Amazon/PayPal checkout widget wars reach Europe

Profile picture for user kmaciver By Kenny MacIver October 9, 2014
Summary:
Amazon widens global assault on PayPal with launch of Login and Pay service in UK/Germany — early adopter AllSaints reports big leap in checkout conversions.

AllSaints-SoHo-Flickr-Thomas Gehrke
AllSaints: Amazon conversion

AllSaints, the “directional” London-based fashion brand, has an instinctive distrust of anyone else’s core competencies — not least of all in technology. With around 120 stores worldwide, 2,400 employees and £199 million ($320m) in annual sales, the company vigorously applies a vertically integrated business model and is famously paranoid about letting any third party near its designs, production or distribution. It commissions bespoke music for its stores, where the interiors are hand-crafted right down to their individual fittings by a team that also builds much of the furniture seen in its offices. Alongside, it has a software team of 25 which provides all of its core applications, from warehouse management to EPoS to its global website — again, all entirely in-house.

So how come AllSaints has become one of the very first companies in Europe to bolt on Amazon’s Login and Pay module to its ecommerce site, and start singing the praises of that ‘frictionless inline checkout’ over its own buying process?

The answer lies in some compelling metrics. But it also points to the early days of a checkout widget war that is underway between Amazon and PayPal — and which may even have influenced eBay’s recently announced plans to spin off PayPal and free it of its auction-site association.

In offering online customers such a checkout service — essentially an API that enables customers to bypass the tedious task of entering new or half-forgotten website sign-in, credit card and delivery details, and instead use trusted and commonly used credentials — AllSaint’s Richard Ascott, global director for digital, was recently highlighting the unprecedented nature of its decision at the Retail Week Technology and Ecommerce Summit in London:

We own everything ourselves. We partner with almost nobody. But we have found something that’s quite interesting here. All of the business questions that we ask about customers every week — about traffic and device usage and so on — they don’t care about. What customers care about are three things: speed, security and convenience. The longer a payment process takes, the more likely customers are to abandon their basket; the more windows and info, the more likely they are to abandon their basket.

Ascott cites research that shows that 57% of people say if a website takes three seconds to load a page they leave. On security, he’s convinced by numbers that suggest 80% of people feel more comfortable when they see trusted payment logos like Visa or MasterCard.

Richard Ascott -CDO-AllSaints
Richard Ascott, global director for digital at AllSaints

But, even more than those, AllSaints is obsessed about delivering convenience to the customer: Unlike almost all of its rivals, it maintains 24x7 customer service — in seven languages. It provides free next day delivery up to 9pm. And it even sites its distribution centers right next to the depots of courier services like UPS just so it is the last company pick up of the day.

Express checkout

Those three aspects were front of mind when AllSaints set about redesigning its website in 2013. The company rebuilt its standard online checkout process and in the process took a full minute off the average customer checkout time — to good effect: the conversion of customers from browsers to buyers tripled. “That new process benchmarked really well against the competition and we were feeling pretty good about that when Amazon came and asked if we wanted to partner.”

Despite innate skepticism about outside technology, Ascott could not question some of the fundamental numbers:

What you have here is just a simply, elegant way of using a power that has gone beyond the tipping point. We are all members of Amazon [there are over 144 million active Amazon customer accounts worldwide]; we all have Amazon logins; it’s one of the few passwords we remember. I have never come on stage and endorsed other brands but using [the Amazon tool] just takes out so much of the friction. And that shows in the initial data for basket share.

Since installing the Amazon button alongside its own checkout, AllSaints has run numerous speed trials. It has found that new customers using its own checkout process take an average of 1 minute 34 seconds to complete the process; for those working with data pulled in from their Amazon account, the average drops to a mere 29 seconds.

After just a week of data, other metrics were equally impressive:

  • Amazon took 24% of basket share even when up against the usual line up of Amex, Visa, MasterCard and, indeed, PayPal. At AllSaints in the US, the Amazon widget instantly became the number one checkout choice.
  • Conversion through the checkout rose by 34%
  • Average transaction value increased by 15%.

As Ascott argues:

It feels to me like a no-brainer so far. It is intuitive and people are just using it. We’d primed our customer experience team to talk people through how to use it, but in the initial period they didn’t take a single call on that. When you are confronted with somewhere where you can remember your password and you don’t have to find your credit card, it just increases propensity to convert.

Amazon’s experience in the US, where Login and Pay was launched a year ago, shows such conversions are driven by the strength of the brand of the seller and the associated level of trust. As Amazon Payments’ Annemarie Jung, director of external payments for Europe, outlines:

If it’s a well-known brand, speed might be more important than other aspects, but with a smaller seller, whose brand is less well known, and where customer trust in the website still needs to be build, then the trust they have in Amazon plays an important role.

Sting in the long tail

However, the kind of uplift seen at AllSaints comes at a not insubstantial cost to the retailer — especially in the UK. In that market, which accounts for 10% of Amazon’s global sales, retailers using Login and Pay are being charged 3.4% plus £0.20 per transaction (volume discounts are available). That’s a lot more then the “interchange fee” of 1% to 2% typically charged by credit card companies. And Amazon is varying that significantly across different country markets.

In Germany, which accounts for 14% of Amazon sales, retailers adopting the widget pay just 1.9% and €0.35. Those compare with US costs per transaction of 2.9% plus $0.30, with discounts for those processing $3,000 or more a month or who have numerous micro-transactions of less than $10.

My take

Amazon is playing the long game in payments. Over 20 years it has build almost-unrivaled levels of trust, with customers happy for it hold their personal information, address lists and multiple credit card details. It’s previously offerings with Pay with Amazon and a login widget hardly caught fire. But by combining these and taking the service global, it has thrown down the gauntlet to PayPal, and offered to solve one of the biggest ecommerce headaches for companies that exist at the lower end of the long tail — albeit with a sting in that tail of hefty transaction fees.

It’s unlikely that All Saints or others on the UK’s initial adopter roster — such as SecretSales.com, Moss Bros and MastersofMalt.com — are paying anything like those levels at this stage. But by the time they are exposed to the full fees, they and others will undoubtedly be hoping that open rivalry between Amazon and PayPal (which charges UK merchants a fee of between 1.4% and 3.4% plus £0.20 per transaction depending on how much they sell) will have started to drive those down. After all, we’re only talking about a widget here that can be swapped on or out at any stage.

• Richard Ascott and Annemarie Jung were speaking at the Retail Week Technology and Ecommerce Summit in London.

Image credit: Flickr/Thomas Gehrke