Open banking platform Tink has revealed new research, highlighting how 2023 could prove difficult for British businesses.
Tink’s survey of UK online retailers found that 50 per cent are concerned about how their business will survive over the next year. Forty-one per cent are also afraid of going bankrupt in the next 12 months.
Thanks to rising interest rates and a cost-of-living crisis, consumers have already started to reduce their spending. Sixty-six per cent of retailers are expecting to see, or have already seen, greater numbers of abandoned baskets. A majority of these are also expected to be at the point of payment (64 per cent).
Lower average order values (75 per cent) and fewer repeat customers (67 per cent) are expected or have already been experienced. With these trends set to drastically damage online retailer profit margins, 40 per cent have already cut, or are considering cutting, costs.
Surviving the difficult economic climate
Forty-nine per cent of retailers are at least considering reducing staff to save money. Other popular methods discussed include training (55 per cent), advertising (52 per cent) and investing in technology and online capabilities (48 per cent).
As retailers cut back, consumers may also experience reduced or cut services. Over half (53 per cent) of merchants are already, or considering, stopping free delivery. A similar proportion (54 per cent) also at least consider stopping free returns.
Although many retailers are looking for ways to cut costs, 32 per cent of retailers are looking to invest more in upgrading their payment stack to reduce costs associated with current payment methods. The findings show that online retailers understand that innovative payment solutions can not only help them reduce costs, but also make the point of payment process easier for consumers.
A Tink consumer survey found that 34 per cent of consumers say they abandon online purchases if they have to manually enter payment details or personal information at check-out. It also found that third-party authentication websites were a major point of frustration, according to 46 per cent of respondents.
Consumers are also actively looking for secure instant payment options. Forty-three per cent are concerned about online payment fraud while 47 per cent are reluctant to use buy now, pay later, as they are concerned about falling into debt.
Tom Pope, head of payments and platforms at Tink, commented on the findings.
Pope said: “As the economic situation becomes increasingly challenging, it’s important that retailers can not only manage and reduce their costs but retain customers with services that better meet consumer needs.
“Against this backdrop of cutting costs across the board, it’s encouraging to see that retailers are investing in digital payment methods that help solve these issues.
“Low-cost, low-fraud and zero-friction payments improve the user experience and lead to fewer abandoned baskets, while the ability to settle payments instantly will be essential for businesses who find themselves struggling with cash flow as the recession bites.”