The past year or so has changed how we shop and how we think. As the world changes and as consumer behaviour changes with it, as merchants we must start to ask ourselves, very seriously, will our ecommerce strategy, tactics and technology be ready for 2021 and beyond?
As online merchants, Canadian businesses saw significantly more new-to-online customers in 2020, as well as an increase in sales from existing customers. This led to a very good year not just here, for most companies, but around the world and in North America in particular. eMarketer estimates that ecommerce sales reached a whopping $3.914 trillion in 2020.
What the ecommerce industry needs to know about how consumer attitudes and behaviour are evolving is a crucial element to future success. But as new demographics of online shoppers emerge, this sets the stage for difficult, interesting and important questions. While as merchants we may know to varying degrees our customers, do we now know what those customers think? Where do consumer attitudes stand right now? And how do these attitudes and spending patterns vary between countries, ages, and genders?
One of the most extensive and revealing in-depth studies has been conducted by the ecommerce systems provider ClearSale, which partnered with Sapio Research to answer these questions and more. Whether your target buyer is here at home, or a 60-year old American women or millennials in Mexico, this research gives us new information on topics like:
• Why people shop online
• How important security is to your market
• What your customers think about ecommerce fraud
This report, along with insights from ClearSale partners, provides deep insights on consumer behaviours and attitudes on how to build a better, more secure online shopping experience that delivers precisely what customers want.
2021 Global Report on Consumer Behaviours
• The shift to online shopping will last beyond 2020 for 20 percent or more of global consumers
• Merchants should worry more about false declines than fraud; for every $1 in losses due to credit card fraud, merchants lose $13 to false declines.
• High frequency/high spending shoppers are more likely to shop with overseas merchants – 69 percent+
• Only 40 percent of ecommerce shoppers have their credit card within easy reach while shopping, so merchants should welcome mobile wallets and other payment options.
In everything from openness to mobile shopping to the likelihood of boycotting a site after a false decline, there are distinct differences between each country’s shoppers that merchants should know and reflect in their online store.
Age and sex influence risk aversion in online shopping. In pursuit of a good deal on an item, 35 percent of men are willing take more fraud risk. The cut-off age for a high level of concern about fraud in online shopping is 55. And that’s just a small nugget from the bigger (and deeper) picture.
1. The Big Picture of Consumer Behaviours
The research revealed there are overarching trends and noteworthy items that apply to online consumers in general. Here’s what was learned by zooming out to look at overall consumer attitudes and behaviours with online shopping. Fifty-nine percent of respondents who shop online once or twice a week say they have been shopping more frequently in the last six months. Even infrequent shoppers are going online more often; among shoppers who only buy online once a month, almost 30 percent said they have shopped more frequently in the last six months. Only 14 percent of consumers are shopping online less often.
What are some of the reasons for these shifts? For those shopping online more often, people were staying out of stores and shopping from home during lockdown periods.
“In many ways, retail has been reinvented,” says Neil McHugh, Senior Principal Product Manager at Oracle CX (right, a ClearSale partner). “In the last six months, multiple studies have indicated five to seven years’ worth of growth in just the last four months in the ecommerce space.”
But what of those who are shopping less? Financial anxiety and soaring unemployment figures are a likely explanation for the 14 percent of respondents who are putting fewer items in their carts. Are these changes here to stay?
“These changes will shift back to some degree,” says ClearSale’s Senior Director of Marketing, Sarah Elizabeth (left), “But certain segments will find themselves with a permanent increase in ecommerce volume.”
Consumers have learned to love the convenience of online shopping – and delivery – for heavy and bulky items, as well as for non-emotional, everyday purchases such as cleaning products and beverages for example. This concurs with the results of a survey by McKinsey that showed projected growth in online sales of items like groceries, household supplies, over-the-counter medicine, snacks, personal care products, and tobacco.
Not all industries will see the same level of consumer behaviour in 2021. To gain some extra insight, we spoke with McHugh for deeper, industry-specific insights and predictions.
Consumer electronics is experiencing a huge explosion. “For a while, we were seeing some market saturation,” says McHugh. “People weren’t as worried about buying the latest or newest. But with the pandemic’s drive to ecommerce combined with everybody being home more, there’s an uptick in consumer electronics.”
Fashion and luxury are industries where consumers will expect more and more personalization. “But that means they’ll have to give more data,” adds McHugh. “So there has to be a certain confidence level there. But that can also help in areas like inventory and returns.”
Automotive is going to see a huge increase in B2B, according to McHugh: “There’s an incredible amount of green space in automotive B2B, and we anticipate it will grow exponentially over the next three years. So how do we ensure that B2B ecommerce clients are protected as well?”
Travel and airlines have been heavily impacted by COVID, but this ecommerce segment may see people deciding to use their loyalty points for other purchases. “People are looking to use their incentive points in non-travel ways,” adds McHugh. “So, there is some level of opportunity there for an ecommerce boost.”
How Consumers Are Shopping Today
Does your website suit how customers browse and buy from your store? Fifty percent of consumers are most likely to use a tablet or mobile phone when visiting your online store, so a bad mobile experience immediately impacts half your potential market. Can your customers pay the way they want to? Only 40 percent of ecommerce shoppers have their credit card within easy reach while shopping, so accepting payments via e-wallets and other methods can help keep more of those customers in the checkout flow.
In fact, alternative payment options have seen a boost in usage during the pandemic and may help speed up the transformation of some shopping experiences.
For example, the Halifax Wanderers, the Canadian professional team, is working with payment processing company Sona to develop an app with a rechargeable mobile wallet for in-stadium ordering. Ryan O’Leary, CEO of Sona explains, “Instead of waiting in line at halftime with everybody else, fans can grab their device, go to the mobile app, and order right from the stands. Then the food is brought out to them – no cash, no credit, no waiting in line.”
McHugh adds, “One of the big trends we’ve seen in ecommerce over the last couple of years is people want payment options. Just offering PayPal is fine for some, but not for everybody. So flexibility is important, while still being tight on security and fraud prevention.”
Easy, one-touch payment experiences are especially appealing to younger demographics, which is why it is important for ecommerce merchants to put themselves in customers’ shoes when developing their storefronts and identifying the right payment options to offer. However, with the increase in mobile wallets and m-commerce can come an increase in fraud risk, according to McHugh.
“People are conscious of security on their home PCs and laptops,” he notes, “but there isn’t the same mentality with mobile. And yet, people have their banking apps on there, their insurance app on there, their Amazon account – all these things that are tied together. And they’re not thinking about their data security.”
Fraud and the Consumer Experience
Sharing their precious financial information on the web is still a concern for online shoppers. A full 90 percent of respondents say security is very important to them when shopping online.
“People are looking for personalized experiences,” says McHugh. “But to have that personalized experience, you need to give people your information. So you can’t have a conversation about personalization in ecommerce without also talking a out fraud and security, because people are concerned about it.”
That concern directly impacts shopping behaviour. Seventy-nine percent of respondents would be more likely to buy online if the merchant had fraud protection and 46 percent would shop online more frequently if they were not afraid of fraud.
Reports of large-scale breaches and legislation like the EU’s General Data Protection Regulation (GDPR) have heightened focus on data privacy. As online consumers weigh the risks of online activity, fifty-one percent believe that fraud protection is more important than data privacy.
Interestingly, while 42.25 percent of respondents have experienced an incidence of online fraud, 78 percent say they feel “just as” or “a lot or somewhat” more safe shopping online compared to brick and mortar. While that might sound counterintuitive, most consumers have not had to bear the consequences of online shopping fraud – and therefore may have a false sense of security.
As Rafael Lourenco, Executive Vice-President at ClearSale notes, ““In a card not present transaction, the financial liability is on the merchant side, not with the consumer. In that situation, banks reimburse consumers easily. With brick and mortar transactions, the financial liability is on the bank or card issuer, not the merchant. Banks are less open to reimbursing consumers for transactions at brick and mortar retailers, as a card would have needed to be present for the transaction to take place.”
However, the security consumers may feel with online shopping is not all-encompassing. If you’re not a big brand name or one of their trusted sites, you’ll need to make it clear to consumers, upfront and center, that you take their data privacy seriously. For merchants, delivering on this promise of fraud protection comes with a catch-22: Stronger fraud protection often means more legitimate orders are falsely declined. And false declines bring costs to the merchant that go far beyond just the loss of the transaction.
False Declines Come at a High Price for E-Tail Merchants
Most automated fraud programs are built on fraud scoring and fraud filters designed to catch and auto-decline any order the program thinks might be fraudulent; we describe the process here. But research shows this cure may be worse than the disease.
Up to 90 percent of declined transactions are actually legitimate orders. This means an enormous amount of revenue is lost due to over-zealous fraud programs. In fact, for every $1 in losses due to credit card fraud, merchants lose $13 to false declines.
And that’s just the tip of the iceberg. Merchants often take another hit in the way consumers react when they are falsely declined. Thirty-nine percent of respondents say if a merchant declines their payment, they will never place an order with that merchant again. And 28 percent say they go to social media to express their displeasure, potentially causing irreparable damage to the merchant’s brand name.
“False declines cost merchants more than lost order revenue,” explains Lourenco. “They create a negative customer experience and can drive customers away for good, so merchants lose lifetime customer value.”
Merchants must balance site security and fraud protection with the need to make their online shopping experience as frictionless as possible. Customer experience is a key differentiator for online merchants, and false declines are just one of the factors that impact how consumers feel about shopping on your site. End-to-end protection against a broad spectrum of ecommerce fraud can protect your revenue and serve your customers better. Now that we’ve seen the big picture, let’s look at more segmented data and dive deeper into precisely what your market thinks.
2. Consumer Behaviours Online by Spend
The good news is that when it comes to online spending, shoppers spread the wealth across categories. Whether they spend $2 a month or $1000, consumers are equally likely to make online purchases of beauty supplies, books, electronics, fashion, home goods, pet supplies, and sporting goods/leisure.
Unsurprisingly, the smallest category right now is travel. Keep in mind this metric doesn’t consider income – only how much people spend online. Most people who spend a lot online do so frequently: once or twice a week. Only 10 percent of big online spenders limit themselves to shopping online once every few months.
Does geography play a role in who spends the most? For big spenders, U.S. and Mexico top the charts, followed by Australia and Canada, with the U.K. trailing.
Expectations for these consumers have been set by the seamless online shopping experiences they’ve had on sites like Amazon. Once consumers have seen one-click checkout, personalized product recommendations, shipping time visibility and other features, they notice the difference when these features aren’t offered.
In essence, ecommerce merchants must ensure that every aspect of their customer’s experience, from site speed to filtering options are intuitive, pleasant, and convenient.
As O’Leary of observes, another must-have for a positive customer experience is speed and reliability of transaction processing: “Merchants need current technology that’s going to make it faster for consumers to pay, and a level of support and training on how to use that technology.”
Where and How Consumers Shop Online (by Spend)
Because high spenders are old hands when it comes to online shopping, they also feel more comfortable online shopping in general, and they extend that comfort level to buying from overseas merchants. Those spending $260U.S. or more had the most confidence in overseas merchants:
No matter where in the world you operate, 52 percent of consumers order from both overseas and local websites. This means that for half of your high-spend customers, the origin of your site is not the most important factor.
Fraud and the Consumer Experience
You would expect a close correlation between the amount spent online and concerns about fraud and data privacy, but our findings reveal a mixed, and sometimes conflicting, picture. As consumers spend more, their concern about fraud increases – but their concern about data privacy does not.
The lure of a low price seems to be one reason for this conflict. 46 percent of respondents say getting a good deal on quality items is more important than a secure website. (And yet, 89 percent of those same people say security is “very important” to them when shopping online. Evidently, it’s only important until it costs
them money.) Only 26 percent of the low spenders would take the risk for a good deal. Logic would tell us that those with the lowest amount of money to spend would be more interested in getting a good deal, no matter what. But in fact, it’s the opposite. Lower spenders are willing to walk away from a great deal if the website doesn’t give them confidence.
Why are people less concerned about data privacy as they spend more? It can likely be explained by the “boiling frog” effect: Put a frog in a pot of boiling water and it will immediately jump out – but put the frog in a pot of cool water and slowly increase the temperature, and the frog won’t notice it’s slowly boiling to death. Similarly, slowly ask people for small bits of information over the course of many years, and their inner alarm never sounds.
Lourenco explains: Because higher spending/frequent shoppers have typically experienced positive service levels across multiple online merchants, they have a low tolerance for what they perceive as poor treatment. 45 percent of high-spend ecommerce shoppers say they would complain on social media after a false decline, and the same percentage would never shop with that merchant again. Shoppers on the lower end of the spending scale seem much more forgiving: Only 21 percent would go to social media. However, that may also be because these shoppers may have less of an online presence–and in fact these consumers may very well be telling their friends and family in person about their poor treatment.
“Had you asked people in the past if they would be willing to share online their family’s information, home address, their geo location at all times, their circle of friends, and all their likes and dislikes, the answer would clearly be no. But when each piece of information is shared, not at once, but accumulated across individual posts, restaurant check-ins, likes, etc. it doesn’t feel as intrusive.”
3. Consumer Online Shopping Behaviours
Baseball, apple pie, and “add to cart”: Americans shop online most frequently, followed by the U.K. But America is big, and its ecommerce market is complex. The U.S. and U.K. are trailed by Mexico, Canada, and Australia when it comes to their monthly average spending.
Where and How Consumers Shop Online by Country
The market may be international, but U.S. and U.K. consumers tend to stick fairly close to home. The availability of a large variety of products at a range of price points from domestic merchants may explain why consumers in these regions are the least likely to order from overseas. Consumers in Mexico, Australia, and Canada, on the other hand, have no such qualms about overseas shopping.
There are also significant differences in what device people use to shop. Mobile shopping has made much more headway with U.S. consumers than Canadian ones: 63 percent of U.S. consumers are most likely to use a mobile device when shopping online, compared to only 39 percent of Canadians.
This variance is not due to a lack of access, however. Smartphone penetration in Canada currently stands at 83.14 percent, not far behind the United States’ rate of 89 percent. Check the Canada Profile: The Guide to Ecommerce in Canada (opposite page). Explore some of the challenges involved with ecommerce in Canada, the risks of online payment fraud and some tips for preventing fraud, while selling into Canadian market.
Australians show a similar reticence to Canada. Despite a smartphone penetration rate estimated at close to 80 percent in 2020, only 25 percent of online sales in Australia were being made through mobile devices in 2019, and 63 percent of Australians still prefer desktops or laptops for ecommerce transactions.
Fraud and the Consumer Experience by Country
Interestingly, consumers in Mexico and the U.S. are aligned not only in the amount they spend online, but in their perceptions toward security. 40 percent of Mexicans and 28 percent of Americans think retailers are “overly cautious” when it comes to data security. This metric in every other country is in the teens. This difference may be attributed to a common belief among Mexican and U.S. consumers that online shopping is “a lot or somewhat safer” (46 percent for Mexico and 45 percent for US). Consumers in Australia, Canada, and the U.K. are only at 25 percent, 28 percent and 27 percent respectively.
They’ll still perform a certain amount of due diligence, however: 64 percent will read website reviews before shopping (U.K. shoppers are least likely to do this – only 34 percent will bother looking up reviews.) The question is: What amount of due diligence on behalf of the merchant is acceptable to the consumer? Americans, for one, value convenience but are willing to accept some electronic monitoring and assessment as they shop if it keeps them safe. Most even say they’re OK with using two-factor authentication.
In the U.K., ecommerce merchants are particularly cautious when it comes to data security, in no small part due to the massive potential fines for GDPR violations.
“In Europe, fraud and personal protection have become mandated by law,” explains McHugh. “And if you break that law, your company will get fined millions of dollars a day. So merchants will be diligent no matter what.”
Requiring registration prior to checkout, however, is where many shoppers draw the line. If you ask Australian or American shoppers to create an account, they are more likely to jump ship (or abandon cart). Mexicans are pretty unflappable about a fraud experience, but false declines? Not so much. As merchants contemplate accommodating additional payment methods, it’s important to keep in mind the heightened regulations as a result of the EU’s General Data Protection Regulation (GDPR). Effective in September of 2019, the Payment Services Directive 2 (PSD2) of the GDPR requires that Strong Customer Authentication (SCA) be applied to all electronic transactions in the European Economic Area (EEA).
And what of false declines? Americans are fairly understanding about the whole thing. Those polite Canadians, though? They take serious offense when falsely declined and are much more likely than Americans to boycott a retailer after a false decline or fraud experience. Australians are also likely to hold a grudge.
4. Consumer Behaviour by Gender
Despite women often being portrayed as more frequent shoppers, men actually take the lead when it comes to ecommerce: Men shop online more frequently, and that frequency has increased more for men (44 percent) than for women (36 percent).
By a significant margin (14 percent), men are more confident in making purchases from overseas merchants: In pursuit of a good deal on an item, 35 percent of men are willing take more risk than women with a site that doesn’t offer top-flight security measures: Men also spend more during their online shopping forays; over 50 percent spend over $65 per month.
Previous research by Sapio revealed where men’s online dollars go: Men make more technology-based purchases than women (49 percent vs. 31 percent).
Because men are a bit more cavalier when it comes to ecommerce fraud, they also have less patience for fraud prevention efforts and are much more likely to take to social media if a victim of a false decline. Women, on the other hand, are more cautious – and much more forgiving if an ecommerce merchant’s caution causes them to be falsely declined. That being said, more than a third of women would still post a negative comment on social media, so merchants should still make sure their fraud prevention is as accurate as possible while still being robust.
5. Consumer Online Shopping
While country and gender showed little variation in how people buy online, age segmentation reveals significant differences. Notably, people over the age of 55 are much less likely to buy beauty supplies online and are much more likely to buy home goods. This may be explained by the fact that people over the age of 60 are less likely to buy decorative cosmetics or fragrances via traditional shopping, so it’s no surprise this would affect online numbers as well.
In general, people over 55 shop online less frequently and stick to local sites. This is not particularly surprising, as personal computer use only became widespread in the mid-1980s: Older members of the 55+ group may not even have a computer or may have only obtained one after retirement. Because of this unfamiliarity with the digital landscape, only 31 percent of the 55+ group feel “very confident” purchasing from overseas merchants. In fact, 29 percent feel very unconfident. Conversely, when asking people under 55, only 12 percent do not feel confident shopping overseas.
In short, any international merchants looking to woo the 55+ market has work cut out for them when it comes to making sure sites are both secure and re-assuring.
Fraud and the Consumer Experience by Age
In keeping with their cautious natures, older consumers embrace merchants’ efforts when it comes to fraud prevention and data security. Only 10 percent of shoppers over 55 think retailers are “overly” cautious with data security, as opposed to 30 percent of shoppers under the age of 55.
McHugh agrees: “Ecommerce sites catering to older consumers need to not only make their site ultra-secure, but also should spend time/money to ensure their site looks reputable as well. “Younger consumers have grown up with a comfort level around having personal information online. Older folks grew up in an age of privacy, so security is a big deal. In general, older consumers tend to be direct with their feedback as well.”
“Older consumers may have a longer standing relationship with certain merchants, so being flagged as a false decline may feel like a betrayal. ‘How dare you, I’ve been your customer for 33 years!”
Digging deeper in the reasons why, O’Leary of Sona notes there is a difference between fraud (which can happen to anyone and is a known possibility when doing business online) and a false decline (which feels more personal, especially if it comes from a long-standing merchant).
There is a surprise in this data, in that older consumers are actually more forgiving than the younger cohort if fraud does happen; only 5 percent would write off that retailer. There is also a marked difference in the likelihood to make a negative social post.
How Merchants Can Keep Consumers Happy and Safe
Now that we’ve taken you inside the minds of consumers, what should you DO with this information? Unless you are targeting a very narrow audience (i.e., Mexican men under 55 looking for a great deal on a fragrance purchase), the data confirms that for a majority of likely shoppers on your site, fraud protection will be among their top concerns – and therefore should be yours as well.
Regardless of the markets you serve, there are best practices you can apply that will help you find the sweet spot between reducing friction in transactions while protecting against fraud:
• Be cautious when it comes to automated fraud filters. Not only do they fail to account for human variance (for example, your best customer shopping while on vacation in a foreign country), but if they are layered incorrectly, they may cancel each other out.
• Site design and functionality can make a massive difference not only to the customer experience, but to the perception of security. Even something as simple as letting customers know they’re going to a secure checkout can help allay fears.
• Once a customer enters their shipping and billing information, give them the opportunity to save that information with a secure password. It will make their future shopping more secure while also saving them time and effort.
• Manual review of flagged orders can vastly reduce the risk of costly false declines.
The key is to partner with a fraud protection company who is customer-focused and can make the identity verification process fast and pleasant.
It’s also important to make sure you work with a fraud protection partner that understands the concerns and motivations of your distinct customer segments and knows how these attitudes manifest in behaviour. Fine-tuning your customer experience to the preferences and expectations of your shoppers makes fraud prevention much more accurate and less likely to harm that experience.
For more information, or to obtain the full 2021 Global Consumer Behaviour Analysis report, contact ClearSale at www.clearsale.com
This report is largely based on the report and is used with credit to the authors and the contributors.
Rafael Lourenco is Executive Vice President and Partner at ClearSale, a card-not-present fraud prevention operation that helps retailers increase sales and eliminate chargebacks before they happen.
Sarah is a Senior Director of Marketing at Clearsale and has developed deep knowledge about fraud prevention.
Ryan O’Leary is CEO of Sona.
Neil McHugh is Senior Principal Product Manager at Oracle CX.