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Online Alternative Payments: A Merchant vs. Consumer Divide
Javelin Strategy & Research, Oct 2010, Pages: 52
Online merchant sales continue to be dominated by the credit card, but as the e-commerce market and the volume of online sales grow, merchants are broadening the array of payment options they offer. The breadth of options offered is important because consumers use multiple payment types to make online purchases, with more than half using an alternative payment service for online purchases in the past year. This report looks at merchant offerings of online alternative payment options and examines how these services contribute to an effective online sales strategy.
Primary Questions:
- What online payment options do merchants accept and how is the mix of payments evolving over time?
- Why should merchants adopt online alternative methods of payment?
- What drives value in an alternative method of payment for various constituents?
- How can the introduction of alternative payment options be managed to optimize consumer and merchant value?
- What are the emerging alternative methods of payment that best meet the needs of each constituent and why?
Methodology
This report is based on data collected online from U.S.-based merchants that are members of Shop.org and that have an online presence as either a pure-play or multichannel merchant or branded manufacturer. Shop.org is the world's leading membership community for digital retailers, and is a division of the National Retail Federation. Founded in 1996, Shop.org has 600 members, including the 10 largest retailers in the U.S. and more than 60 percent of the Internet Retailer Top 100 E-Retailers. Methodology for the Javelin/Shop.org survey incorporated the following:
- An opt-in sample of 60 merchants providing responses collected in July and August 2010 with an overall margin of sampling error of ±12.65 percentage points at the 95% confidence level. Among the merchants sampled, 45% have annual online sales below $10 million and 55% have annual online sales of $10 million or more (27% have annual online sales of over $100 million). In addition, three-quarters of the respondents are multichannel retailers and branded manufacturers, while 25% are online-only merchants. Fully 77% of the merchant participants have operated an online site for five or more years.
The report also incorporates data collected by Javelin:
- A random-sample panel of 3,294 consumers collected in November 2009 with an overall margin of sampling error of ±1.71 percentage points at the 95% confidence level. In 2010, the U.S. population was estimated to comprise 306 million people, including 232 million adults, 168 million online adults, and 88 million online households.
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