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2021, the year of payment data revolution for independent retail

01 February 2021

Matt Oldham, Non-Executive Director, Suresite

As people avoid big supermarkets, Mintel estimated that convenience sales will grow by almost 8% this year – compared to the 3% achieved in 2019.

Long gone are the times when you had to pop over to an ATM before visiting a local convenience store. The pandemic has fuelled the growth of cashless society and forced even the smallest convenience store in the most remote village in the UK to think about updating their payment solutions.

The rollercoaster year and new opportunities

A record 62% of debit card payments in August were contactless, according to UK Finance. Just under half of all credit card transactions were contactless.

In 2020, home food delivery has been at an all-time high.

Payment methods are evolving constantly, customers want to be able to pay any time, on any device, by any currency (Apple Pay, Samsung pay, cryptocurrencies and various devices).

So what has changed? A lot. And retailers have been forced to digitalise their payment services and understand the technicalities of a whole new payment world.

How can independent retailers gain a better understanding of which payments they should focus on? Which payment fees make a difference to their profit? What products are their customers spending on and how can they grow the shopping basket?

Now, let the data party begin.

Data is king. For years this claim belonged to bluechip companies with big marketing and sales teams analysing spreadsheets and trying to work out customer behaviour. Whilst data science is still evolving, no longer does it belong just to the top players. The digital payment transformation has unlocked new opportunities for independent retailers too.

Data, payment methods and fees

If your store is on the outskirts of a small town, the likelihood is that most of your payments come from a standard debit card. But if you are placed next to an international university, you may see more payments coming from UnionPay. Why are these examples important?

Independent retailers often focus on merchant fees for debit card payments, but they might be losing profit on high fees for UnionPay, corporate cards, card-on-file or other payment types.

Historically, payment providers offered bundle pricing, but EU regulations have forced them to be more transparent and break their fees down clearly for all parts of the transaction process and for different payment methods.

Regulation novelties coupled with data give retailers an opportunity to understand which payment methods are the most common ones in their store and negotiate better merchant fees with their payment provider for the transactions that matter.

Grow customer spend

Whilst the average spend in convenience stores was £6.38 in 2019, according to Nielsen, sales were up 17% for convenience stores earlier this year as a result of the pandemic. The basket value has growth to £7.46 and average basket size to 2.5 items – up from 2.3 in 2019.

Let’s think of a convenience store owner who, based on their payment data, knows that most of their store transactions are around £6 and they want to achieve £8 on average. What do they do? Because they work with data, they can make very targeted changes and offers. They can offer a special bonus product or service for purchases over £8. At the same time, to drive these purchases, they can place a product which prompts impulse behaviour by the till, e.g. a bag of sweets for £2. And here we are, the total of the basket is now £8, meaning a 20% growth on total sales.

The WHAT

So now we know how our customers pay, how much they spend, but the question is, what do they buy?

Often we see special offers such as a main meal, dessert and bottle of wine for a discounted price designed to tempt an impulsive purchase. But working with payment data, coupled with SKU-level data, retailers can discover other shopping patterns of their local customers and create more targeted offers. For example, if half of the people who buy breakfast cereals also buy orange juice and fruit, then retailers can capitalise on this.

To be able to see the level of detail required to understand the shopping basket break-down item by item, who made the purchase and how, retailers need what we call SKU-level data. Most payment providers can’t yet offer this data, but it’s worth watching this space in 2021. As the retail appetite for insightful data analysis grows, payment providers are constantly developing their offerings.

Payment data: Where to start?

Most independent retailers don’t have a degree in data science and thanks to the technology available it’s not even necessary. Here are a few things which can make the difference between flying and cutting dry in 2021:

  1. Research payment providers. Payment providers are jumping on the opportunity to monetise their data and retailers should research the services available carefully. It’s the how which makes the difference. If a retailer receives a fat CSV file, they will likely give up after five minutes and never come back. Data vs insights – make sure you choose a provider that shares the data in a digestible format which allows you to create insights quickly.
  2. Timing. You want live data to be delivered regularly. If you are running a special promotion you want to know how it’s performing so you can make adjustments if needed.
  3. Payment methods. Understand the most common payment methods in your store and negotiate the best merchant fees.
  4. SKU-level data. Find out what developments your payment provider is working on. Insights based on SKU-level data will help you understand your customer behaviour and choose the best tactics for driving impulse purchases.
  5. Experiment. No longer is it about spray and pray, trial and error without insights. Work with data to understand what works and drive customer loyalty which will lead to increased profits.

The digital payment transformation has brought new challenges for independent retail. Many have said goodbye to cash with broken hearts. But independent retailers that choose the right payment partners which offer easy to digest and valuable data for them, can play a whole new game. They can become what they have never been – marketers, strategists, data science experts, and most importantly, grow businesses that will thrive in 2021.

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