I can still clearly remember the ghostly picture in April 2020: all the streets were completely empty. The major shopping streets: deserted. The coronavirus pandemic has moved people out of stores and in front of screens. Many have discovered online shopping for themselves during this time. A survey by Postbank showed that 35 percent of Germans are shopping online more this year than before. I believe fears concerning the coronavirus, combined with accelerated digitalization, will push this positive trend even higher. In any case, online retail is feeling the effects more and more clearly. The German E-Commerce and Distance Selling Trade Association (BEVH) estimates revenues in German online trade at 72.6 billion euros for 2019 and it forecasts another jump to 80 billion euros for 2020. When I look at our customer’s transaction volumes today, this forecast seems quite realistic.
This rise primarily requires popular discount events like Black Friday and Cyber Monday. And not just that. Some online retailers are trying to outdo the competition by starting their campaigns in October, while the shopping high will continue to the days after Christmas thanks to voucher sales and returns. Soon, the peak season in digital business could account for a quarter of the year’s revenues. This is an important signal to merchants that they should prepare for longer intense periods, from order checks through to returns management and the handling of outstanding receivables.
Black Friday business continues to pick up
At Arvato Financial Solutions, we draw up annual forecasts for the busy phases in online business together with our partners and prepare our customers accordingly. The popular Black Friday and the intense weeks before and afterwards are prime examples of the peak season in e-commerce due to their high revenues. Last year, we saw 90 percent more transactions than in 2018 – and that was just on Black Friday itself. Even the day before, we registered about 2,000 orders per minute. On the day after Black Friday, we had 200 percent more manual order reviews, i.e. high-risk orders, which we manually checked for our customers in case management. For 2020, we expect that this strong growth trend will continue. And by a clear margin.
Online merchants therefore have every reason to be optimistic. But the immense increase in revenues is also accompanied by substantially more fraud attempts, payment defaults and returns. This year, merchants will likewise feel the additional costs of these processes much more strongly and for a longer period of time. Peak season will draw on at least until into the first quarter of 2021.
Perfectly and quickly handling all incoming orders during these intense phases will be key. Ideally, this can be achieved with an agnostic business automation platform offering access to all financial services along the order-to-cash value creation chain.
Customer service first: buy first, charge later
Payment on open invoice represents another challenge that is undergoing a veritable revival thanks to shopping behavior affected by corona. Customers want to see the goods before they pay. This is particularly the case in the fashion sector, where clothing is tried on and frequently returned. Payment on open invoice is therefore all the more popular among consumers, sometimes with the option of payment by installments for expensive fashion articles.
However, these prolonged payment periods tie up retailers’ liquidity. At the same time, they need to keep the due dates in mind, and in cases of doubt send reminders and collect receivables. So, an increased risk and the extra costs are part and parcel of running Black Friday business.
In view of the forecasts for longer and more intense peak shopping phases, I recommend any e-commerce company to work with an experienced financial service provider. They can keep a close eye on the relevant processes, automate them and reliably handle them – even at peak times. This includes processing return debits and credit card chargebacks, for example.
Would you like to learn more about peak seasons and Black Friday?
You can soon read more on the topic on this blog and on our website. Plus, you can look forward to an expert talk as a webinar as well as more fascinating content. During the talk, I discuss the challenges and solutions related to peak shopping periods like Black Friday with my business partner Jan van der Holst from Adyen. On that note, stay tuned!