Every penny counts: how independent retail can make the most of payments


Matt Oldham, non-executive director, Suresite 

Oldham: payment challenges

This year has been a rollercoaster for the retail sector, there is no doubt about it. Fashion brands are calling for administration, home entertainment is at an all-time high, customers are changing behaviours with every new media headline. But there is one retail group which has been celebrating a steady success as people avoid big supermarkets – the convenience sector. 

IDG forecast reveals that the UK convenience market is set to grow by £6.9bn in the next five years, to reach £48.2bn by 2024. The sector will benefit from a multitude of new store openings over this period, helping to fuel a compound annual growth rate of 3.1%.

Research from Mintel estimates that convenience sales will grow by almost 8% in 2020 – compared to the 3% achieved in 2019.

There is a whole plethora of payment challenges brought by the pandemic and increased customer interest. But whilst the transformation has been challenging for some, the move to digital payments has brought convenience stores and independent retail a new source of power to fuel 2021 – data. 

Four payment changes independent retail faced in 2020

Long gone are the times when you had to pop to an ATM before visiting a local convenience store. The pandemic fuelled the growth of a cashless society and forced even the most remote convenience store to think about modernising their payment solutions. So what has changed this year?

  1. Card and contactless payments 

A record 62% of debit card payments in August were contactless, according to UK Finance. 

The merchant service fees for small retailers can be greater than the cost of handling cash. Historically, payment providers offered bundle pricing, but EU regulations have forced them to be more transparent and break their fees down clearly. 

The challenge for smaller retailers is to understand different payment system solutions and the breakdown of service fees as choosing the right provider can make a significant difference in their profits. 

But it’s not just about stating the obvious – that retailers have had to make preferred payment types available and transition to card and contactless payments.

Many SMEs have not been physically equipped to manage within the new Covid-19 restrictions. There are practical factors to consider such as choosing the right terminal – with handheld/portable terminals more suited to restaurants and bars. Equally, retailers need to think about the positioning of the terminal in the store layout for ease of customer use. 

Wifi – hand on heart, who would think about wifi? But if the router is placed further away from the till position, poor connectivity means slow transactions which can lead to frustrated customers. 

Sanitising is a whole new story – pin pads are tactile therefore need regular cleaning and disinfecting. 

The retail world is facing more challenges than ever before – and ones that have only recently come to light. Retailers who identify them and stay agile can focus on growing their profits through new payments solutions. 

2. Growth of delivery 

Express grocery delivery services such as Snappy Shopper have celebrated success this year and consumers are set to choose a retailer who can offer home delivery. Logistics and transport aside, the growing customer appetite for delivery straight to to their doors means a whole new payment solution headache for independent retail. 

Order errors made either by the consumer customer or the retailer are usually picked up by the retailer, reducing their margins. Payment reconciliation means they have to follow the payment through the transaction cycle for correct bookkeeping. 

Will your payment provider accept payments online? These pose a greater risk as the card is not present which is usually priced into the terms and means greater costs. Alongside ‘pay by transfer’, online card payment fees are something retailers should look out for when agreeing terms with their payment provider. 

3. Customer trends

In simple words, customers want to be able to pay any time, on any device, by any currency. But with every new payment method, there is a new payment challenge and solution which every retailer needs to understand. 

This year has accelerated the use of customer trends which have been slowly emerging for years. Card-on-file payments (Apple Pay, Samsung Pay), cryptocurrencies and different devices are used for payments. 

Make sure you understand the most common payment methods in your store and negotiate the best merchant fees with your payment provider for the transitions that matter. Often retailers only focus on the fees for debit card payments. However, their location may mean they are accepting a high number of corporate card payments. By taking a closer look at their payment data, they may identify that this is actually cutting into their profit and costing them money.

Open Banking is also slowly becoming more popular, it’s a solution which can bring retailers great benefits of understanding their customer, growing loyalty and cutting out interchange fees through solutions like Amex or Joto in France. But retailers need to understand Open Banking and learn how to utilise it. 

4. Data is King

The digital payment transformation has brought new challenges for independent retail. Many have said goodbye to cash with broken hearts. But independent retailers who choose payment partners that can provide them with easy to digest and valuable data can play a whole new game. They can become what they have never been – marketers, strategists, data science experts, and most importantly, growing businesses that will thrive in 2021.

Payment providers are jumping on the opportunity to monetise their data and retailers should research the services available carefully. Choose a provider that shares your payment data in a digestible format which helps create valuable insights. 

Retailers need live data to be delivered regularly. If you are running a special promotion you want to know how it’s performing so you can make adjustments if needed. 

Independent retailers often see a very specific customer behaviour based on their locations. To be able to see the level of detail required to understand the shopping basket break-down item by item, who made the purchase and how, retailers need what we call SKU-level data. Most payment providers can’t yet offer this data, but it’s worth watching this space in 2021. As the retail appetite for insightful data analysis grows, payment providers are constantly developing their offerings.

Smaller independent retailers often see digital payments as a burden which is more expensive than handling cash. This is not necessarily true as leading card merchants can offer card processing rates very close to the costs charged by banks to deposit cash. Additionally, cash carries theft risks and takes significant time and effort to both account for and store securely. But that’s for a whole different article. If there is one thing set in stone, it’s that independent retail can’t hide from the payment revolution anymore. 

It’s been a learning curve. Smaller retailers have to pay attention to regulations, trends and solutions available in the wild and crazy payment world in order to increase their profits and drive customer loyalty. The pandemic has fuelled payment novelties, but retailers that choose the right payment partners for their needs, adapt and turn challenges into opportunities will fly in the post-pandemic world.