NEW YORK, Aug. 14, 2019 /PRNewswire/ -- New research launched today by global payments provider Klarna reveals that online SME retailers in the US might be small in size but are increasingly open to new technologies and innovation to help drive growth over the next year.
The research - conducted across 100 US SME decision makers at online retailers in 2019 - shows the US's SMEs understand the need to embrace flexibility and innovation. Over the next 12 months they plan to prioritize investing in flexible payment options (47%) and e-commerce capabilities (45%) to meet consumer demand for a frictionless shopping experience.
SMEs eager to cater to the 'want it now' generation, but must overcome blockers to new tech adoption
Despite their ambitions, the research shows online retail SMEs face a myriad of challenges preventing them from fully embracing innovation. Nearly half (40%) said operational size was the biggest barrier to adopting new payment options, meaning they feel too small to benefit from the opportunity.
Given market uncertainty and fluctuating consumer spend, it's not surprising that some smaller merchants are cautious with their cash. They may be able to react faster to market demands when it comes to style, designs and stock, but they have a smaller financial buffer to bounce back if operational finances get tight. So, any investment has clear and significant impact on their bottom line.
But SMEs who let this stand in the way could be damaging their bottom line in the long run, especially given 49% said competition from bigger players and online giants is the biggest external challenge currently impacting SME online retailers. Competition from other small online retailers (31%) and lower consumer spending (33%) are also keeping retailers up at night.
Enhanced customer experience is key to boosting loyalty
Encouragingly, the research shows that online SME retailers are thinking ahead and have plans in place to boost customer experience within their businesses over the next 12 months. As well as recognizing the potential of innovative technologies, they also understand the importance of an omnichannel presence, with over two thirds (68%) believing that physical outlets help experience and loyalty.
Yet whilst customer loyalty remains stable, the research shows businesses are losing more customers than they should during the checkout process; one in four (24%) visits result in a dropped basket - leading to a loss of vital revenue.
Laurel Wolfe, VP Marketing, Klarna US commented: "Shoppers today demand a frictionless buying experience from browsing to checkout, so it's encouraging to see online SME retailers looking to bring new technologies into their businesses to enhance customer experience.
Introducing new tech, like Klarna's installment payment option, is an investment that will provide benefit in the long run - ultimately leading to greater sales, higher basket value and increased customer loyalty. Being small in size doesn't have to mean small-picture thinking. SMEs have the advantage of agility, and are often better equipped to integrate new technologies than their larger counterparts."
Download the report: www.klarna.com/us/business/independents
Klarna's top tips for embracing innovation and staying ahead of the game:
1. Put faith in flexibility
Flexibility and speed are the new differentiator. In a rapidly evolving and competitive retail market it's what can set businesses apart. Our research shows that online retail SMEs are worried about the cost of introducing flexible payment options and fear that they'll lead to an increase in returns.
However, alternative payment methods shouldn't be associated with spiraling costs and logistical nightmares. Klarna's research shows that pay later transactions are more cost effective for retailers than card payments, by creating an uplift in sales volume and increased customer loyalty.
2. Lean on expert partners to fill knowledge gaps
The very nature of being a small business means having less members of staff on the ground. Whereas larger businesses may have a whole department responsible for looking after transactions, for smaller retailers it may fall to an individual - or to no one at all. Online retail SMEs should look for external insight and lean on partners to help easily integrate innovative payment methods into their checkout processes. This will free up their time to concentrate on other things.
3. Investment is key for growth
Given the wider market uncertainty and fluctuating levels of consumer spending, it's not surprising that some smaller merchants are cautious with their cash. And when it comes to investing in new technologies, our research shows that many online SME retailers feel like they are too small to benefit from investing in new technologies.
But the value of embracing innovation speaks for itself. Innovation can help advance the business goals of any organisation - regardless of shape or size. It's about having the confidence to take the leap of faith. With a fifth of visits ending in dropped baskets for small retailers, not investing in their e-commerce ecosystem will likely damage the bottom line in the long run.
About the research:
Survey of 100 US SME decision makers at online fashion retailers conducted by Censuswide in May 2019.