NEW YORK — Retailers like Adorama and Nordstrom are engaged in a delicate balancing act: They want to make the checkout as frictionless as possible, but they don't want to deprive shoppers of the option to change their payment method or open a new line of credit at the point of sale.
If the retailer doesn't strike the right balance, it may unintentionally push consumers away by making the payment experience either too streamlined or needlessly complex.
"What I think nobody has cracked is, how do you remove friction and still give choice? Meaning, how do I assume what you would choose as a payment method? How do I have that readily available and still give you the choice to say 'no, I need something else here'?" Frank Keller, senior vice president and general manager of merchant and payments for PayPal, said in an interview at the National Retail Federation's Big Show last week in New York.
PayPal is working on developing application programming interfaces that capture data that most card transactions do not, such as stock keeping unit (SKU)-level information, Keller said. Right now, this data is "very fragmented," he said. "And the idea is, how do we consolidate all of that, no matter how you paid?"
Some retailers have already found ways to collect this type of data and use it to determine how to treat each customer uniquely at the point of sale.
Some customers want more choices at checkout, such as an offer of buy now/pay later credit for a specific purchase. Others would prefer to keep the payment in the background. The challenge is determining which customers want which checkout experience.
"It all comes down to data … so that we know where you're shopping, how you're shopping, and when is the right time to offer you maybe a credit option that you don't normally have today," Daniel Crisologo, director of payments at Nordstrom, said during a panel discussion that Keller hosted.
Nordstrom offers the same payment options online and in stores, but it's important for the payment option to be "curated," so that the customer sees certain options only when it's appropriate, Crisologo said.
Nordstrom also uses its customer data to fuel a
Retailers are well positioned to gather data that can predict what a customer's next purchase will be, and offer alternative ways to fund that purchase or to keep that purchase within the retailer's ecosystem.
One example would be a customer buying a new camera or even just a new lens, according to Hani Batla, chief information officer and chief technology officer at Adorama.
"Now there's a data point we have on this person," Batla said. "Based on the lens you buy, we know what you're going to do with it. We know if it's a lens designed for landscapes, you're probably not going to sit in your apartment in New York City taking pictures of your dog."
Adorama can use this data to suggest outerwear, camping gear, or even a vacation package. This, in turn, allows Adorama to direct those customers to partners such as PADI, which offers scuba diving instructions. While this example is a referral instead of a separate transaction, Adorama expects this system to evolve, Batla said.
There's a potential "creep factor" to data collection, and retailers can mitigate this by communicating about their data practices only when the customer is most receptive to it, said Brendan Witcher, vice president and principal analyst at Forrester Research.
Witcher advises retailers to be upfront about how they plan to keep a card on file, but says it's unnecessary to remind the shopper about this at every payment because the customer has already opted in.
And for some customers, that set-it-and-forget-it model is still the best experience.
"There are just some people that say, 'I always pay with this … if you don't accept the payment type that I want to use, that's a pain point for me,'" Witcher said. "The idea is to create the conditions that allow a customer — not force a customer — to have the experience that they want."
