Exclusive: ‘A key moment for retail?’ – Dr Christine Bailey, Valitor in “The Fintech Magazine”

A survey, during the pandemic, of 300 SMEs in the hospitality and service sector, by Valitor and Visa, has revealed a surprising degree of resilience and optimism. But, as one door closes and another opens, those businesses need additional support from PSPs, says Valitor’s CMO Dr Christine Bailey.

Back in January 2020, when COVID-19 was still a brief segment at the end of news broadcasts, payment solutions company Valitor spoke to The Fintech Magazine about the disappointing performance of the high street over the festive period and how better use of payments data could help buck this trend.

Then the world changed. By the end of March, lockdown had stripped us of most of our retail freedoms. No longer could we simply head out for a carefree coffee with a friend on a Saturday morning, or pop into the shops for an impulse buy on the way home from work. For many bricks and mortar businesses, sales almost entirely ceased overnight.

But, as with any crisis, there’s always an opportunity. There’s no denying the retail and hospitality sectors have been hit hard, and footfall on the high street was still down nearly 50 per cent in July, compared to the same time last year, according to the British Retail Consortium. But, while several major names have bitten the dust,  many smaller businesses have been presented with a one-off chance to build an online presence that could be pivotal for them, and  provide a major source of revenue for years to come.

Following the biggest decline in high street spending on record, Valitor and Visa joined forces in the second quarter of 2020 to interview 300 small and medium-sized businesses in the hospitality and service sectors, to discover how they were coping with the pandemic.

“Only two per cent of respondents stated that there’d been no impact on their businesses, whereas 63 per cent said they’d had to close temporarily,” says Dr Christine Bailey, CMO of Valitor. “These preliminary statistics may sound bleak, but 65 per cent of interviewees later claimed that the pandemic had actually opened up new business opportunities for them.”

Some were fairly obvious – petrol stations did a roaring trade in new stocks of hand sanitiser, while convenience stores saw toilet roll sales explode. After the initial shock, others took the chance for a strategic rethink – altering product lines to cater for a different type of customer; re-planning their spaces to make them COVID-compliant and more luxurious and appealing; maximising hitherto unexploited aspects of their product or service that spoke to customers’ desire for things that nourished the soul, or played on localness, community, traceability and safety.

“Some required a little more ingenuity,” says Bailey. “Sixty-five per cent of respondents said that they had expanded their channels to cater for the restrictions of lockdown, and a common example of this was restaurants providing a takeaway service and allowing customers to come in and pick up their orders. We also interviewed a car dealership that had continued to offer its clients car servicing by collecting their vehicles from their home and then returning them after they’d been serviced.”

The Bricks And Mortar Under Quarantine survey, which was conducted by WBR Insights, showed that increasing their geographical reach has proved to be a lifeline for many businesses during lockdown, as has expanding their product offerings. Thirty-seven per cent of interviewees stated that they are now selling new products and services that are more relevant in a COVID world – and not just artisan hand sanitiser and superhero face masks.

“We’ve even interviewed golf clubs that have had great success in offering training courses online,” says Bailey

But perhaps the most significant change, in response to the pandemic, has been the rapid acceleration of SMEs’ digitisation processes.

“Thirty per cent of respondents said that they were now conducting business online for the first time,” says Bailey. “I would class this move online as the standout trend that has developed among bricks and mortar businesses due to COVID-19. Although many are yet to upgrade their websites to be able to conduct ecommerce directly, they’ve been establishing an online presence in other ways. For example, restaurants have been presenting their menus on Facebook and florists have been advertising their bouquets on their websites. Apps like ShopAppy, which helps small businesses to easily, quickly and cheaply attract online shoppers, have proved exceptionally popular with local retailers.”

Global pandemic aside, there’s arguably never been a better time for physical businesses to take their first steps into the virtual world. Taking the UK as an example, 95 per cent of the population was already accessing the internet on a regular basis in January, prior to the outbreak; 86 per cent regularly searched for products and services there, and 81 per cent had made a purchase online. Given how primed the public already were to take their shopping online, it’s unsurprising that 90 per cent of all sales were taking place over digital channels at the height of lockdown. Research suggests that this is no fleeting phase, either – 44 per cent of consumers plan to continue shopping online after the pandemic passes.

That’s not to say the process of moving a business online has been easy for owners. Numerous barriers still prevent them from doing it successfully, says Bailey.

“Forty-four per cent of our survey’s respondents identified compliance with data and security regulations as an impediment to their online growth, and 40 per cent claimed that competition from other businesses [which is particularly prevalent online due to the ease with which consumers can compare retailers] was affecting their success. Thirty-two per cent said that building a website with ecommerce capabilities was proving challenging, and the same number stated that they’d had difficulty attracting customers in a virtual environment. Other common concerns include online fraud, lack of funding and delivery logistics.”

Partnering with a payment services provider can, Bailey  believes, alleviate the majority of those teething issues for online newbies.

“Not only can they help businesses to navigate data regulation to prevent it from impacting their growth, but they also usually offer fast and free setup to reduce the initial cost of moving online.

“In the current climate, cashflow is still a huge problem for many businesses, but many payment providers offer fast settlement times, which can help to reduce this issue. Fifty-one per cent of our survey’s respondents cited 24/7 support as the most helpful thing a payment service provider can offer, so businesses should make sure that the provider they choose is consistent in delivering excellent customer service. Last, but by no means least, the payment technology supplied by the provider needs to be extremely reliable – in a world dependent on cards, a failure in payment technology can spell disaster for a SME,” says Bailey.

Indeed, the survey revealed that small businesses had experienced a 55 per cent increase in online payments over the course of this year, so implementing a robust card payment system should be a priority. Moreover, the pandemic has precipitated the meteoric rise of a new type of virtual checkout process that is increasing customer expenditure in online stores by an average of 30 per cent. Buy now, pay later (BNPL) facilitators, such as Klarna, have witnessed unprecedented uptake during lockdown.

“We’ve seen a 20 per cent increase in inbound requests from retailers who want our service to better cater to their shoppers’ demands,” says Laurel Wolfe, Klarna’s vice president of marketing. “By allowing shoppers to acquire goods and then defer payment, retailers can boost purchase power at the point of sale. The best part for the retailer is that they get paid upfront, which aligns with 35 per cent of retailers in Valitor’s report, which value fast settlement to ease the problem of cash flow.”

Once perceived to be a golden ticket for shopaholic millennials, the BNPL option’s appeal has widened throughout the pandemic.

“At Klarna, our fastest-growing demographic is those aged 50-plus,” reveals Wolfe. “Regardless of age, all shoppers value the same thing – speed, convenience, payment choice and ease of use. That means a great, frictionless user experience with a streamlined checkout process and minimal steps on the path to purchase.”

The question that haunts many bricks and mortar businesses is ‘will physical retail ever recover from the crushing blow dealt it by lockdown, or have our shopping habits shifted irreversibly in favour of online?’.

The jury – the great British public – is still considering its verdict and may be for some time yet. Meanwhile, anyone in retail might do well to heed these presidential words of wisdom: “In a crisis, be aware of the danger – but recognise the opportunity.” Finding a payments partner to maximise any online advantage has got to be a wise move.