Brick-and-mortar shops use new payments tech to grow sales during lockdown

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Small and midsize merchants in North America continue to struggle with the effects of COVID-19 on their bottom lines, but those who have developed an online presence and made changes to in-store payments have found the process to be a vital step.

As many as 80% of small businesses have seen a positive impact after adding online options or in-store payment enhancements during the early months of the pandemic, according to recent PaySafe research. Of the 88% that reported making at least one change to their checkout process during the pandemic, 39% of those reported sales actually increasing during COVID-19.

"It is tough right now, no doubt, but better use of technology and resources has helped many stay open and will help tremendously as things rebound and reopen," said Afshin Yazdian, CEO of U.S. acquiring at digital payments provider Paysafe. "A lot more optimism comes out afterward, in seeing a situation where they are able to survive, and have technology now that once things open, they will be able to operate more efficiently."

Nearly 60% of merchants say the pandemic forced them to refocus their business toward online sales, while 40% are considering closing their store entirely and becoming online-only, according to the research.

During the first months of COVID-19, PaySafe surveyed 350 small and mid-size businesses in the U.S. and Canada that primarily did business through brick-and-mortar locations, as well as 1,100 online companies with global business. The results come a couple months after it took an optimistic economic tone in viewing the pandemic as an opportunity to push digital options in North America.

Sixty-four percent of the businesses enjoying an uptick in sales attributed it to being able to accept online payments. Almost a quarter of businesses, at 23%, launched an online checkout for the first time during the pandemic.

Mostly, business owners were quick to realize they had to update technology to fight the pandemic and meet mounting consumer demand for safer, faster options, Yazdian said. "The technology of contactless payments or mobile ordering is much more intuitive now, generally very easy to implement, and they will use it long after COVID."

Not all businesses have been able to find an easy track to converting to contactless equipment in their physical stores, though terminal manufacturers have been moving quickly to get terminals or upgrades certified and on the market.

In its recent report on the State of Retail Payments, the National Retail Federation reported that 58% of retailers overall in the U.S. were accepting contactless cards, while 56% were able to accept digital wallet payments from mobile phones.

The Paysafe study found the pandemic has created a fair amount of soul-searching for smaller businesses, as 58% said it forced them to refocus to online sales, and 49% were considering closing the physical store entirely and becoming online-only.

"There is a fear of the unknown, as they hear contactless, omnichannel and mobile ordering, and it sounds a little scary because it is not something they are used to," Yazdian said of small-business owners. "We have simplified how this works and people are becoming less fearful of technology, if they know it exists, and they can implement without a lot of training and without a lot of implementation."

The gap between brick-and-mortar businesses with an online presence and those without is growing, the PaySafe report said. Nearly 40% of in-store businesses said their sales volume actually increased because of COVID-19, but only 17% cited in-store sales as the key factor.

"Covid-19 has hit the merchant community in a very real way, resulting in rethinking the way they serve their customers," said John Drechny, CEO of the Merchant Advisory Group. "We have seen several adapt by adding or accelerating plans like 'buy online and pickup in store' or the use of QR codes to view menus and pay bills."

Merchants who have adapted to serve their customers in creative ways have been rewarded by those customers' continued loyalty, Drechny added. "Every merchant knows it must continually adapt and innovate to continue to attract and retain customers."

Drechny acknowledged that customers still had to be able to shop at stores, regardless of how many updates were in place to accommodate the lockdown.

"Any changes made have not been sufficient to create enough revenue to survive" if customers remain cautious and the pandemic continues long-term, Drechny noted. "The longer we see the environment impacted by the pandemic, the more merchants we will see not be able to continue to remain in business.”

The Paysafe research echoes that concern, as 93% of businesses that have lost business say they have not rebounded to pre-COVID levels yet, although only 12% say they have seen no recovery at all.

Another 12% of businesses said they had made no adjustment to their checkout offering during the pandemic. Of the 88% that had introduced changes, the most popular were accepting contactless payments on delivery and accepting card payment on delivery, both at 44%.

The pandemic is not creating an overriding dismal view of the future for these businesses, as 76% said they were optimistic about the future of in-store retail, while 21% are pessimistic. More than half, at 54%, said their opinions were driven by COVID-19, while 39% said it affected their opinion to some degree and 7% said the pandemic has not affected their opinions at all.

Some of that optimism for the future has its foundation in simple human nature, Paysafe's Yazdian said.

"There will be some pent-up demand, as people will want to get out and do what they did before (the pandemic)," he said. "If these businesses can hold on until then, they will be fine."

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Digital payments Coronavirus Retailers Small business