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Visa’s Cybersource: The Frictionless Fix Is In For Physical Retail’s Broken Business Model

Although much of the 2021 holiday season will be very different than anything that came before it, some of the changes are easier to anticipate than others.

Discussing the most recent edition of PYMNTS’ Global Digital Shopping Index, Michele Herron, Cybersource‘s senior vice president of strategy and insights, told Karen Webster that much of the data confirms what we already knew — or at least strongly suspected. Consumers are going digital and are finding the experience to be an upgrade, while the physical retail channel is becoming increasingly unsatisfying by a pretty wide margin.

Herron and Webster agreed that’s not too surprising, given consumers’ 2020 drift toward digital and the large set of eCommerce upgrades that merchants have made over the past eight months. If one suddenly finds that digital technology means they can easily and reliably get groceries or items from a favorite merchant delivered, why stop doing that?

Herron said that means retail needs to catch up and start rethinking a model that is “definitely broken right now” when it comes to shopping in a physical store.

“Consumers are telling us they don’t want to go in [the store] right now,” Herron said. “Before COVID-19, there were probably a lot of demographic groups that didn’t know how easy it is to order online and then head to the store for pickup. Or the experience wasn’t as good in terms of either delivery or curbside.”

“But now that that friction has been removed, I know which stores do [buy online/pick up in store (BOPIS)],” she said. “I know which parking [lot] to go to. And I think that’s going to be an experience that persists and pushes even further into the store.”

But as fast and furious as the digital pace has been in 2020, Herron said it’s only going to get faster in 2021. After all, consumers expect digital services that meet and exceed their already high expectations and are showing a preference for retailers that meet those needs.

Winning The Digital Consumer

When we look at the diversity of entities performing really well in the current retail environment, Herron said that what unites them is that they were already digitizing in the pre-pandemic world.

The winners emerging now had already been thinking about continuous customer experience across channels before the pandemic, she noted. That means they were ready to spring into action when the entire retail segment shifted toward online commerce last spring as COVID-19 swept the globe.

But as Herron pointed out, a fair share of other merchants was caught almost entirely unprepared, and those firms now face a dual challenge.

For 2020, they’ve had to pack years of innovation and digital progress into months, simply to keep up with radically reoriented consumer behaviors. And that pressure isn’t going to lessen in 2021 because consumers have changed a lot more than just how they shop — they also relate to and think about shopping differently.

“Now, as a shopper, I expect you to know me in a physical store and online at the same level,” Herron said. “There are all sorts of things happening online, like recommendations, preferences and suggestions. That stuff hasn’t been fully evolved into the store experience. Bringing the digital into the physical store experience — I think that’s going to be a big investment area for 2021.”

What that might look like will vary. But Herron said one payments-connected area that’s prime for big growth is the possibility of moving the card-on-file experience — which consumers have come to rely on when they transact digitally — into the physical retail space as well.

She said we’re already seeing the green shoots of this happening in the market. For instance, Herron recently purchased eyeglasses with an in-store check-in that allowed her to grab her pair and walk out with them in hand, relying on the transaction to settle in the app’s back end later.

“It was just a really elegant experience, where I could just walk out,” she said. “I don’t think a lot of merchants are prepared to bring in cards on file yet, but it’s a tremendous unlock in terms of seamless payments and creating a better customer experience.”

The Coming Landscape

As the latest Global Digital Shopping Index makes clear, the changes that have taken root in 2020 aren’t going away. Given how far consumers’ preferences have evolved over the past eight months, a retreat to the pre-pandemic world would be nearly impossible.

But Herron said that’s not bad news for physical retail because the big takeaway from the data is that consumers aren’t hungry for purely digital experiences.

In fact, PYMNTS’ study found that the best performers for consumer satisfaction included physical retail outposts. Herron noted that success doesn’t come from offering one magic channel or payment method, but from offering choices and allowing consumers to decide.

And although we know that digital has often been their choice and will likely continue to be, the opportunities to build retail’s next evolution are much bigger than the challenges.

“If there’s a theme about commerce this year, it’s definitely [that innovation is] going faster and will keep going faster,” Herron said. “I think that makes it really exciting and interesting, especially when we look at the study and think about what consumers are demanding these days. I think there are tremendous opportunities for merchants to meet them where they are — and it’s going to be really compelling to see how quickly we can change commerce next year.”

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