Hidden Marketing is a series we’ve created where we learn from e-commerce market leaders by becoming their consumer. We did this by going through the checkout process on the websites of the 50 largest DTC brands. We then recorded and analyzed their strategies.

In the previous two “Hidden Marketing” pieces we looked at free shipping and upselling at checkout. In this edition we’ll be looking at payment processors. Which should you be using?

Why Your Payment Providers Matter

Checkout is the critical moment when your customer makes a commitment to purchasing your product, or if you’re lucky, products. And if you’re cash only, and your customer doesn’t have cash, you may be out of luck. It’s important to have speed and flexibility, if you want to compete, especially in ecommerce.

A process that used to take 30 minutes and a drive to the store can now be done in under three, from your bed. It’s a low barrier to entry, but it’s also a low barrier to exit. A distracted child yelling “Mom!”,  a spam phone call, or even a fly on the wall can cause shoppers to leave a cart abandoned.  

Over 70% of carts are abandoned (statistics vary) and 30% of those are abandoned because of a need to “re-enter credit card information.”

6% of carts are abandoned simply because payment is too much work.

Improving your payment process is a small change that can have a big impact on your conversion rate and therefore your entire ecommerce business.  Think about how appealing Amazon’s “one click” payment option to customers.  Offering additional express checkout methods can recover a substantial amount of revenue.

As online shopping becomes increasingly more mobile, express payment options are even more relevant. And these days there are a lot of options,  PayPal, Amazon Pay, Shop Pay and Apple Pay are all popular picks.  Shopify even makes it easy to accept alternative methods of payment like cryptocurrency.

After examining the checkout for 50 top DTC brands, here’s what we found.

• Only 5 (10%) of the brands we secret-shopped were limited to a credit card option. These were: Harry’s, The Bouqs, Quip, Kiwi Co. and Smile Direct Club.
• 33 of the brands we looked at use PayPal, 29 use Apple Pay, 14 have Amazon Pay, and 14 have Shop Pay.
• 9 brands (18%)  had credit-card and PayPal as the only two checkout options. Brands such as: Dollar Shave Club, Honest Company and Everlane.
• 5 brands used Apple Pay, but not PayPal. Brands such as: Daily Harvest, Glossier and Away.
• 18 had an installment plan, the most popular being Affirm (6) and After Pay (6).
• 18 had four or more payment options including credit card.

So, what does this mean for your ecommerce site?
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‍Have a credit card option‍

There’s only one type of payment that works for anyone who shops online, and that’s a credit card payment. 100% of the brands we mystery-shopped used an embedded credit card form.  

If you’re on Shopify - which many of our clients are, you can choose from Shopify pay (powered by Stripe) or an external provider for credit card payments - which will have an additional fee from Shopify.  Ultimately, which credit card processor you use will depend on your business and how you’re hosting your site, so we did not dig into the source code to find out which are on Stripe specifically.  Credit card input is not the fastest way to pay, or the easiest, but it’s the most universal and that’s critical.

After you have your primary payment processor set up, you can then look into express payment options which will help drive up your conversion rate. The applications you use here will depend on two things, your product and your customer.

Paypal is big business‍

Paypal is the most widely used payment processor -- 87.5% of online buyers use PayPal.

Adding a PayPal button to your checkout makes it easier for many of your customers to follow through with their purchase in a couple of clicks, without pulling out their credit card and inputting their address.

According to the study of Nielsen’s Online Buyer Insights — online stores with PayPal generate a higher conversion rate than those who don’t — the number goes up to staggering 44%.

The difference may only be 60 seconds, but the level of commitment feels lighter with the click of a button.

More options could be better

When deciding which express checkout options to use, it’s worth considering your customer and your platform. However, many e-commerce sites are now just offering them all. And with a simple UI, this might be a good strategy.

Amazon Pay
Newer to the scene, Amazon Pay brings some of the same simplicity of ordering on Amazon to independent ecommerce sites. Amazon Pay is not nearly as widespread as PayPal, but as with all things on Amazon, it’s worth keeping an eye on.

Apple Pay
If most of your traffic is on mobile, Apple Pay is specifically worth looking into. Especially if your shoppers are in a higher income bracket. Apple Pay is more specific to Apple users and has lower adoption, but it’s very efficient, easy and trusted by the people who use it. ‍

Shop Pay
Shop Pay is Shopify’s new express option aimed at the DTC customer who buys products from multiple brands like: Brooklinen, Allbirds, Outdoor Voices and Third Love. It’s one way for Shopify to try to compete with Amazon, creating more of a unified brand and discovery experience. Similar to other quickpay platforms, Shopify gives you a unified account, allowing you to quickly checkout on any of their sites that offer Shop Pay.

Installment plans are worth considering

Price is another big barrier at check out. Buying a mattress or couch online? It’s often easier to stomach $300 for the next four months, than a $1200 payment right now. For higher price point purchases you can add a payment plan option such as Afterpay and Klarna.

Typically these processors allow customers to break their payments down into multiple monthly installments that automatically deduct from their credit card or debit account, often with zero interest. Furniture and Jewelry stores have been doing it forever, but with online shopping and the tech that has evolved, you can look at setting up installments for purchases as low as $35.

This is also a good option if your customer is younger and maybe doesn’t have an income yet, or only has a part-time job.

Other things to consider

• If you’re shipping internationally, you’ll also want to consider which providers work in which countries.
• Price is a factor and the fees can be a bit tricky.  If you are working on tight margins, make sure to do your due diligence. Offering PayPal on top of Shopify can end up costing over 5% on each purchase. It's important to weigh the increased conversion against the cost.

Our takeaways

Which payment processors we recommend will vary a little bit depending on the business and the customers, but here are some general reccos we’ll leave you with:

• Unless you have a good reason not to, you should have a Paypal button on your site.
• Try setting up an installment processor if your AOV is over $100.
• We suggest Apple Pay if you are doing a lot of mobile sales to higher income individuals.
• If you are on Shopify, there doesn’t appear to be any major cons to adding Shop Pay, since it’s likely targeting your customer.