How does the choice of payment and shipping method influence the purchase decision?

Internet commerce is booming. Nowadays you can buy almost anything online and online shopping is an integral part of our lives. Why do people actually shop online?

• Comfort and 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's easy to shop right from your sofa during a movie break or while watching a soap opera.

• Convenient collection

Making an online purchase and getting the order at home is very convenient. In the past, to buy a product you had to take the car, visit a shopping center, find parking, etc. Today, the reality is very different and the buying process has become a pleasant activity. In addition, when buying an appliance or furniture, the customer does not have to worry about picking up and transporting the product.

• Sortiment

Imagine entering an online shopping mall that offers access to multiple stores with different products. In the digital world, we talk about marketplaces, sites that bring together different suppliers and have 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 much safer shopping, especially for products with high added value, such as jewelry or electronics. You buy online and receive safely without having to move an expensive product. Online purchases are also safe in terms of several services that make it possible to prevent fraud.

• 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 shoppers. Choosing to buy online may be the best route for these occasions.

What factors influence the purchase decision?

In addition to simplicity and convenience, there are other factors that consumers consider when buying online. For 50% of consumers, better prices are a benefit of e-commerce shopping, according to Boston Consulting Group (BCG). For 33% of people, saving time is paramount and 27% say that the ease of comparing products from competing brands is most important to them. The following factors influence the purchase decision the most:

Free shipping

It is at the top of the list of e-consumers' favorite benefits. According to a Boston Consulting Group (BCG) survey, 74% of consumers say that "free shipping" is an influencing factor when deciding whether or not to buy online.

Payment methods

A study by CyberSource 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.

Right of return

This is one of the key factors for all companies, as the customer cannot test the products and may want to return them. A few years ago, this was a big cost factor for businesses and consumers, but since e-commerce started to grow, return policies have improved greatly.

Product reviews

A friendly or not-so-friendly opinion counts. More than 47% of people search for information about the product on the Internet before making a purchase.

Intuitive Navigation

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

The choice of payment methods is important

With different payment methods, you can serve different customer profiles and not lose sales. When a person visits your store and has a payment method in mind, they need to find that option to complete the purchase. Almost half of online shoppers have abandoned a purchase online 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 their own preferences and also uncertainties about some payment methods.

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

• Security of the place where it is purchased
• Amount to be paid
• If interest-free monthly payments are offered
• If a direct discount is offered
• Preselection of a payment method
• You will receive points credit on your next purchase

What are the main ways to pay online?

To attract and retain different customer profiles, it is essential to invest in different forms of online payment. The most popular electronic payment systems in the DACH region are as follows:

PayPal

With almost 305 million active accounts, more than 3.5 billion payments made and more than 69% of e-merchants offering payments via PayPal, it's not hard to see why PayPal has such a place in the market. PayPal is now available in 202 countries and can process 25 currencies. According to Statista, PayPal is one of the most popular payment methods among German shoppers. 48% of users pay for their internet purchases using this store payment system.

Purchase on account

Purchasing on account is particularly popular with shoppers 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 later.21% of shoppers prefer this transaction type to all other online payment methods, according to Statista data. The four payment methods cash on delivery, invoice, prepayment and direct debit are activated in Shopware's standard version.

Direct debit

Direct 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.

Instant bank transfer

Sofortüberweisung is one of the fastest payment methods. Customers initiate a transfer immediately when shopping online. There is no need to open online banking afterwards and carry out the transaction.

Paydirect

paydirekt is the online payment method of the German banks and savings banks. It is a good alternative to the most popular online payment methods and offers merchants numerous advantages. paydirekt is "Made in Germany" and is subject to German data protection regulations. It uses German servers and encrypts data to the same level of security that is used for online banking. This payment method offers maximum security and optimum convenience for every online purchase. Worth mentioning is CrefoPay. This is an omnichannel payment solution. It enables payment processes to be customized according to individual needs. Via CrefoPay, companies can offer their buyers the most common payment methods in online retail (mentioned above) such as Paypal, credit card, Klarna and purchase on account. Our agency for software development has experience with integrating this payment system for the website. When shopping, users can select this payment method and are then taken to the payment methods page. Here, customers can choose between different options. Everything is simple, secure and free of charge.

Mobile Payment

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

Google Pay

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

Amazon Pay

Amazon Payments is a service that allows Amazon customer accounts to be used at online stores that do not belong to Amazon without having to disclose payment details. Thanks to Amazon Pay, retailers can offer their customers a familiar and standardized checkout experience. Internet shoppers can use the address and payment information already stored 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 a mobile online payment system that allows you to make contactless payments stored on your 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 quick and easy payment experience in a secure environment.

The choice of shipping methods also influences customer loyalty

The logistics and parcel services offered to customers are one of the key elements of an e-commerce offering. These elements have a significant influence on consumers' online shopping decisions.

The following criteria are important for buyers when selecting a particular shipping method:

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

Free shipping is very important when shopping online.

• 95% of people who shop online say that shipping costs are a factor in their purchasing decision - according to the results of the Boston Consulting Group (BCG) survey.
• 36 % of consumers state that the reason for canceling the order is due to the shipping costs.
• Customers who took advantage of free shipping showed a 10% higher overall satisfaction rate than those who had to pay 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 Germany

DHL

DHL is the most used shipping service provider in German e-commerce. 84% of the top 500 online stores by e-commerce net sales in 2020 in Germany, for which information on the shipping service providers used is available and known, use DHL as their shipping method. The company has 29,000 locations in Germany.

Hermes

Hermes is the second largest parcel service in Germany with 16,000 pick-up points in Germany. Hermes is in first place in the price-performance category for courier, express and parcel service providers.

DPD

DPD Germany is also a common delivery company for parcels under 30 kg, mainly in the express market. There are currently 7,000 pick-up points in Germany.

Create an effective shipping strategy

Shipping can have a major impact on your eCommerce profits. A good e-shipping strategy is the result of three equally important variables working together:

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

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

1. Free shipping

It has the advantage of fulfilling customers' wishes and expectations and has been proven to positively influence the conversion rate and reduce the number of abandoned shopping baskets. While this is convenient for customers, it is not the same for your business, which has to bear the costs. Therefore, the choice of free shipping needs to be carefully considered as it can turn a competitive advantage into a profit loss. For example, many online stores only offer it at a minimum price or only on certain products so as not to affect profits too much.

2. Shipping costs

The cost of a shipment usually varies depending on the weight and size of the parcel being sent. You can offer your 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 fixed shipping strategy.

3. Evaluate in real time

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

4. Mixed pricing strategies

Many online stores offer free shipping if a purchase threshold is exceeded, or with longer delivery times. There are also faster shipping options for a fee, alternating flat rates and real-time rates (i.e. the actual cost based on the weight, size and destination of a parcel). E-commerce is a complex and expensive activity, so every choice must be made carefully. Shipping and payment are important factors in the purchasing decision. It is therefore worth offering the most common payment and shipping methods in the online store and creating effective strategies.