The apparel manufacturer is stepping up its digital marketing in hopes of connecting with a younger audience.
Credit cards dominate, but online retailers’ interest in alternatives is strong.
Credit cards continue to dominate how shoppers pay for the merchandise they purchase from web merchants, but more online retailers are taking a closer look at alternative forms of payment such as cash, deferred billing and e-checks, say online -merchants participating in the latest -Internet Retailer survey.
Most web retailers have a payments program that`s grounded in accepting major credit cards--American Express, Discover, MasterCard and Visa, the survey shows. 85.2% of all chain -retailers, catalog companies, consumer brand manufacturers, virtual merchants and consumer service companies taking part in the survey say that credit card -transactions account for more than 90% of their total sales. In contrast, only 9.4% report that credit cards represent less than 80% of their total sales. Among chain retailers, 83.2% say that more than 90% of all online sales are paid for by credit card, compared with 82.1% for catalogers, 88.5% for virtual merchants, 86.6% for consumer brand manufacturers and 63.7% for -consumer service companies.
Discounts and fees
But the Internet Retailer survey also shows that web retailers vary widely in the credit cards they accept and the discount rates they pay transaction -acquirers. Most web retailers are also paying additional monthly service or transaction fees to their payments -processors and increasing the size and scope of their fraud -prevention programs.
The survey was e-mailed in early October to all subscribers of IRNewsLink, the magazine`s newsletter, and 276 responses were collected and analyzed using web survey technology by WebSurveyor, which has partnered with Internet Retailer in a series of monthly surveys of the e-retailing industry. The -survey found that while almost 60% of all web -retailing -organizations pay a discount rate that -averages between 2% and 2.9% per transaction, 22% pay a lower discount rate of 1% to 1.9% while a small group, 2%, pays a credit card discount rate of more than 5%. In addition to a discount rate, 81.2% of retailers pay their third-party processors an additional fee such as a monthly service charge or per-transaction fee.
The results of the survey clearly demonstrate that web merchants are accepting a wider variety of credit cards to attract shoppers and give customers more options to pay. 72% report that they accept all four of the major cards--American Express, Discover, MasterCard and Visa--compared with 9.9% that accept only MasterCard and Visa. The use of major credit cards is widespread, but only a small number of retailers are entering into co-branding relationships or issuing private label cards. Only 3% of the online retailers in the survey issued both co-branded and private label cards compared with 88.3% that offered neither.
Major credit cards are the -preferred method of payment by web -retailers because credit cards are widely accepted and used by consumers as an easy and convenient way to make an online purchase. But identity theft and other forms of criminal activity that result in credit card fraud are often cited by -payments processing research firms and others as one of the chief threats to the overall success of business-to-consumer e-commerce. As a result, web merchants are increasing the time and resources devoted to fraud prevention.
Automating fraud prevention
For instance, the Internet Retailer survey reveals that 55.4% of web merchants now have an automated fraud prevention program in place versus 44.6% that don`t. In general, automated risk management systems have the ability to flag unusual orders and payments transactions and cross-check a shopper`s billing and shipping address. But the survey also notes that 81% of chain -retailers, catalogers, virtual merchants, consumer brand manufacturers and consumer service companies are using additional manual procedures such as calling a customer about an unusual transaction to identify possible incidents of card fraud, compared with 19% that don`t.
Credit cards are a widely accepted form of -consumer -payment that offer retailers and -cardholders numerous ways to work with financial institutions, processors, card organizations and others to troubleshoot and resolve potential transaction problems, including fraud. But not every consumer who shops online -carries or qualifies for a credit card and many who do have cards prefer not to use them online. As a result, web retailers are taking a much closer look at offering their customers new alternatives to credit cards. 50.6% of online retailers taking part in the study now offer their customers -alternative payment options. Of the -retailers that do accept alternative -payments, 10.4% accept e-checks and cash, c-ompared with 10% that accept cash only, 13% that accept e-checks only, 4.8% that accept e-checks, cash and deferred billing and 4.8% that will take cash and offer deferred billing.
Overall, according to the Internet Retailer survey, alternative -payments represent only between 1% and 2.9% of the total sales of 21.7% of all respondents versus 11.7% that say alternative payments are about 3% to 4.9% of all sales and 10.9% with alternative payments that account for 5% to 9% of all sales. Interestingly, the survey reveals that consumer service companies are among the biggest beneficiaries of -offering alternative payments. 18.2% of consumer service companies responding to the survey say that 20% or more of their total sales are paid for by a method other than a credit card, compared with 8.8% of chain retailers, 10.7% of catalogers and 5% of virtual merchants.
But over time the survey -suggests that web retailers do view -alternative payments as a way to attract more customers without credit cards, appeal to shoppers who want to pay at a later date or just want to pay by cash or e-check. More than one-half of all web merchants taking part in the study, 52.7%, respond that it is "very important" or "important" for a business-to-consumer e-commerce site to offer an alternative payments program compared with 47.3% who don`t plan to offer any -alternatives or who consider alternative -payments "-unimportant." Among consumer brand -manufacturers and chain retailers, a merchant segment that`s invested heavily in stores and point-of-sale systems that can accept numerous types of payments, -offering more forms of alternative payment is an emerging priority, the survey found. 60% of consumer brand -manufacturers and 58% of chain retailers in the survey say offering e-checks, cash and deferred billing is "very -important" or "important," -compared with 56.5% among virtual merchants, 50% among catalogers and 36.4% among consumer service -companies.