By Aaron Begner, EMEA General Manager at Forter
As energy and fuel prices, food shopping bills and rent spikes push the cost of living up across the U.S., consumer spending habits are shifting in response to these economic pressures. Findings from Toluna’s Global Consumer Barometer Study show that a majority of consumers think they will fare worse financially in the coming months and consumer confidence remains low at 25%.
Overall, economic sentiments about 2023 are pessimistic, but U.S. consumer spending shows it has not affected purchasing quite yet. Online shopping is still reporting increased spending, about 27% year-over-year from 2021 and traditional brick-and-mortar stores are also benefiting.
The current economic climate has made consumers more selective about where they spend their money and the length of time taken to deliberate over a purchase. They’re more likely to spend their cash with companies they’ve grown to trust – those with longstanding excellence in customer service, consistent delivery of the products and services they love, generous loyalty programs and those that provide unique customer experiences.
Weathering the economic tides heading into 2023 requires merchants to deliver on 3 primary areas of focus:
Enhance the Customer Experience by Focusing on Personalization
Thanks to digital transformation, retailers have a big opportunity to set themselves apart from the competition by augmenting every step of the shopping experience — from the moment potential customers log onto a webpage through and post checkout. Based on research from McKinsey’s Next in Personalization 2021 report, about 70% of consumers expect some level of customized shopping experience, and 76% are disappointed when that isn’t met.
Personalization works to boost revenue, as showcased by popular fast-fashion retailer Fashion Nova. In the midst of the pandemic, Fashion Nova ramped up its AI-driven personalization strategy to provide clothing recommendations based on previous shopping habits and offer alternatives to sold-out items, to help increase company revenue.
Deliver a frictionless experience through checkout for good customers
Even in “normal” economic times, retailers cannot afford to mistakenly deny legitimate customers. Research shows that 40% of customers will shop with a competitor when falsely declined for a purchase and merchants can lose up to 75x more revenue to false declines than they do to fraud.
False declines and manual review friction happen because of a change in shopper location, order data inconsistencies, a larger than average order or lack of purchasing history with the retailer.
Instead of relying on legacy-based rules to approve purchases, retailers should invest in identity-based solutions to discern between legitimate customers and fraudsters at every step of the buyer’s journey. Powered by richer data and deeper context, retailers can cut down on false declines and build better relationships with consumers.
Differentiate Your Digital Journey
Consumers have sky-high expectations when shopping online. Loyalty programs, convenient delivery options like same-day delivery, buy online and pick up in-store (BOPIS) and fuss-free returns must be part of the package. Retailers who fail to meet expectations risk customers abandoning their carts, but organizations that get these processes right will reap the most loyalty.
However, opening up some of these options will widen the surface area for fraud and abuse. Merchants are challenged with balancing the desire and competitive pressure to meet consumer demands, like easy returns and fast shipping, with the risk of digital commerce fraud or the abuse of benefits such as free returns.
The good news is there is a way to differentiate your digital journey while minimizing the chance of fraud. Using automated, machine learning technologies to start each consumer relationship with a foundation of trust can enable merchants to deliver a buyer’s journey that provides high value while combating abusive buyers in real-time.
Empower the Customer
Sensing a theme yet?
In order to navigate the rough economic days ahead, it is critical that merchants put the customers in the driver’s side of the buyer’s journey. With machine-learning-based solutions to protect the bottom line against fraud, merchants have the flexibility to offer personalized and competitive offerings to customers throughout the entire shopping experience.
Whether it is a peak shopping period, the current economic slowdown or the introduction of new regulations, retailers should always stay nimble to minimize friction in the customer journey, maximize conversion rates and protect revenue. Doing so will enable them to weather any storm that lies ahead.