PayPal’s Cameron McLean reflects an exceptional year and what companies can expect over the next 12 months.
It goes without saying that 2020 was an unpredictable year in which nations, companies and individuals had to relearn the way we live, work, play and interact. Our work and personal life merged with our home, and social distancing made everything virtual. One profound change has been the dramatic acceleration from physical to digital in all facets of our lives by staying connected, shopping, paying and more.
Consumers are using digitization for all of their daily needs, from food and meals to entertainment, and many say they will continue their online shopping habits after the pandemic. This trend is supported by the “Silver Tech” generation, which has embraced the advantages of the digital.
According to IBM’s U.S. Retail Index, the pandemic has sped the transition from retail to e-commerce by five years, forcing malls to adopt and accelerate their digital strategies in order to survive. The ripple effect of e-commerce has also fueled fintech adoption rates, with markets such as Hong Kong, Singapore and Australia rising to 60% in the last 12 months, up from 16% and 31% in 2015 and 2017, respectively.
When planning the next normal in 2021, what should companies think about in order to be successful?
Despite the negative economic outlook, consumer spending remains high
The World Bank estimates a global GDP decline of 5.2% due to the pandemic; COVID-19 is projected to lose 195 million jobs worldwide and accelerate technological change that could displace 85 million jobs over the next five years. Governments have pledged around $ 100 billion to help businesses and workers cope with the effects of the pandemic, and more are expected to come.
This dire outlook explains why consumer spending was low across all industries earlier in the year as households slumped while shopping. Surprisingly, however, consumer spending on ecommerce platforms shows the opposite.
Alibaba’s Singles Day (11/11) grossed more than $ 74 billion this year, nearly double its previous record, meaning the world’s second largest economy is returning to pre-pandemic consumption levels. And as the holiday season worsens, expectations are high for unprecedented spending.
Live streaming is booming
The new record for Singles Day is mainly due to live streaming: This brought in 583,000 orders per second during the 24-hour event and has become a popular way for brands to sell products virtually. Brands and retailers that use livestream or modern technologies like augmented reality (AR) and even robots to streamline their operations seem to have a competitive advantage that resonates with their customers.
China’s live streaming e-commerce sector generated $ 61 billion last year and is expected to double to $ 136 billion this year and continue its upward trend. These amazing numbers show the huge business opportunities in this new sector, which already has more than 900 live streaming sites.
Social distancing is expected to continue in the near future, which means brands are required to limit the number of employees and customers in a store. The introduction of technology tools like live streaming will exponentially help brands increase customer engagement virtually.
Digital payments are becoming mainstream
The reluctance to use cash will force the introduction of contactless and digital payments as the preferred method of transaction both offline and online. In the third quarter, PayPal recorded 15.2 million new active accounts – our second highest quarter in organic user growth – paired with 1.5 million new merchants – twice as many as in a quarter.
Salesforce’s State of the Connected Customer research report also found that consumers now spend 60% of their time interacting with businesses online, compared to 42% before the pandemic. By incorporating the online-to-offline (O2O) model, which refers to services such as online information, discounts or services, member discounts, in-store collection of items purchased online, or returns of online purchases in physical stores, to Through their business strategies, companies can improve customer experience, service and loyalty. With the O2O model, we also expect consumers to opt for payment methods that act as a bridge between online and offline, such as digital wallets with QR codes.
In line with the upward trend in e-commerce, companies also need to find ways to optimize and protect their margins. On average, 88% of shopping carts worldwide are abandoned, with one of the most common reasons being due to complex checkout processes.
For companies looking to keep and grow their customer base in this competitive environment, a simpler, faster and more intuitive checkout process with seamless and secure payment options is vital.
Building trust will be the key to sustainable adoption of digital media
While it is great that more and more companies are going online to access a global consumer base, it is disheartening to see many companies and even consumers falling victim to cyber fraud. This accelerated growth in digital and e-commerce has drawn unwanted attention from malicious actors exploiting vulnerabilities for nefarious purposes. COVID-19-related email scams rose 667% in March alone and are likely to continue as the scammers hit our psychological buttons to obtain our personal and financial information.
Growing concerns about online security are driving the adoption of digital wallets that use data encryption to keep payments secure, prevent fraud, and provide buyer and seller protection. Our recent Borderless Commerce report found that more than 30% of Singapore shoppers use PayPal because our Buyer Protection Policy makes them feel safe.
Implications for the way ahead
This year has been a year of rapid acceleration and adaptation. Here in Singapore, an important finding from the Ministry of Communications and Information (MCI )’s recent Insights Conference was that companies have all the tools they need for digital transformation at hand, but success depends on their ability to use these tools quickly and effectively. Looking ahead, it is imperative for companies to digitize and innovate, with a growth strategy that puts their customers first.
The rise in e-commerce and digital payments combined with the changing purchasing behavior of consumers must be understood by companies if they are to be successful in the new normal. Most importantly, as we become more reliant on technology and e-commerce, we should be more vigilant in finding new avenues for economic recovery.
