The Convergence of Payments & Delivery

While working on Afterpay's Express Checkout strategies, I saw how bringing checkout forward into the cart, mini cart and product page had such a profound effect. This was a multiplier in some merchant cases and even a small c. 10% lift resulted in a significant low-cost acquisition of new customers. This was a funnel equation. The higher you are in the purchasing funnel, the more customers exist there. Enabling checkout earlier simply taps into a larger customer base - and it works.

Conversely, it was always thought by merchants as lowering AOV by preempting checkout. The data never displayed this. Enabling a payment to happen earlier may be more convenient and immediate, but it doesn't change what or why someone is shopping.

So I got to thinking ...

Traditional checkout is incredibly painful. Removing friction here is almost magical when it comes to increasing conversion rates, frequency and customer acquisition as an express or accelerated checkout proves. Average checkouts today are 5 steps and over 40 input fields. This is true low-hanging fruit of e-commerce as it's UX/UI driven and there are so many ways for you to reduce input fields and steps in checkout. If you aren't working on this and your digital ad spend is steadily increasing alongside a declining ROAS, you better stop right now and get to work.

But, this doesn't solve the number one and three reasons for cart and browse abandonment: shipping cost and shipping time. If payments and BNPL were the new thing in e-commerce, delivery is the new payments.

Looking at top Australian e-commerce merchants (I used the All Star Bash nominees):

• They all offer standard and express shipping
• They all have a free shipping threshold, which has been decreasing (c. $65)
• Some even offer free shipping as Express or a separate threshold
• 1/3 offer a same day delivery, about the same offer BOPIS or BOSFS

In the future, customers will want their orders even faster. While they have a greater propensity to pay for an expedited service today, that propensity will follow a similar trajectory as the free shipping threshold. There are a couple solutions for this problem, the first is in accelerating your checkout to achieve top-of-funnel effects and optimising your growth metrics: acquisition, conversion, frequency, and AOV. The second is in reducing your overall checkout steps and inputs to achieve better bottom-of-funnel results.

The third is delivery.

Adding capacity to "Buy Online Ship from Store" (BOSFS) model results in accessing additional inventory and sees tremendous lift across an omni-channel merchant with 50-100 or more store locations. But that doesn't help the P&L.

What does help the P&L is more of a "Buy Online Deliver from Store" (BODFS) model. This brings same day delivery costs to an equivalency against parcel post on a 3km, 5km and up to 10km delivery radius. It also results in a fantastic customer experience with less carbon footprint, promoting optimised stock turns and accessing complete stock holdings. I know many merchants in the Australian marketplace as my teams managed delivery, integration and technical support to all market segments. I understand your ERP & logistics problems and also how to solve for them across your store networks.

What comes next is the convergence of payments & delivery.

About Mike Fowler

Mike is an eCommerce veteran, senior leader & growth strategist for some of Australia's best retailers. Formerly at Afterpay as Director of Merchant Services APAC, General Manager and founder of the growth team at Mosaic Brands (Noni B Group) developing and launching 9 iconic multi-category online marketplaces, including: Noni B, Rockmans, Millers, and Rivers, as well as Head of Digital at Blue Illusion. Member of the Australia Post Customer Advisory Group with more than 15 years experience in helping retailers leverage eCommerce, CX, payments, & logistics opportunities to maximise growth.