E-commerce challenges faced by retailers during the holiday season and how to overcome them

New report by payment giant PayPal looks at how merchants can reduce shopping cart abandonment, stay ahead of consumer trends and prevent online fraud

With global digital revenue growing 50 per cent year-over-year to S$1.48T in November and December last year, businesses should identify the challenges of the holiday shopping season so that they can devise strategies to maximise opportunities. PHOTO: GETTY IMAGES

Last year, retailers worldwide experienced phenomenal growth during the holiday season. Global digital revenue grew 50 per cent year-over-year to US$1.1T (S$1.48T) in November and December 2020.

The outlook for the upcoming year-end sale season is promising, as the upward trend in consumer spending looks set to repeat itself. As uncertainty looms over the state of Covid-19 infection rates in the coming months, consumers will continue to forgo leisure travel and large gatherings, and direct their spending towards festive season gifts and personal purchases.

Global e-commerce retail sales are projected to grow to US$4.891T (S$6.617T) in 2021 - an increase of 14.25 per cent from the previous year - indicating strong consumer demand this year.

To maximise these opportunities, businesses first need to identify the challenges that lie ahead, and devise strategies to overcome them.

Shopping cart abandonment is a problem that plagues retailers all year round - but cart abandonment rates are particularly high around the holiday season. December is the month with the highest level of shopping cart abandonment, followed by November and January, as shoppers flock online to browse Christmas gift ideas, the Black Friday sales and the January sales. A failure to reduce shopping cart abandonment at this critical time of the year can result in a significant loss of revenue for retailers.

To address the issue, merchants need to find ways to prevent visitors from exiting their site before a purchase is completed, and to motivate cart abandoners to return to the site and complete their purchases. PayPal's 2021 Digitize and Thrive Report outlines a range of strategies - including customer support, personalisation and retargeting tactics - that can help merchants reduce shopping cart abandonment.

Understand the continual shifts in consumer trends

Another challenge retailers face is the inability to keep up with fast-changing consumer preferences. Since the start of the pandemic, there have been dramatic and continual shifts in consumer trends, as shoppers have had to adapt their shopping behaviour to an ever-changing "new normal".

Merchants need to have their fingers on the pulse of consumer behaviour, and align their inventory plan and holiday strategies with emerging trends.

The PayPal report offers valuable insights that businesses can draw upon to make informed decisions about their product mix, inventory and marketing.

The report outlines recent trends, such as the demand uptick in the fashion and luxury goods sector. This shows that shoppers may be looking to revamp their wardrobes as they gradually return to in-person activities. For fashion retailers, this can indicate a need to stock up on, and feature trendier pieces - rather than work-from-home outfits - more prominently in their holiday campaigns to maximise sales.

The growth in online sales and payment activity during the festive season also presents an additional challenge for retailers: a rise in online fraud. Common types of e-commerce fraud businesses need to guard against include chargeback abuse, identity theft, clean fraud, affiliate fraud and triangulation fraud.

Actionable tips on how merchants can strengthen their fraud prevention strategy - such as utilising identity verification tools and partnering with a trusted payment provider - are included in the PayPal report.

For more e-commerce strategies to mitigate challenges and maximise sales during the upcoming year-end holiday season, download the PayPal Digitize and Thrive Report.

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