The Good, The Bad And The Missing Online Checkout Strategy

After nine months and 10,000 data points examining data on the 650 merchants that drive 70 percent of online spend in the U.S., one thing is abundantly clear: big merchants lack an online checkout strategy.

They have plenty of other strategies — and executives — focused on perfecting the process of getting consumers to their virtual front doors. Where things totally fall apart is how to get them out the back door with a purchase. That’s where their lack of a checkout strategy is apparent.

It’s counterintuitive since the big guys have more resources than their smaller merchant counterparts – and this one big oversight is costing them big time. A merchant that clocks $100M in annual sales from their online channel may be losing up to $40M every year thanks to the friction associated with converting shoppers to buyers online – a problem made more acute when those journeys start on a mobile device.

To unpack what goes into a checkout strategy and why they could help boost the bottom lines of merchants big and small, Karen Webster spoke with BlueSnap CEO Ralph Dangelmaier. Here’s what they talked about.

Checkout Strategy? What Checkout Strategy?

“Most merchants’ checkout strategy is all about reducing the cost of acceptance,” Dangelmaier said. “That’s often the first question we get [from merchants].”

A starting point Dangelmaier said he uses to shift the conversation more toward friction from the consumer’s perspective.

“What we then quickly shift to is a conversation about ‘how do I create less friction?’ – which is the essence of a good checkout strategy,” Dangelmaier emphasized.

Dangelmaier said that the optimal checkout strategy eliminates friction in three key areas: getting a consumer to fill the shopping cart efficiently, getting that consumer from the shopping cart to the checkout page, then making the payment – and all of the parts in between.

Hint: It’s All About The Conversion Data

Webster mentioned that merchants often don’t entirely understand where their conversion “blind spots” are since they don’t have all of the data they need to diagnose how bad the problem is. Or maybe they have data, but not all of the right types of data. As a result, it’s difficult for them to assemble the full story.

“Lot of retailers have data on their costs, but don’t have data on their conversions. Many times, we’ll work with merchants and we’ll ask them how many declines, from where, at what price point, from what issuing bank – and we’re met with blank stares. They just don’t have access to the data – and without the data it’s very hard to actually devise a checkout strategy that optimizes conversions,” Dangelmaier said.

The only way to solve this problem is for merchants need to get more data in their hands. But all too often, Dangelmaier says, merchants are unable to tap into data that’s available so they never see at what point customers abandon checkout or where the customer drops off during their shopping experience.

Big Isn’t Better, Necessarily

The data shows that there is no real difference in performance between the big retailers and the small ones.

“The big guys don’t perform any better than the smaller merchants,” Webster pointed out. “After nine months of looking at this, I found this surprising. We now believe that this is not just an aberration, but a reality.”

Dangelmaier agreed, pointing out one key distinction between large and small merchants.

Smaller merchants, he says, are able to move more quickly and address conversion problems – they have fewer organizational layers to navigate and perhaps feel more pressure to perform.

“The bigger merchants are more entangled or engrained into many more platforms,” Dangelmaier observed. “So to unwind those systems and optimize online/mobile checkout is a lot more work for a bigger merchant than it is for a smaller merchant.”

“I think a lot of merchants want to try these things but they just don’t have a program in place to really get them out into market,” Dangelmaier said.

Tackling Those Problems

Webster points out that the whole process of accommodating online and mobile checkout often boils down to one other major problem: like anything trying to tackle everything at once often means nothing gets done. Breaking issues down into smaller pieces can make the process easier on the merchant’s side – and at least get them on the road to solving their checkout conversion problems.

Dangelmaier agrees, and suggests that merchants evaluate each strategy one by one instead of looking at online checkout conversion as just one big problem itself.

“The only way to really tackle these things are to carve them into bite-size pieces and make progress over a scheduled timeline. I think that’s where merchants could probably use a hand is trying to put those timelines and schedules together and try to come up with what options are best for them,” he said.

Only then can they tackle that one big problem: having a checkout strategy that drives sales, not prevents them.