Unlocking Success in the Ever-Evolving Retail Landscape: Insights from Afterpay and Square

Discover the latest retail trends and strategies to thrive in a changing economy. Afterpay and Square's comprehensive data analysis offers invaluable insights into consumer behavior and business opportunities. From enhancing in-store experiences to embracing omnichannel strategies, find out how to attract new customers, boost revenue and future-proof your retail business.

The economy seems to be a constant topic of conversation these days. In light of all of the recent volatility many retailers may be wondering how consumers are thinking about spending and what they can do to prepare their businesses. Based on Square and Afterpay U.S. data, consumers are still spending and the retail industry is growing.

To help retailers understand trends in the industry, Square and Afterpay have paired data from purchases made by millions of shoppers with sales from hundreds of thousands of retail sellers. Below are three things you should do to meet customers how they’re shopping today.

Give shoppers a reason to come in-store

During Covid there was a massive increase in online shopping, for obvious reasons. Despite this increase in online shopping, in-store shopping has rebounded and in a 2023 survey by PWC was found to be the method of shopping most common to the average shopper, slightly above mobile, 20% above PC, and 28% above tablet.

Many retailers have sensed this shift back in-store. In Square’s 2023 Future of Retail report, 94% of retailers reported a focus on enhancing their in-store customer experience, turning commerce into an event. Even with foot traffic back into retail locations increasing, it’s imperative that you give customers a reason to stop by outside of your core offering.

For example, many retailers are adding food service. The Afterpay and Square State of Retail report found that in retail locations the hiring growth of baristas, servers, and bartenders has outpaced overall hiring growth by 8x. Restaurants are already thinking ahead of the game here — an average of 20% of revenue now coming from products and services (definitely outside the lane of food!).

The hiring growth of baristas, servers, and bartenders has outpaced overall hiring growth by 8x

We refer to this growing trend as multihyphenate businesses - businesses that diversify their revenue by adding non-core offerings. Think of the coffee shop in your neighborhood that has hoodies sitting next to the register (which also serve as marketing for your business out in the wild!). With consumer trends seemingly changing by the day, you never know what outside-the-box offering can resonate and take off, while also building loyalty to your business.

Tip: Read about this restaurant that has 9 different revenue streams.

Need some other ideas? Our data found that consumer spending on services, such as spas, cultural and recreational activities, and entertainment, have trended higher than the retail industry average. With competition for consumer attention ever-increasing, it’s time to get creative and think a bit outside of your traditional lane.

Don’t forget omnichannel shopping is important, especially for Millennials and Gen Z

The way consumers shop, especially younger consumers, in-store shopping is just one possible touchpoint in the customer journey. The more touch points you offer, the more opportunities you have to not only reach new customers but to also build affinity with existing ones.

For example, think about someone finding your product on Instagram, clicking through to your website to learn more about your brand, and then ordering from their phone to pick up the item in-store. And while they’re in the store maybe they wander past another item that piques their interest. According to a report from IDC Retail Insights, businesses who employ an omnichannel strategy report a 15 percent to 35 percent increase in average transaction size, plus a 30 percent higher lifetime value than those who shop using only one channel.

The Afterpay 2022 Gen Z report found that 40% of Gen Z consumers prefer online shopping vs in-store because of its 24/7 availability and the ease of being able to search and find exactly what they are looking for. Online doesn’t just mean a website. For example, it was reported late last year that around 40% of Gen Z uses TikTok as their search engine, turning to ordinary people and influencers alike for their reviews on products, services, restaurants, places to travel — you name it.

Another benefit of the online shopping experience? Customer service. With that 24/7 availability, you are able to translate the in-person support that customers can receive in-store to constant support available at their fingertips digitally. Besides using it for shopping, the next-gen consumers are heavily leveraging their mobile devices as their primary customer support tool.

More than 84 million messages have been sent between sellers and buyers through conversational commerce platform Square Messages, with inquiries ranging from how to pick up an order to cost of services

If you’re thinking about how to upgrade your existing customer service tools, think about the hot new tool everyone is talking about — enter ChatGPT. This powerful tool can help answer customer questions in your chatbot, provide personalized product recommendations, and monitor the quality of your customer service conversations. It’s important to note that human oversight is a must, as any AI-generated output may not be accurate or ethical.

BNPL is key to a successful omni-channel strategy

A key component of the omnichannel experience that is often overlooked by business owners but essential to a successful omnichannel customer experience — payments.

The same Gen Z report found that almost 1 in 5 Gen Zs have abandoned a purchase in the last 12 months because their preferred payment method was not available. For many Gen Zs this preferred payment method is buy now pay later (‘BNPL’) with 44% of Gen Zs using BNPL in the last 12 months. The Afterpay and Square State of Retail report found that in the past year, 2 in 3 Afterpay online transactions from millennials and Gen Zers were made on mobile devices, with the volume of Afterpay transactions up 196% since 2020.

In the past year, 2 in 3 Afterpay online transactions from millennials and Gen Zers were made on mobile devices, with the volume of Afterpay transactions up 196% since 2020

It’s worth noting that the growth of BNPL isn’t driven solely by younger generations either. As of March 2023, the number of Afterpay orders made by Gen Xers and boomers increased 16% and 12%, respectively.

As we talk about Afterpay as an essential payment option across generations it’s also important to think of it as a customer acquisition tool within the omnichannel shopping experience. Merchants offering Afterpay report that 30% or more of their Afterpay shoppers are new to their brand.

As of March 2023, the number of Afterpay orders made by Gen Xers and boomers increased 16% and 12%

Tip: Don’t forget to use the free assets in our Marketing Resources Center to market to your customers across your channels that your business accepts payments with Afterpay. Square marketing can also help you send personalized email and text message campaigns to drive traffic to your online and physical stores.

Omnichannel is king

As you and other business owners wade through the current economic uncertainty remember that one of the best ways to future-proof your business is to think omnichannel. Expanding the channels you market on, as well as diversifying your revenue streams through non-core offerings, allows you more ways to connect with both existing and potential customers.