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Industry Trends

Holiday Shopping in 2020: The Most Wonderful Time of the Year for Payments

What are the lessons learned.

Written by

Ana Rita Costa


22 December 2020

This year’s Black Friday and holiday season have been the ultimate test for innovation in the payment industry. What have we learned from Black Friday and holiday shopping in 2020? How can we use those lessons to level up the payments game in 2021?

It’s Beginning To Look a Lot Like Christmas. The tagline for Black Friday.

Black Friday is one of the most, if not the most, important days in the calendar for many retailers. COVID-19 added a new layer of challenges to the date this year, leaving a few lessons to be considered further going into the holiday season and the new year.

Although shoppers are usually expected to spend more and more every year during Black Friday, this was not the case for 2020. At least not in all countries. In the US, Black Friday sales grew 21.6% compared to 2019 and this was considered the second-largest online spending day in US history after this year’s Cyber Monday. Nevertheless, in Europe, the statistics show a different scenario. The countries that usually spend the most, like Germany, France, and the UK, all registered a decrease in sales compared to last year’s Black Friday as shoppers shift the intention of buying from 'want’ to ‘need’.

2020 also witnessed the highlight of the “kindness economy”. A show of support and solidarity seeped into the way buyers spend, with new trends for conscious, small business, and local shopping becoming considerably more relevant.

With consumers planning to spend less this year, due to the financial instability and the disruption of social events created by COVID-19, this shopping season has proven to be especially challenging. How are Black Friday trends seeping into Christmas sales? What is the shopping experience customers are looking for right now? And how will it stick for the coming year?

Baby, It’s Cold Outside. I’ll order it online.

For retailers, online competition is greater than ever. Even stores that managed to remain open have had considerably fewer customers walking in. In a report from SYKES, nearly 26% of consumers said they won’t feel safe buying in store before the vaccine is out.

While 2019 registered an increase of 14.7% on online purchases during the US holiday season, the growth for this year is expected to be 35% in relation to 2019 with an expected value of up to $192 billion in sales, according to Deloitte. Now more than ever, it is clear that retailers that don’t move a substantial part of their business to online channels will have difficulty thriving.

Over the last few years, mobile has solidified its position as the device of choice for shopping. According to Payvision, by 2022 there’ll be more than 2.7 billion mobile payment users in the world. The trend of mobile payments has already been proved to be real in recent years during Black Friday, particularly in the fashion sector. It’s a reality for the coming years that Google Pay, Apple Pay, or WeChat will expand their user base for payments on wearable devices. Optimizing the checkout experience for mobile should be on the list of priorities for businesses going forward.

The most recent updates from apps like Instagram, Facebook, Snapchat, and Pinterest show a clear investment in commerce features. As consumers spend more time interacting with friends, family, and followers through social media, the same goes for shopping. Social media has become an important sales channel for the holiday season strategy and it will certainly grow through 2021.

Perks like free shipping have turned into essentials. The number one reason for shoppers to abandon a purchase, with over half of UK consumers (54%), is the lack of fast and affordable delivery options. An estimated 38% of shoppers won’t shop somewhere that doesn’t offer free shipping. In a year ruled by the logistics of shipping and delivery, services that were once considered an add-on have become absolute essentials.

Major retailers like Amazon, Target, and Macy’s are offering free shipping during the holiday season with no minimum order amount following this trend.

Rudolph the Pay Later Reindeer

The use of buy now, pay later services on Black Friday more than doubled in 2020. The likes of Klarna and ClearPay had a major role in Black Friday shopping this year, and the perks of delayed payment they offer are quickly stepping up to the frontlines.

For split payments, PayPal introduced a ‘Pay in 4’ offering that lets consumers split their payments in 4 installments, one every two weeks. Both Visa and Mastercard announced partnerships with payment processors to create installment options. American Express created Plan It which lets US cardholders split up large purchases of $100 or more into equal monthly payments for up to 24 months with no interest.

According to Afterpay, younger shoppers’ concerns about credit card interest, hidden fees, and revolving debt have led to a detachment from the use of credit cards. 42% of Gen Z and 69% of millennial shoppers are more likely to purchase items if a buy now, pay later (BNPL) service is offered. If the trend finds its way into the wallets of older generations remains yet to be seen. Nonetheless, if you’re trying to appeal to the younger customer and operating within clothing, sporting goods, home furnishings, toys, electronics, or health/personal care, you should consider adding a BNPL to your payment offers. These have been the sectors most popular with Millenials and Gen X when it comes to BNPL.

Jingle Bells, Contactless Sells.

After months of lockdowns, mask enforcement, and never-ending handwashing, consumers are very much wary of crowded indoor spaces, touching shared surfaces, and paying in cash.

Just as much online shopping suffered its twists and turns, in 2020 the in-store payment methods also went through the changes demanded by the pandemic. This resulted in an uptick in the preference for contactless payment methods.

Before COVID-19, 10% of consumers preferred to use mobile wallet payments, such as Apple Pay and Google Pay. During COVID-19, that number increased to 13%. The preference for contactless payment cards increased from 7% to 9%, and tap-to-pay through mobile devices rose from 3% to 4%. 43% of customers say they intentionally avoid shopping at stores that don’t accept contactless payments.

Making your store feel safe for customers is of the utmost importance, and on that matter, contactless is here to stay. You should work on finding the best terminal solution for your store and educate your team on how to best manage the devices at hand.

All I Want For Christmas is a Flexible Return Policy.

No holiday season is up without a returns sprint. Although this year it might look more like a marathon since many retailers have adjusted return windows to go run from November to the end of January. The goal is to ease customers’ worries about getting their money back if they find the need to shop sooner to avoid crowds and to make sure their orders are shipped on time.

The holidays return fraud still plagues retailers, 25% of annual product returns take place between Thanksgiving and New Year’s. According to the National Retails Federation, about a quarter of holiday shoppers buy items specifically with the intention of returning them later. With that kind of consumer behavior, retailers should be prepared to deal with large volumes of returns. According to ReBound Returns, “online shopping typically sees around double the returns rate of high street shopping” and retailers are likely to see their return volume rise this year as consumers flock into online channels.

Handling returns is a tough balance. It’s difficult to go through with proof for a return, a customer can have a multitude of valid, or even not so valid, reasons to want to return a product. At the same time, alienating customers is the last thing any business is looking to do. Dispute processes lean towards benefiting the customer, which can put merchants in a very tough spot when battling chargebacks. When it comes to returns, clarity, flexibility, and keeping tabs on your transactions is the best course of action.

  • Be mindful of your return policies. Craft clear and reasonable return policies, and also make sure you show them off to your customers. More than two-thirds of customers actually read the return policies.
  • Be flexible with your return policy. It might sound counterintuitive after putting all this time into a proper return policy that you would second guess your rules. But keep in mind it’s important to keep the customer on your side. When it comes to this customer support is key. Make sure you understand the motive for return, be as detailed about it as possible.
  • Twist that return into a new opportunity. Work around your returns to push for customer loyalty. Consider offering alternatives to traditional refunds, what about 15% more than the refund value in store credit?

Although sometimes underestimated, disputes are an imminent threat for all types of businesses that accept card payments. Convenient returns please consumers, poorly managed return processes, and outdated policies can help along with fraudulent, abusive returns or unhappy customers.

Big shopping events in 2020 like Black Friday and Cyber Monday added tremendous force to a shift already in the making. From the store to the web, from the counter to the online checkout, from the shopping bag to the cardboard box, shopping will never be the same. Evidently the same applies to the payment industry. The holiday season has proved that businesses who move with the time and adapt to consumer behavior changes can soften major threats.

Reach out to Switch to know more about enabling BNPL services, expanding on contactless applications, and handling disputes.



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