During June, 2Checkout (now Verifone) proudly hosted the sixth edition of our CommerceNow online event, where a group of amazing founders, specialists, marketers, sales reps, eCommerce experts, and revenue leaders shared their knowledge and expertise.
This is the first of a series of blog posts where we’ll share the key takeaways from several of the CommerceNow ’22 sessions. You can also register to watch all recorded webcasts here.
Several presenters shared wisdom and inspiration around the topic of optimization, whether applied to payment innovation, tax strategy, or pricing.
In his presentation, “How Payment Innovation Helps Merchants Address New Omnichannel Expectations,” Francois Crehange, Product and Solution Director for Verifone, discussed the recent myriad of dizzying changes in the eCommerce landscape.
Changes which began to gain traction before but were then accelerated after the advent of COVID:
- Customer expectations are evolving as their options continue to grow; local versus hypermarkets; quick commerce and last-mile delivery service; dark stores and kitchens; shopping channels 2.0.
- The purchasing path is very fragmented and less linear. A customer may start a purchase on their laptop, pick up in the store, return via mobile, etc.
- The sharing economy is growing, including the used-product market and second-half market.
- More than ever before, consumers now expect to be able to gain transparency about the quality of production and the traceability of the products they are seeking.
The bottom line, Francois emphasized, is that businesses need to enable customers to buy wherever they are, whenever they want to, and however channel they decide to use—in-store or online, face-to-face or digital, and via counter, kiosk, or an endless array of devices.
Because of this, he added, players in the payments realm are required to address and perfect this wide variety of payment experiences, including contactless, click-and-collect; or link, email, or SMS. They also need to anticipate a variety of potential actions on transactions, no matter the initial channel, including voiding an order (or just part of it), refunding (all or part), as well as the more predictable, seamless new purchases.
On top of this, Francois said, payment providers and merchants are coping with an ever-evolving array of other new challenges, including:
- Upgrading payment solutions
- Regulatory and security changes
- New technologies
- New business models
- An increase in alternative payment methods, with additional new connectivity modes that contribute to a smooth customer buying experience.
The good news, he said, is that new payment solutions can help merchants continue to meet customer expectations and improve the overall shopping experience. Some examples:
- Pay-by-link for telephone sales wherever the customer is
- App or in-store APMs and buy now—pay later (both online and in store)
- Payment via personal shopping apps (more features and easier for merchants to integrate)
- Live shopping and follow-up support
- Payments for in-store shopping without cashiers—Amazon Go and mobile app scanning in the Americas, self-scanning in IA or smart basket in Europe.
Other positives Francois mentioned: Merchants can now grow their business by leveraging the APMs expected by their customers, and there are opportunities to offer a unique payment ID for added value services that add revenue. Additionally, omnichannel payment solutions provide an abundance of useful data that can guide merchant analysis and insights.
“The boundaries among eCommerce, omnichannel, and different sales channels are thinner and thinner,” Francois emphasized. “Our mission is to offer a seamless payment experience, whatever technology or context.”
Learn more about payment flexibility and how merchants can significantly improve the shopping experience by watching Francois’ full session here.
In her session, “How Tax Impacts Your eCommerce Business, and How You Can Manage It,” Liz Armbruester, SVP of global compliance for Avalara presented an overview of current eCommerce stats, what indirect tax laws are and will continue to impact eCommerce sellers, and why businesses should consider automating their tax compliance.
eCommerce, by the (staggering) numbers
- Global eCommerce sales hit a whopping $5.542 trillion in 2022
- US eCommerce sales will reach $740 billion by 2023
- 49% of brands plan to invest in social commerce content in 2022
- 21% of 2022 purchases were made online
- 67% of global consumers made a cross-border purchase in 2022
“Businesses of all sizes are embracing eCommerce, but tax authorities have also taken note of these numbers,” Liz pointed out. There are new laws that increase the complexity and risk for businesses, therefore automation of tax compliance may be a good option for many merchants in the eCommerce universe.
Indirect tax laws: why do they matter, and what can we do about them?
One of the most impactful recent economic nexus laws, Liz explained, resulted from the 2018 Supreme Court decision, South Dakota v. Wayfair, Inc., which allowed states to impose sales tax obligations on out-of-state (remote) sellers based on their level of economic activity in a state. All 45 states with state sales tax have since adopted some form of this economic nexus.
“Because of this, the complexity has exponentially increased, because all states have different regulations,” Liz pointed out. The burden is on the merchants to be knowledgeable and compliant, she explains, and eCommerce businesses have all this complexity, she continued, plus the sheer number of tax jurisdictions to consider—over 13,000 US jurisdictions, with zip code boundaries that can all have varying tax rates.
What drives the nexus challenge, Liz continued, is also determined by each individual business:
whether they own or lease their business property; if they employ field staff or service staff; where their inventory is located; whether they have affiliates; and, finally, their economic nexus.
For eCommerce, specific digital channels can impact tax obligations. Marketplace facilitator laws require the marketplace to collect and remit sales tax on behalf of their third-party marketplace sellers that are using their platform. The amount collected counts towards their aggregate threshold that determines the amount of tax owed.
Marketplace facilitator laws are confusing and complex, said Liz, and thresholds by some states are not “one and done,” she added, so compliance is always evolving. There are numerous examples of lawsuits over back taxes, sometimes just for inventory stored out of state.
International indirect tax laws add another layer of complexity. Changes to VAT are increasing tax obligations for global eCommerce sellers. Some of the changes, Liz shared, include:
- The EU has simplified VAT, which is helpful. Merchants are only required to complete on tax return for all sales throughout the EU.
- Brexit has changed the tariff including the codes.
- There are new e-invoicing mandates that require certain businesses to electronically transmit invoice info to other businesses and tax authorities in Europe, Latin America, and Asia.
Why automate tax compliance?
“In my opinion, digital transformation strategy should include tax, and it’s prime for automation,” said Liz. As businesses spend astronomical amounts on digital changes and upgrades, automation makes sense for several reasons, including:
- Customer satisfaction
- Risk management
- Business growth
Furthermore, Liz added, the costs per month of manually managing tax compliance for small-medium size businesses can approach as much as $14k/month, and even then, those businesses might get flagged for an audit.
The top benefits of automation, said Liz, include:
- 77% increased confidence with sales and use tax accuracy
- 75% improved tax compliance reporting
- 56% minimized resources dedicated to tax calculations and filing
- 48% peace of mind
And how to choose the right automation solution? “What is the environment you’re operating in today, what kind of tax support do you need, and where are you going? Ensure that the solution you pick covers you for today and tomorrow,” urged Liz. She recommended exploring the following:
- Reassess your tax obligations by determining where you have nexus
- Automate the registration process for any new jurisdictions
- Then, expand your automation by integrating the automation software you’ve chosen with your existing system. Finally, train your staff so they are equipped to handle the complexities of tax compliance, even with automation.
If you want to discover how tax automation simplifies tax requirements while enabling growth and positive customer experiences, watch Liz’s full session here.
Eiko Van Hettinga, co-founder and managing director of 7Learnings, had additional optimizations recommendations to add in his session “Pricing Optimization for eCommerce.”
Eiko covered three main topics in his presentation:
Why should you invest in automatic price optimization technology?
“Pricing is the most important lever with the highest impact on your profits,” Eiko emphasized. “The rule of thumb is that if you get 1% better at pricing you’ll drive a 6% bottom line, and I think that’s not even the high estimate.”
Rising complexity in online retail increases the need for automation and optimization, Eiko added, including but not limited to:
- Logistical costs
- Assortment size
- Supply chain restraints
Eiko continued by saying that carrying this out manually would be exceedingly difficult for most businesses. “Technology has changed a lot, and AI has had a huge impact on optimization, especially because it’s more available and the data maturity of companies has increased.” According to Gartner, he added, price optimization has the highest business value and feasibility of all AI use cases in retail.
What’s the next generation of technology?
Eiko explained that predictive pricing is the new alternative to the more traditional rule-based pricing, which relies more on humanly programmed logic (considering costs, cost base with margin, what the competition is doing, etc.). Predictive pricing starts with a forecast, which explores and nails down how price will affect the main KPIs—demand, revenue, prices, etc.
Based on forecasts, Eiko explains, you can run optimizations tailored to your business’ goals, with optimal prices recommended by predictive pricing to reach those goals. The main difference between rule-based versus predictive pricing is that the latter forecasts the impact of price changes before new prices go live, so the business can refine their strategy as they go along before revealing prices to their customers.
Predictive pricing uses two key technologies, Eiko explains. There are powerful machine-learning forecasting models for sales, costs and profit, and then there is a customized optimization based on that forecasting and the business’ goals. Predictive pricing requires a lot of data, both internal (product attributes, transaction data, cost data, historic prices, stock and marketing data, etc.) and external (competitor prices, day of the week, holidays, and even weather).
“Predictive pricing is advantageous because you are able to achieve the highest level of automation, versus the manual, rule-based approach,” he added. He discussed the automation benefits in his presentation, and shared real-world examples of how predictive pricing can maximize profits and increase revenue over the lifetime of a business’ product.
“Optimization can also help steer your marketing efforts and tell you where to invest your budget, by predicting the impact of your marketing campaigns,” Eiko continued.
How should a business implement pricing technology?
Predictive pricing technology can be implemented quickly, Eiko said, and he described a sample timeline of the process in his presentation. Most importantly, he said, a strong team is needed. The essentials are:
- Ensure top management buy-in
- Have a good understanding of your stakeholders
- Have the right tools and resources available
- Use your data to inform your strategy
- Build an interdisciplinary team of pricing managers, data analysts and scientists, and product managers
Looking to learn more about how to best optimize your pricing in order to boost your revenue? Then make sure to watch Eiko’s full session here.
Want to access and benefit from more expert tips and tricks from this year’s CommerceNow? To watch this year’s sessions, make sure to visit the event page, as all the presentations are available on-demand!
The post Best Practices to Optimize Your Payments and Pricing Strategies – CommerceNow 2022 appeared first on The 2Checkout Blog | Articles on eCommerce, Payments, CRO and more.