declined. Then, of course, there are returned orders — which can easily reach 20% or higher, depending on the vertical — and chargeback claims. Before you know it, the initial set of customers that marketing has acquired has shrunk by as much as 30%, in some of the hardest hit verticals, and revenue has leaked.
Additionally, in the near future - during 2020 - online retailers will have the added challenge of PSD2’s Strong Customer Authentication (SCA) to contend with. This regulation has the potential to cause further revenue leakage in the shopping journey, due to lost conversions from additional friction and step-ups during the online checkout process. However, forward-thinking merchants can turn this challenge into an opportunity ahead of the mandatory 14 March 2021 enforcement deadline in the UK (and 31 December 2020 in most of Europe). By adopting ways to seamlessly authenticate the user, retailers can transform SCA into a competitive differentiator.
So what should retailers do?
Retailers that are looking to break down the barriers that prevent their customers from completing a sale, must first remove the internal silos that prevent the business from forming a clear view of the buying funnel and get teams to collaborate about this issue. After this, they need to develop a revenue leakage dashboard that provides a comprehensive view of the buyer’s journey to help them assess and plug holes.
The next step is to establish a revenue-leakage benchmark. Retailers need to know where they stand in comparison to others in the same space; taking factors like their ‘vertical’, basket size, and brand maturity into consideration. There is a whole industry of consultants whose expertise can be drawn on.
From there, retailers can identify where leakage is the most severe and take steps to strengthen that weakness. The next part of that phase includes optimising that trouble spot; measuring improvements and testing effectiveness; then moving to the next problem and repeating the cycle again to improve.
Additionally, one key area where revenue normally leaks is at the payment level. Significant progress can be made here and retailers should trust their fraud professionals to drive the relationship with payment gateways in their favour. Typically payment gateways try to dictate how risk management operations perform and so we advise that inhouse fraud experts strive to drive and control this relationship.
Aside from this, retailers need to assess their fraud tools and processes. For instance, experts can, appropriately and easily, review and disable some rules and filters activated by payment gateways, ecommerce platforms and card processors to see what orders are not getting through systems. Also, retailers should strive to understand whether they are suffering from an unreasonably high percentage of declines from payment partners - accessing benchmark data from the likes of Visa can help here.
Finally, merchants should evaluate the market for SCA solutions that will allow them to provide the best customer experience and minimise the number of step-ups caused by SCA. We are all hoping exemptions will enable this to an extent, but this is still a very undefined area and there will still be the need for SCA. Merchants should investigate additional tools such as biometric authentication to seamlessly perform SCA in the background, minimising friction and also revenue leakage.
Overcoming the fear to create future success
Putting measures in place to stop revenue leakage in its tracks will improve retailers’ confidence and sales figures as they trade. Naturally, over-cautiousness is common, and understandable, in a world rife with cyber theft, data breaches and fraud, as firms manage this challenge.
But, this fear is causing retailers to put up barriers between themselves and customers. Treating innocent shoppers like criminals, in a bid to avoid fraudulent payments, can result in frustrated customers abandoning their baskets and taking their custom to retail brands that are already equipped with more seamless buying journeys.
There is hope for retailers though. By marrying the right ecommerce platform with the right design, user-experience and risk-management practices, retailers can prevent revenue leakage and preserve lifetime customer value – giving themselves the confidence to serve more legitimate customers in the way they want to be served.
eTail Connect Spring 2020, is celebrating its tenth edition and is the leading retail event for Senior eCommerce, Omnichannel and Digital Strategy Executives from world leading companies.
Download the agenda today to discover more about this invitation-only event.