Interview - Simon Black, MD, Sagepay - A view of the future of ecommerce
Opportunities abound in the e-commerce market for suppliers of technology to retailers because the online phenomenon is driving a sea-change in the way consumers are transacting.
This will not only affect how people shop for goods but also how they pay parking fines, pay for their club memberships, and myriad other transactions that they undertake during the course of their everyday lives.
This is the view of Simon Black, managing director of e-commerce payments specialist Sage Pay, who sees a bright future as this phenomenon is changing the way retailers operate: “The demands of retailers are changing so there is an opportunity for suppliers because their customers [the merchants] need more from them.”
He cites the way merchants’ demands are changing as they battle fraud, understand social media, present their websites in different formats, deal with payments via increasingly streamlined checkouts, and ensure PCI compliance as the demands on retailers to comply with new rules increases.
But Black says the challenge for both retailers and vendors is that “they need to keep adapting”. He points to the ‘E-business Benchmark Report’ commissioned by Sage Pay that found the average annual sales growth of those surveyed was a hefty 40% - which is much greater than the overall e-commerce market – and he puts this down to the fact that those retailers who respond to such surveys are “much more engaged” and continually adapting their businesses to the changing marketplace.
“These retailers want to benchmark [against others] as opposed to those retailers who have a website, but beyond that it is largely business as usual for them. For many of these businesses what we are seeing is online revenues going down as the market matures,” he says.
Black points to one toy merchant that increased its online prices to match those in its store – after store customers complained – and immediately saw a decline in online revenues as it lost business to other more competitively-priced online operators including Amazon.
In contrast, a retro t-shirt retailer that has embraced video testimonials and uses fresh content as well as using social media in a meaningful way to engage with its customers is enjoying improving online sales. “These [differing performances] reflect the wider trend of some retailers struggling, including some big names, while others are doing well.”
One of the areas where the more progressive retailers are experimenting is with mobile. “We had three years of hype around mobile and until recently it was not clear what the focus should be. But now we know that it will have two major impacts,” predicts Black.
These are firstly, shopping over mobile devices, which he suggests will become the premier sales channel within five years as more transactions are undertaken on mobile devices compared with desktop PCs.
Secondly, there is the impact on payments, with the big development being virtual wallets. Since the payment element is the biggest potential obstacle to fully mobile commerce – because people are so comfortable paying with credit and debit cards through chip and PIN devices, which is “not ideal for mobility” – the emergence of virtual wallets will be a useful step along the mobile payments route.
Black says these electronic wallets will enable people to “just tap their phones” in a contactless manner against a reader and buy low-value goods such as sandwiches. “There was a false start with contactless, but with the 2012 Olympics and Visa’s involvement next year will be the year of contactless.”
But beyond paying for goods, he says these “massively intelligent wallets” will provide a myriad of other capabilities such as having defaults on the application whereby different payment cards can be selected, and having automatic crediting of virtual stamps to loyalty schemes with customers’ favoured coffee shops.
He believes there will be widespread adoption of these virtual wallets within the next three-to-five years, during which time the payment element will be developed further through maybe a streamlined chip and PIN terminal that plugs into the mobile device or the payment regulations being defined differently for the mobile channel.
“We’re not far away from chip and PIN payments on mobiles. But the issue is security. ‘Bumping phones’ together [to undertake a transfer of cash] might be good for a £5 transaction but for £500 it will require a password entered or voice recognition or maybe even iris scanning. Ultimately it is making payments easier and more secure in the future than they are now,” he says.
At present Black says there is an “arms race” among the likes of Google, MasterCard, Visa and well funded US-based start-ups that all want to be the default virtual wallet. But whichever wins is largely immaterial to Sage Pay because the company’s objective is to “drive efficiency and security for both buyer and seller and create a good customer experience” for all payment methods and platforms.