A Payment Method that Increases Sales and Reduces Cart Abandonment
This is a guest post by Chris Dolan, VP of Strategic Partnerships at Sezzle.
According to a study by SalesCycle, 78.4% of online carts are abandoned. Talk about missed opportunities!
The #1 reason cited for abandoned carts is unexpected shipping costs or timelines. Fortunately, if you’re reading this, you know ShipStation can help you solve those problems. The second most common reason for cart abandonment is price sensitivity, or sticker shock. When the shopper looks at the total tallied up in their cart they balk at the price and abandon the cart.
Adding a new type of alternative payment method – an interest-free installment payment plan – can help.
Limited Payment Options = Limited Sales
You may currently be missing out on more sales than you realize by not offering your consumers an alternative payment option. You can have great products, beautiful product pages, a well-designed website, and an effective marketing campaign driving traffic to your site, and still be missing out on potential sales when shoppers abandon their cart. Why are they leaving? Do you wish your conversion rate was better? Or your basket size was higher?
If you are hoping to reach millennial consumers and are only offering them traditional credit card payment options, this could be a significant driver of your cart abandonment rate.
It’s the Millennials!
There are some pretty surprising statistics around young adults’ payment behaviors and access to credit that create an opportunity for merchants. According to Bankrate.com, only one in three millennials in the United States have a credit card.
That number may seem hard to believe, but it makes sense when you consider the factors influencing the millennial generation. They came of age during a financial crisis and their worldview has been shaped by that experience. Even those millennials who do want to use a credit card may not be able to get one. One in five people between the ages of 23 and 27 have been declined for credit multiple times within a single year, according to a 2016 study by ID Analytics. The biggest factor limiting millennials ability to get credit is their credit scores. 67% of consumers under the age of 30 have a subprime or non-prime credit score.
As a merchant, if you are only offering traditional payment methods, you are missing the opportunity to convert a surprisingly large portion of young shoppers.
Point of sale financing solutions are a proven way for merchants to increase sales. You may recall the classic infomercial pitch “this item can be yours for just four easy payments of $XX!” It’s a classic because it works. However, most point of sale financing solutions have historically charged the consumer interest or fees, making it a potentially poor deal for shoppers.
Now, new fintech startups like Sezzle are creating payment solutions that allow shoppers to budget purchases over time, without the interest or fees. This creates a win-win for both merchants and shoppers. How does it work?
You can think of Sezzle as “reverse layaway” or “instant layaway” for eCommerce. Sezzle splits the purchase up into four equal, interest-free installments. Shoppers pay Sezzle 25% down at the time of purchase, and Sezzle pays the merchant the full purchase amount upfront, less a small processing fee. The merchant sends the item to the shopper right away and Sezzle then automatically deducts the remaining three payments from the shopper in biweekly installments over 6 weeks total.
Sezzle has partnered with over 2,000 merchants to offer this payment method and is lifting sales by 10% and increasing basket sizes by 41%. Shoppers get to budget their purchase over time while enjoying their item right away. Merchants get incremental sales and are paid upfront without taking on any risk. It’s a true win-win!