As 2025 beckons, slight economic improvements such as easing inflation are tempered by high interest rates and cost-of-living pressures that continue to impact both consumers and small businesses. For many online retailers, higher National Insurance contributions and new tax policies are adding to operational costs. As PayPal’s 2024 e-Commerce Index highlights, 89% of UK businesses express economic concerns, and 46% cite rising costs.
But there is good news too. Despite the majority (two thirds) of UK consumers spending less on non-essentials, online spending continues to increase overall, presenting growth opportunities for online retailers. In fact, UK consumers were spending an average of £407 online per month in 2023, a 17% increase from £348 in 2022. Phone bills, insurance and utilities have now surpassed fashion purchases, becoming the ‘most paid for’ online payments category (58%).
This demonstrates the extent to which digital payments have become a vital part of our nation’sbusiness landscape. And why payment providers have such a crucial role to play in supportingretail sector growth in the coming months. To this end, I wanted to share a few valuable insights and actions online retailers can take to encourage online shoppers and help boost sales.
1. Design and test your online experience to satisfy millennials – this will raise your user experience bar
One of the key findings I found most interesting from the 2024 e-Commerce index was that,despite being internet natives, Gen Z are more patient than their millennial peers when it comes to navigating long and difficult checkout flows.
More than a quarter (28%) of millennial shoppers are ready to abandon a purchase or payment because checkout took too long, and 20% because it was too difficult, compared to 21% and 14% of Gen Z, respectively.
This indicates that instead of testing and designing e-Commerce user experiences for internet native Gen Zs, retailers will do well to focus on their millennial peers. While they didn’t all grow up with smartphones and internet on demand, millennials began to learn about and experience computers while at school and joined the workforce when PC adoption was already widespread. Plus, they’re in the prime of their careers, enjoying greater spending power.
Crafting seamless, flowing customer experiences that help satisfy the demands of millennials canbenefit all consumers by raising the overall quality of the shopper experience.
2. Deliver fast checkout and a range of payment types – from cards and digital wallets, to 0% interest Buy Now Pay Later (BNPL)
Our research shows 43% of consumers are more likely to purchase online if their preferred payment method is available, and 39% because of a fast checkout experience.
So, it’s worth retailers reviewing their current payment method offerings and working with atrusted partner that provides cards, digital wallets, and BNPL options, as well as the latest innovations that help accelerate checkouts safely and securely.
Co-op, as one of the world’s largest consumer Co-operatives with millions of members and more than 2,400 food stores across the UK is a good example of a retailer that’s put these insights into practice. It worked with PayPal to help streamline and accelerate checkout by ensuring shoppers don’t have to enter their card details every time they shop online, while also offering more ways to pay, which has subsequently driven a higher frequency of purchases, and helped attractyounger demographics*.
3. Be willing to explore, test and learn about AI – UK shoppers are interested in using it
While there is some argument that AI, especially generative AI, is entering the ‘trough of disillusionment’ stage of the tech hype cycle, this is another area where cautious optimism and focusing on concrete progress is more valuable than getting swept away with either ups or downs.
Firstly, our data shows 83% of UK businesses are already using AI in their business operations, and secondly, consumer interest in retail AI remains strong: More than half of all UK consumers (56%) are happy to use AI to help them shop online, rising to two-thirds of Gen Z (65%).
For retailers, AI technology can help accelerate and personalise the shopping experience to drive conversion at multiple stages of the customer journey. During pre-purchase, targeted offers and rewards based on AI-analysed shopper insights can attract new customers. At purchase, automated accelerated guest checkout can improve conversions. And post-purchase, personalised predictive rewards and recommendations can help retailers connect with customers after they buy, encouraging them to return.
Why it’s worth demanding more from your payment partners
Ideally, a payments provider will help online retailers deliver on all these insights, by enabling afast, optimal checkout experience that works for shoppers of all ages while integrating effective AI tools. And the right payment partner can do much more than this, too.
In the shared pursuit of improved customer satisfaction and increased sales, retailers should demand much more than just a button. Alongside a seamless checkout experience, the right payment providers can help manage retailers’ exposure to fraud, offer robust reporting capabilities, and bring all this together in one platform.
Which should go a long way to ensuring your optimism and plans for growth in 2025 are well founded.
If you’d like to learn more about how digital shopping continues to evolve, download the full report here.
These results may not be typical and may vary substantially by business. This content is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
* Data source from Co-op interview, June 2024.
Sally Bracken
