eCommerce landscape shift
In terms of geography, mature markets such as the USA, UK, Japan, Germany and France will continue to see healthy growth, with Compound Annual Growth Rate (CAGR) expected to increase to 6% in the UK and 14% in the USA. However, the biggest spikes in growth will be seen in emerging markets such as China, India, Russia, Brazil and Mexico: CAGR is predicted to increase to 17% in China and 30% in India. Despite what we see in GDP in these countries, eCommerce is thriving.
Cards have had a continual strong-hold as the major payment method in the global eCommerce market, but alternative payment usage has continued to rise, and the next five years will see this trend continuing – and even overtaking – card usage. Alternative payments are set to claim 55% of eCommerce turnover by 2019. However, this doesn’t mean that cards will become redundant. They are the payment instrument behind some of the more prominent alternative payment methods such as eWallets where customers simply prefer to aggregate choices into a wallet. Alternative payment usage is on the rise in every market. North America, long known for its card preference, is set to have the largest shift towards alternative payment method usage. In 2014, 28% of eCommerce turnover was made up of alternative payment transactions; in 2019 this will be 35%.
Drilling down into specific payment types, eWallets will become the most popular payment method in the future: 27% of global transactions will take place using eWallets, with cards pushed to second place at 24%.
As well as offering consumers’ preferred method of payment, consideration needs to be given to the ease of use and accessibility of using these payment methods on different devices – whether that’s a smartphone, tablet or wearable device. There will be 11.6 billion mobile-connected devices by 20201. And 23% of the $2.4 trillion eCommerce market is expected to come from mobile devices.
Evolving billing models
For the digital content sector, understanding the shift in consumption and billing models is critical. The models that offer increased control over finances, reliability, security and the option to make spontaneous purchases are winning among consumers. Subsequently there are monetisation opportunities for content providers through different payment methods instead of the traditional pay-as-you-go such as subscriptions, micropayments and metered billing. However, they are all at different stages of adoption and so an evaluation of what works best for their customers and their business is needed.
The current usage levels for the following billing models are all set to increase by the following percentages: account on file (24% to 32%), subscription (11% to 19%), usage-based (13% to 25%), advertising (5% to 20%), personal information (4% to 14%) and micro-payments (15% to 29%).
Where consumers get frustrated, is when the user journey is poor, personalisation is intrusive, pricing is confusing and it just feels like poor value for money. As a result we are seeing specific demands for how these models evolve, including increased security of personal information, improved ability to avoid overspending and easier to understand transactions.
The preferences are also affected by the geography of the customer, and the type of content they are consuming. For example, 65% of consumers in Brazil would be interested in sharing personal data for free access to content, compared to just 32% in Japan. And 61% of social media subscribers would share their birth date for extra content, compared to 40% for publishing.
When thinking about subscriptions, there can be some customer resistance. 58% of consumers only want to pay for what they use, 39% do not want to commit to a long-term service and 25% are concerned about sharing personal information in the long-term. Subscription is a model that many consumers are familiar with, and it is on the rise, but there is growing interest for metered and micro-payments as customers strive to control what they pay for depending on what they use.
What this insight shows is customers want convenience, transparency and the option to say no or opt out altogether, whenever they decide. By understanding these consumer preferences – whether that’s for payment methods, billing models or the overall experience – and using this insight to evolve the offering, digital content businesses will be able to capitalise on this predicted eCommerce growth.
"Consumers are demanding more personalised, flexible, immediate and relevant experiences from their vendors, which is driving the rise in subscription models. However, successful vendors make sure they understand their customers in order to build memorable subscription experiences that drive loyalty and long term relationships. Subscribers are in control of what, when and how they gain access to the services available. Companies that don't get the payment methods right fall at the first hurdle. Working with the right partners can therefore be critical for commercial success".
John Phillips, GM EMEA, Zuora