How to avoid checkout cannibalisation

Wednesday 3rd July 2024

Jeweller helping a man at the main checkout desk

As a retailer, you understand the importance of giving customers a variety of payment options when they get to the checkout. But can too many payment options confuse your customers, or lead them to pay via a more expensive method that ultimately impacts your bottom line?


What is checkout cannibalisation?

Checkout cannibalisation occurs when cash or card customers make a purchase using an alternative payment method, such as interest free credit or low interest finance.

It usually happens if you’re not transparent about your payment options from the get-go. Let your customers know straightaway if they can spread the cost to help them make a more informed, meaningful purchasing decision. This will ultimately convert customers and improve average order value.


So why does checkout cannibalisation matter?

Some payment methods are more expensive than others, and this can impact your profit margins. If a customer was always going to make a purchase, but choose to use finance for convenience, this could start to become costly. You’ll be paying subsidies to allow your customer to use finance, when they would’ve made a purchase using a cheaper payment method anyway (such as a debit card with a lower transaction fee).

Fortunately, checkout cannibalisation will rarely impact you or your bottom line if you integrate your finance options effectively.

That’s because finance is more than just a payment option. It should be used as a selling tool to bring in customers, keep them captivated and potentially even persuade them to spend more with you. To make finance work harder for your business, you need to let customers know about it right at the very start of their journey.

How to reduce the impact of checkout cannibalisation

1. Promote your finance options at every stage of the customer journey

One of the best ways to avoid checkout cannibalisation is to be upfront about the payment options available so there are no surprises when a customer gets to the checkout.

A customer that is intending to pay upfront using a debit or credit card will have already chosen the product they want, that’s affordable for them, long before they reach the checkout. They’re unlikely to make a last-minute decision to fill out a finance application for a purchase they know they can afford outright. And they’re almost certainly not going to go right back to the start of their journey and spend more once they realise finance is available – it’s just too late.

However, tell the same customer that retail finance is available right at the start of their journey (let’s say there’s a window sticker on the front door, or a banner on your website’s homepage), and they can begin their shopping experience knowing they can spread the cost. They’ll be much more likely to spend more than they could afford outright, too.

Promoting finance in-store

We’ve talked before about how to promote finance in-store, and this really is one of the most effective ways to shop checkout cannibalisation. Our top three tips are:

  • Place POS materials (hangtags, window stickers, posters) throughout your store – particularly in high-traffic areas and at the entrance
  • Train your in-store team so they’re comfortable discussing the finance options available
  • Give customers the option to complete their finance application online or take it away with them to complete at home

Promoting finance online

Your website obviously promotes your products, but are you waiting until the checkout page to tell your customers about your finance options?

  • Include a banner on your homepage showcasing your finance options
  • Make sure every product page explains the finance options available, preferably with an embedded calculator so customers can work out how much the product could cost them each month
  • Promote soft search functionality (if available), so customers can check their eligibility before going ahead with a full application

2. Understand how your customers use finance

To keep track of checkout cannibalisation, you need to have a firm grasp of exactly how customers paid and how they intended to pay.

We regularly survey customers to find out the impact of finance and can segment this information by sector or even by specific retailers. As a result of this fact-finding mission, we know that 57% of customers surveyed would not have made a purchase without our finance options being available and 58% spent more because of it.

3. Stay driven by data

Your sales figures will tell an interesting story. Take the time to analyse your stats and identify any patterns or trends when it comes to how a customer pays for their order.

For example, if you notice your card sales dropping and sales via finance increasing, but your overall figure is roughly the same, then you could be experiencing checkout cannibalisation.

However, if you notice your sales from customers using finance increasing and overall basket value going up exponentially too, this could actually be a good sign. It indicates your average order value is increasing thanks to finance being available.

4. Work with the experts

We work closely with our retail finance providers to support them when integrating our finance options. From advice on how to promote finance to expert analysis on your finance figures, our consultative service helps retailers grow their business.


Case study: Reaching the right audience by improving the customer journey

A jewellery client of ours onboarded our retail finance solutions. But they didn’t shout about finance anywhere on their site, so it came as a surprise to customers when they discovered they could pay by finance at the checkout. As a result, the retailer had an accept rate that was lower than expected.

They worked closely with our team to adjust the customer journey, displaying the finance options on the homepage and across product pages. We found their accept rate doubled.

The retailer’s sales had not only improved, but they were now also targeting a more suitable demographic for finance – those who wanted to browse already knowing they could spread the cost.


Look out for reverse cannibalisation, too

We know retailers can be concerned about pricey payment options out-performing cheaper ones. But you should also look out for low utilisation of retail finance. This could suggest customers are confused by your payment options and end up going with the most straightforward method (usually paying by card) even if it isn’t the most suitable option for them.

Four or five different payment providers all offering slightly different products over slightly different terms can be overwhelming. This ultimately creates a poor customer experience.

While offering too many finance options is normally a bigger problem for online retailers, it can also happen in-store. Opt for a small but carefully selected suite of payment options, and your sales team will be much more confident discussing them with your customers.

Follow us for more tips on how to make retail finance work harder for your business

Our expert team regularly share their insights on our Hints and Tips page and Novuna Consumer Finance LinkedIn page. We share our thoughts on everything from myth-busting retail finance to utilising your retail finance offering.

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