Market Movers Discussion around Growth of eCommerce with the Adoption of New Customer Buying Behavior

In this episode of Market Movers, Al Lalani, Co-Founder of Annex Cloud, and Maria Prados, VP, Global Retail & B2B, discuss the “sea of change” in the growth of ecommerce with the adoption of new customer buying behavior. They also tackle the challenges behind retaining the flood of new customers in this channel and what to expect in the future.


Al Lalani:

Welcome to another discussion of Annex Cloud Market Movers. We bring in industry luminaries and experts to help us through the current times, as well as give us a vision for the future. Today, I'm very, very excited to welcome Maria Prados. Maria is the VP of global retail and B2B at Worldpay. Maria, welcome to the discussion.

Maria Prados:

Yeah. Thank you so much. I am really, really excited to be here today and start discussing a little bit about these shopping habits and the craziness that is happening all around us.

Al Lalani:

Well, great. Well, before we get started, Maria, maybe you can give our audience a little bit of an introduction about your role at Worldpay and how you help customers there.

Maria Prados:

Yes. Just before that, a little bit about Worldpay in case someone doesn't know, but Worldpay is the number one global acquirer and we process over 31 million transactions across all of the channels on any given day. So this gives us a very, very broad view and in-depth of how and where these consumers around the world are paying for gets and what are the changes that are happening.

So in my role, I joined Worldpay around seven years ago. And as you said, I run the global retail and the B2B vertical. Basically looking at the strategy, partnerships and marketing. So it is very, very exciting that today we're going to be sharing some of these insights and some of the thought leadership that we have been doing.

Al Lalani:

Wonderful. Let's start from a few months ago. Obviously we've talked about this a lot. We talk about it every day. We've gone through a sea of change from a personal perspective, but also from a business perspective. That's resulted in a massive growth in e-commerce over the last sort of eight to nine months, but it's also resulted in some challenging environments within stores, in some verticals. While some verticals have grown in stores, for example grocery, but in some verticals, there has been challenges as well. And consumers are adopting new habits and adopting new sort of digital channels in which they can potentially buy. Could you give us a little bit of an idea on what you're seeing from a payments perspective across all these different channels and what have you seen happen in terms of consumer habits over the last several months?

Maria Prados:

Yes, for sure. And we at Worldpay also wanted to quantify this change. And we know it has been happening, but what we did was we went out to the market and researched around 1200 shoppers around the world. I wanted to share some of the things that we found because I find them extremely exciting.

So first of all, 90% of them said that they have changed their purchasing behavior. Obviously, I would say that not by choice, but actually rather the lack of choice in this case. But it's still pretty much the whole population. And even when asking them even deeper, already over 10% said that they thought these changes were going to be for good. So they were not going to go back into their old habits. And I personally also believe that the more this pandemic continues and the longer it gets, the stickier the new habits are going to get.

So basically there were three very key important findings that I wanted to share with you today. The first one is that Omni channel is now a must to survive. Like you were saying before, a little bit about different channels, where actually when we found that over 70% of shoppers use more than one channel during their shopping journey. We also found that websites right now are their preferred channel. But as you say, physical stores are having a very, very large influence, especially at some specific points like purchasing or when they're looking after customer care. But we're also seeing that they're very important new channels that are picking up, like you said, and probably the most important one right now is social commerce.

I don't know if you've seen, but Facebook reported an increase of over 70% of Facebook messenger users in areas where there was a lockdown. Which is tremendous. But also when you ask, okay, this is definitely a marketing channel where people are interacting, but is this really a sales channel? We also find that half, so around 50% of the shoppers globally, are already saying that they are likely to use social media to buy a product. So this is the interesting piece, especially for me, payments is actually, you need to enable that frictionless payment within the whole platform without very clunky redirects or asks to enter this very long car details pages that you have to do for mobile that are not a hundred percent optimized. So it's very, very exciting.

And then probably the last one is around digital payment methods. We had seen before COVID, a massive growth in those, but now COVID and all of these new channels and the growth of e-commerce is pushing them even to the next level. For us, we have two key winners. So digital wallets and they already represent around 50% of retail e-commerce payments, but we think that they are going to be 60% by 2023. And this is a very easy way for shoppers to shop and to pay across any channel, to be honest, and no longer only digital because as you know, now with contactless, you can pay in the store as well using these digital wallets. So they've pretty much taken over.

But then we have another one, which is what we call the buy now, pay later. And this basically are payment methods that allow you to do a couple of things. So the first one would be, if you're buying something online, then you don't have to actually pay for it until you've received it and you're happy with it, which is pretty good for the shopper experience. But also it works really well in kind of like a pandemic that is having some impact on the economy, because it also allows to split your payment, like equal payments across every month. So we are seeing now that this is the fastest growing payment method actually over anything else. And we expect that it's just going to continue.

Al Lalani:

That's interesting. There's quite a few points you brought up and that represents a pretty massive shift in the payments world over the last year or much more than probably, I think both of us have seen in a few years before that, driven by consumer habits changed, whether you talk about shifting of new channels, whether it's social commerce, contactless payments, buy online, shifting towards sort of that digital purchasing. One of the things that I want to get your thoughts on more, is what impact this would have in the holidays.

Just to give to you some pretext for that question. We've been chatting with several of our commerce platform partners and the growth of commerce over the last decade has been from, let's say, approximately 5% to 15% of sales. And many of the commerce platform partners are projecting their customers to go from 25 to 30% of a retailer's sales happening through commerce, maybe more in some situations for some of the retailers in this upcoming holiday. Not only that, a lot of brands that were not direct to consumers are now starting to adopt direct to consumer, which means that they will have a form of online commerce payments as well.

So clearly there is a big, big shift towards e-commerce. I think we all understand that, but and you mentioned, the longer this stays, it will ingrain that behavior into the consumer mindset and it'll continue. But what is your forecast for the short term for the holidays? How would you ask for people to plan for the holidays, given the lock downs and the shift in consumer behavior?

Maria Prados:

Yeah. Very good question. And that's pretty much where everyone is pretty concerned about because the holidays are already here. I think one of the pieces that we're starting to see is that the holiday period has been made longer. So before it started in Black Friday, right after Thanksgiving and that's when the holiday system began and all of the deals that happened, but we've seen Amazon once again, disrupting the industry and moving Amazon Prime Day to mid October. And that's when all of the big brands went right next to them to start putting their deals up.

So we think that, and we're seeing actually in the data as well, that the holidays now have been extended. And this links very nicely with what you were saying about everything going more towards e-commerce. Before we could remember all of those crazy lines for Black Friday of people waiting outside of the store to open the doors and just go in there and buy whatever you can or you can find. But actually it doesn't feel that that's going to happen this year, or at least not at that scale, due to all of their health and security issues. But then people are planning and thinking earlier because they know that delivery takes some time and they want to make sure that they get it right. So there's this extended period for sure.

Then the next thing, as you said, is e-commerce is king. And this is the time to pretty much go back to basics. I always say this, if you reduce retail to almost nothing, you end up with three things. One is you need to source of manufactured the product. The other one is you need to deliver it. And then the other one is you need to take the payment. If one of those three actually don't work, then retail doesn't work. So I think those three things are the pieces that before were taken for granted because they just happened, in our operational or BAU purchase, but actually now, maybe not. So those are the things where I would suggest that everyone is going to have to prioritize and go back to those basics and make sure that everything is automated and everything's digital.

Like we were saying, there are new channels. There's new ways that people are going to interact with you. There's newer generations that are pushing even harder. And the pandemic has pretty much pushed the whole industry five years ahead in a couple of months.

Al Lalani:

Makes sense. I'll add a number four that is a little bit near and dear to my heart just to get your thoughts. And so in addition to payments, you need someone to buy it and then you want those people to keep buying it. So, that brings me to my topic of loyalty and retention, which is near and dear to our hearts, and something that I know Annex Cloud and Worldpay are working really close in together for. What are your thoughts as a result of this environment as it comes to retention?

What we've seen and just to give you some numbers on what we did research on back in 2008, when we saw the last sort of global recession, loyalty had a major resurgence. In fact, brands that focused on loyalty came out faster out of recession. They were growing 20% better. The consumers, however, during that time had a major shift in their loyalty. We saw a study that was done for 685 major brands across 30 million consumers in 2008. And the study was released in 2009 where they showcased and said about 52% of a brand's loyal customers defected. About half of them defected because they just got a cheaper option. Half of them defected because they just didn't want the product or didn't need the product at that time in a sense. But they defect nonetheless. So we haven't done this study for 2020 yet, but I'm sure something will come and we're starting to see some of that already. That's one.

The second part is there are new brands that are getting exposure now because of distribution issues that weren't doing that before. And those brands will need to retain their customers. Even if it's e-commerce, you'll have to keep your customers because you don't want it to drop after this is all done. So what's your take on retention overall over the next few months and years to come?

Maria Prados:

Yeah. And I think you're completely right. This is also an opportunity and a challenge that comes with e-commerce as well, because the more everything moves to e-commerce, the bigger and the tougher the competition gets. Because once again, you're now one click away from your competitor or from the product from another competitor. So it is super, super important to make sure that that communication and that understanding of the shopper is there, and that you build that loyalty around what is going to add value to your shopper. That is for sure. And actually not only that, it's always cheaper to get a repeat purchase from an existing customer than to try and acquire a new one. So definitely, even for the economics and the bottom line, it's going to pay off.

When I was reading a little bit more about loyalty, actually a couple of months ago for another panel that we were talking about this as well, we were seeing that, even the new generations are still very interested in some kind of loyalty. It might not be the traditional loyalty that they were use to, and maybe just a reward or a point for every purchase or every pound that you spend. But it is just kind of like a new transformation and especially generation Z and even younger than millennials, they still want to be part of those loyalty programs, but it just has to look slightly different. Loyal customers are always like, what? Five times more likely to purchase probably, which is kind of like what we see at Worldpay as well.

So I think for me, as everything moves and with all of these digital disruption, just a couple of things to consider. The first one is how do you actually identify your loyal shopper? And this is kind of links really nicely with payments and a loyalty company, but it used to be quite a struggle. You need to give your shopper this card, so an extra card that they need to identify themselves with, and then they need to make sure that they scan it before they pay or that they have their number online and enter it again. It's quite clunky and especially the younger generations are just not going to be happy with that. It's not seamless, it's not one. They're building the experience, they are interacting with your brand. They don't want to get, I don't know, stop the focus and the attention to have to look for their card or the loyalty card to add it.

So new things coming up into, are tokenize cards that would identify your shopper as you very well know, then that way, just by using your card or even in a digital wallet, then you will already enter into that loyalty program. So that's really what we call, more in the payment world it would be like an invisible or a frictionless payment. So these would be like the invisible or frictionless loyalty side of it. Which as we said, is as important. So that's probably the first thing.

And then the second one, probably more around, how do you get more shoppers, as you said, to really interact and to become loyal? This touches a little bit into the new way of doing loyalty. I think for me, it is all around data. And how much do you actually use the data to add value to the shopper? Now they are not okay with just having like one size fits all loyalty program where everyone just gets the same because they are now used to this mass personalization that happens. So the more you can actually know your individual shoppers, even at that level, and the more you can actually understand what is going to be adding value to them, probably the better.

I think this links nicely with things that we were talking about, like single customer view. And how do you actually understand, show a person that he's happy to give you their information because they think that you as a brand or as a retailer are actually going to add value back at them. I was reading, there's a report from KPMG that said that almost 80% of millennials will switch to a different company that offers a better loyalty program. This is massive. So loyalty is still there, it's just a different view to see loyalty.

Al Lalani:

Absolutely. One of the things we talk about is that the change in loyalty from transactional loyalty to experiential loyalty, and that's the generational shift you were talking about where original programs were focused on buying and getting points. Now it's about the customer experience, the customer journey to create an emotional bond with that end customer so that now they stick with you from time to come.

I'm going to bring a few of your ideas together because you've got so many things you mentioned that all comes together with that experience and loyalty. One is that change in channels. The identification of the customer when they buy on social, when they buy on digital, when they buy in store, when they buy in all these different places in one single customer view, as you talked about, thereby identifying them as one customer and then tying that into the payments, creates a single view of that customer that you mentioned. But at the same time allows for the entire customer journey to be part of the loyalty experience, not just the transactional. And that creates that emotional bond that keeps that customer around and allows sort of that extension within their lifetime value, so to speak for that customer.

So I think, all of these are great points and it all comes together with multiple channels, with the change into digital, with the ability of the consumers to essentially interact with your brand wherever you want and not just the transaction anymore. So that's wonderful that you brought it up. And that single view of the customer that you talked about is extremely important to then identify that customer, but also understand their journey and improve and influence their journey along the way. So that's great.

I think, lastly, changing a little bit towards, out of the general world we've talked about. What are innovations that you see that may come in 2021 and beyond? You talked a little bit about what's happening now with the advent of buy online, pay in store, if I'm saying it correctly, or other sort of ways of paying through social, if you will. But what other innovations you think will come in 20 21 and beyond in the world of payments?

Maria Prados:

Yes. So we're already seeing a lot of the changes happening. As we were saying before, it just feels like the industry has moved five years ahead, just because they had no chance to survive otherwise. So I think probably, apart from what you're saying, like new channels that are interacting and everything more digital, I think one of the biggest changes is the thinking around the physical store. Like we've discussed before, it's still extremely important and this is still needed. And you can see all of the marketplaces and pure players thinking about some kind of face-to-face interaction.

So the physical store is not going to die, but it just has to change. Because that's probably the piece where retail has taken the longest to really put the investment. And of course there's a lot of reasons behind that starting with horrendous legacy systems that have been there for ages. When I used to work at retail, that was my biggest nightmare. Trying to get things quick to market and making quick patches with new technologies and new channels so that they could talk, but actually it was not fit for purpose.

But now that there's actually no other chance than to really think what you did. Then all of the retailers are now starting to have those discussions into, okay, so how do I transform the stores that I have and what are the different pieces that I need to put together? Payments has a very important role in those and things that we're seeing. So for example, some of the biggest examples that are more going to be about making sure that they're allowed to be open again. So do you need to reduce the interaction? So then how do you reduce that interaction in a physical store? So there's a few ways you can do it. You can go all the way into some kind of like scan and go. So kind of like the Amazon Go, which we are doing with some of our customers right now, where you would just allow your shopper to have an app. And when they go in, they pick their product and they'll just pay with their app. That is somehow a card not present, like a digital payment, but in the face-to-face environment. No interaction, pretty quick in and out.

But of course we all know that the store's, one of the biggest benefits is to have that maybe sales person giving you what is the right thing and giving you advice into what you need to buy or not buy. So sometimes that model doesn't work for all of the products and all of this verticals within the retail industry.

So then we have different variations into that. And one of them would be something like pay by link. So right now in the physical store, as painful as it is to me to say and to admit, payment is probably one of the biggest friction points. Once you have your product and you have to go in there, in the queue and wait forever until you go into the till and then you go through the thing... It's horrendous. So the other new technology now is enabling us to do different things. We could start sending what we call pay by link. So a URL to your personal smartphone, where you can actually make that payment. And many times it's just a one-click payment if you're using some kind of digital wallet, like Apple Pay or Google Pay, so pretty easy. You don't even have to wait, you'll do this and leave the store right there with that sales person that you were talking to at the beginning. So really, really easy. Or you can get a QR code, very similar thing.

This in Asia by the way, has been the standard way for ages. And it's only now starting to come more to the Western world. So that's really, really interesting. Probably the last thing that I would raise is what we call endless aisle. Like we said before, stores at the very beginning were pretty much a warehouse. And many stores are still like that. You have to have all of the products out, all of the sizes, all of the colors, all of the different models, because they have this mentality of if the shopper sees it, then they'll buy it. But actually, maybe not. Now, it's everything you were talking about more experiential experiences. So this is exactly what it is. The store has to be way more fun, way more engaging for people to interact. And that means that you cannot have everything out there.

But then how do you deal with the stock and the product? So another thing is making sure that all of your inventory is open and visible for anyone no matter where. So actually, you know what? I don't have this size, but I have it in stock. So why don't, instead of telling you go home and buy it from a website, which no one's going to do, I'll take the payment right now here, and then I'll make sure that it gets delivered to your house. And in the next two days you will have it. So those are probably the top three things that we're discussing most right now around the in store experience.

Al Lalani:

Wonderful. Maria, we got so many insights that I think I could write a whole sort of essay on many changes that are happening. Clearly, we have some interesting times we've gone through, but very interesting times to come. We can continue talking, but this has been a fabulous introduction to our customers and our partners around the world of payments and the changes that have happened around that and the impact of loyalty potentially to come within that. So thank you so much for joining us today. We really appreciate it.

And for everyone else, if you want to go check out some more such videos, go to annexcloud.com/marketmovers, where you will find amazing such videos and keep joining us. Thank you so much.

Featured Speakers

Al Lalani

Al Lalani

Co-Founder, Annex Cloud


Maria Prados

VP, Global Retail & B2B, Worldpay

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For more than 10 years, Annex Cloud has been the worldwide leader in technology and service solutions that transform customer loyalty experiences for organizations, extending valued customer engagements, ultimately making beloved brands. Powered by the modular, comprehensive and scalable Loyalty Experience Platform™ solution suite, Annex Cloud customers capture and use zero- and first-party data to seamlessly deliver value-based individualized experiences across the entire customer journey—from awareness to purchase to retention, loyalty, and advocacy. This one-to-one engagement helps enterprises accelerate growth by increasing average order value, repeat purchase frequency, and customer lifetime value. Annex Cloud is recognized by respected industry analysts and integrates with more than 100 market-leading technologies to seamlessly integrate loyalty across the tech stack.

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