The Impact of Payment and Shipping Method Choices on Consumer Purchase Decisions

Internet trade is booming. Almost anything can be bought online these days, and internet shopping is an integral part of our lives. Why do people actually shop online?

• Convenience  

One of the main advantages of e-commerce is convenience. With the advancement of mobile internet and better access to mobile devices such as tablets and smartphones, it is easy to shop right from the sofa, during the film break or during the soap opera. 

• Convenient pickup 

Making an online purchase and ordering it at home is very convenient. In the past you had to take your car to buy a product, visit a shopping center, find a parking space, etc. Today the reality is very different and the buying process has become a pleasant activity. In addition, when purchasing a device or furniture, the customer does not have to worry about the collection and transport of the product. 

• Assortment 

Imagine you are entering an online shopping center that offers access to several shops with different products. In the digital world we speak of marketplaces, sites that bring different providers together and raise a much larger range of products, like an "infinite shelf". 

• Price comparison 

With two clicks it is possible to place products from different suppliers and at different prices next to each other, making it much easier to find a bargain when shopping online. 

• Security 

E-commerce enables a much safer purchase, especially of products with high added value, such as jewellery or electronics. It is now possible to buy online and receive safely without having to move with an expensive product. Online purchases are also secure in terms of several services that enable online fraud prevention.

• Data protection 

The internet is the place that empowers the shy and gives them a voice. Certain categories, such as erotic products, can be embarrassing for buyers. Deciding to buy online can be the best way forward for these occasions. 

Which factors influence the purchase decision?  

In addition to simplicity and convenience, there are other factors that consumers consider when shopping online. According Boston Consulting Gropu (BCG), for 50% of consumers better prices are an advantage of ecommerce purchases. Saving time is paramount for 33% of people, and 27% say that being able to easily compare products from competing brands is most important to them. The following factors have the greatest influence on the purchase decision: 

Free shipping 

It is at the top of the list of preferred advantages for e-consumers. According to a survey by the Boston Consulting Gropu (BCG) , 74% of consumers say that “free shipping” is a factor in determining whether to buy online or not. 

Payment 

A study by MethodsCyberSource Corp found that online stores that offer four or more payment methods have a 12% higher sales conversion rate than stores that only offer one option. 

Refund policy    

This is one of the key factors for any business as the customer cannot test in advance the products bought online and may want to return them. A few years ago this was a huge cost to businesses and consumers, but since e-commerce started to grow, the return policy has improved a lot.

Product reviews  

A positive or not so positive - opinion counts. More than 47% of people look for information about the product on the internet before buying, and educate themselves by the reviews of the people who had experience and rate the shop or product before making their own decision.    

Intuitive Navigation  

A well-planned layout and effective navigation can help increase online sales and affect the perceived quality of your services.      

The selection of payment methods is important.

With different payment methods, it is possible to serve different customer profiles and not to lose any sales. When a person visits a store and has a payment method in mind, they need to find that preferred option in order to complete the purchase. Almost half of online shoppers have already cancelled an online purchase because the desired payment method was not offered. That's a huge number. Not all people use the same way to pay online. Every consumer has his preferences and uncertainties about some modalities. 

There are the following factors that buyers consider when choosing a particular method: 

• Security of the place where it will be bought 
• Amount to be paid 
• If interest-free monthly instalments are offered 
• If a direct discount is offered 
• Pre-selection of a payment method 
• If it is possible to receive credits for the next purchase 

What are the main ways to pay online? 

In order to acquire and retain different customer profiles, it is essential to invest in various forms of online payment. The most popular electronic payment systems online are the following: 

PayPal 

With nearly 305 million active accounts, more than 3.5 billion payments made and more than 69% of e-merchantspayments through PayPal offering, it's not difficult to understand why PayPal occupies such a place in the market. PayPal is now available in 202 countries and can handle 25 currencies. According to Statista , PayPal is one of the most popular payment methods among German buyers. 48% of users pay for their online purchases using this shop payment system.    

Purchase on account   

Purchase on account is particularly valued by buyers all over the world, especially in Germany. Purchase on account means that the user purchases and receives a product or service immediately, but only pays for it later.  

According to Statista, 21% of buyers prefer this type of transaction to all other online payment methods. In the standard version of Shopware, the four payment methods cash on delivery, invoice, prepayment and direct debit are activated. 

Debit or credit card

Debit or credit card are the most popular payment methods for 19% of users. With direct debit, the purchase amount is deducted directly from the customer's account. 

It is worth mentioning CrefoPay . It's an omnichannel payment solution. It enables you to adapt the payment processes according to your own needs. Via CrefoPay, companies can offer their buyers the most common online payment methods (mentioned above) such as PayPal, credit card, Klarna and purchase on account. Our software development agency is experienced in integrating this payment system for the website. When shopping, users can select this payment method, which then takes them to the page with the payment methods. Here customers can choose between different options. All of this is done easily, safely and at no additional cost.

Mobile Payment

Mobile payment is a term used to describe systems that enable consumers to make payments in physical and online stores from anywhere. Mobile payment systems enable users to register their credit and debit cards and thus make purchases without entering passwords. The most popular mobile payment methods include Google Pay, Apple Pay, and Amazon Pay. 

Google Pay  

Google Pay and two other payment methods are popular with 3% of UK buyers. The main function of Google's electronic wallet is contactless in-store payment. Users can also pay for their purchases on the websites or in mobile apps. Many online companies ( e.g. Asos , Deliveroo , Ryanair ) already offer this option. 

Amazon Pay   

Amazon Payments is a service with which Amazon customer accounts can also be used in online shops that do not belong to Amazon, without the payment data having to be disclosed. Thanks to Amazon Pay, merchants can offer their customers a familiar and standardized checkout experience. Internet shoppers can use the address and payment information already saved in their Amazon account to check out - without having to create an account or re-enter their billing and shipping information.

Apple Pay  

Apple Pay is an online mobile payment system that enables you to make contactless payments that are saved on an iPhone, Apple Watch or Mac with compatible Touch IDs. It is also possible to use this service to pay on the internet or in mobile applications. Apple Pay offers a fast and easy payment experience in a secure environment.  

The choice of shipping methods also shapes customer loyalty. 

The logistics and parcel services offered to customers are one of the key elements of an e-commerce offering. These elements significantly influence consumers' online shopping choices.  

When choosing a certain shipping method, the following criteria are important for the buyer: 

• Total delivery time to the home 
• The availability of alternative package pick-up services
• The cost of delivery or collection, or the minimum order value for free parcel delivery, which is not always offered (more about this below)
• Services for special needs (e.g. cash on delivery, installation)
• The speed of shipping
• The ability to choose or customize the packaging
• How to manage the return or whether the retailer offers services and information to facilitate the return of products
• The methods of delivery monitoring (tracking)
• The express courier used is also an element that may be of interest to end customers.

When shopping online, free delivery is very important.  

• 95% of people who shop online say shipping costs are a factor in their purchase decision - are the results of the Boston Consulting Gropu (BCG) survey.
• 36% of consumers say that the reason for cancelling the order was due to the shipping costs.
• Customers who took advantage of free shipping showed an overall satisfaction rate of 10% higher than those who paid for it.

• With free shipping, people buy an average of 3.7 products per order, while without free shipping, they buy an average of 3.4 products.

The most popular shipping methods in online shopping

Royal Mail is the most popular package delivery company   (37 percent), followed by Hermes (35 percent), Parcelforce (22 percent), DHL (20 percent) and DPD (also 20 percent).

Royal Mail  

According to a study in 2019 is Royal Mail is the most popular package delivery company in the UK. More than half of the respondents, 52.7%, prefer this option. With 23,000 pick-up points, Royal Mail is the most popular shipping method among UK buyers. In 2019, the parcel service distributed 1.22 billion packages.  

Hermes 

The parcel delivery company Hermes mentioned above is also very popular in Great Britain. Over 4,500 pick-up points in the UK ensure the service provider is so popular. 

Parcelforce Worldwide 

Parcelforce Worldwide is a UK courier and logistics service. Parcelforce Worldwide operates its collection and delivery services through a network of 54 “local” depots. The aforementioned module for Magento Royal Mail Parcelforce Worldwide Shipping method enables, among other things, the integration of this shipping in the Magento web shop.

DHL

DHL is the most widely used shipping service provider in German e-commerce. 84% of the top 500 online shops based on e-commerce net sales in Germany in 2020, for which information about the shipping service providers used is available and known, use DHL as their shipping method. 

DPD  

DPD Germany is also a popular delivery company for parcels weighing less than 30 kg, mainly in the express market. 

Create an Effective Shipping Strategy 

Shipping can have a huge impact on the bottom line of your eCommerce. A good e-shipping strategy is the result of three equal variables working together: 

• Customers' expectations: People today expect free (or cheap) shipping, fast and on time.  
• Company's needs and capabilities. Every company must pursue business goals in terms of sales, earnings and customer satisfaction. 
• The specifics of delivery. These have to do not only with delivery times and costs, but also with the receiving options that are offered on website (to understand what options customers want, one can conduct post-sale surveys to offer a service based on their needs).

There are various strategies and methods for managing an online store's shipments. However, the most important delivery strategies are as follows:

1. Free shipping 

It has the advantage of fulfilling the wishes and expectations of customers and demonstrably having a positive effect on the conversion rate and reducing the number of abandoned shopping carts. While this is convenient for customers, it is not the same for the selling company, which has to pay for it. Therefore, the choice of free shipping must be carefully considered as it can turn from a competitive advantage to a loss of profit. Many online shops, for example, only offer it at a minimum price or only on certain products in order not to impair profits too much. 

2. Flat rate shipping costs 

The costs of a shipment generally vary depending on the weight and size of the package sent. Online shop can offer to the customers a flat rate or set a fixed price for delivery regardless of the variables mentioned above. This way you have a clear, transparent and solid shipping strategy. 

3. Evaluate in real time

Many e-commerce companies choose to use real-time courier rates for their shipments. This strategy means customers pay the exact amount of their shipment based on the destination, weight and size of the package being sent. However, users can only find out the shipping costs once the purchase has been completed at the checkout.

4. Mixed pricing strategies

Many online stores offer free shipping if a purchase threshold is exceeded, or with longer delivery times. In addition, there are faster shipping options for a fee, alternating flat rates and real-time tariffs (i.e. the actual costs based on the weight, size and destination of a package).

E-commerce is a complex and expensive activity, so any choice must be made carefully. Shipping and payment are important factors in making a purchase decision. That is why it is worthwhile to offer the common payment methods and shipping methods in the online shop and to create effective strategies.