As the coronavirus crisis lingers on, North American retail companies are paying increasing attention to areas such as fraud prevention, curbside pickup options and contactless payment methods to better compete with the likes of Amazon.com Inc. and Walmart Inc., according to a new survey.

451 Research's "Voice of the Enterprise: Customer Experience & Commerce Merchant Study 2020" highlights how more than 260 small, midsize and large retailers are navigating the economic fallout of the virus to win customers at a time of social distancing. The retailers span the apparel, hospitality, home improvement and grocery segments. 451 Research is an offering of S&P Global Market Intelligence.

Retailers that adapt their businesses could ultimately make their businesses stronger in the long run, well after the pandemic subsides, said Jordan McKee, research director at 451 Research.

"Having a well-orchestrated strategy across sales channels is more important than ever," McKee said in an interview "Even when we begin to return to whatever normalcy looks like, digital will continue to be important and perhaps much more important than it was prior to the outbreak."

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The coronavirus effect

The coronavirus pandemic has had a profound effect on the surveyed businesses, with roughly 57% responding that the outbreak is negatively impacting on the company's overall sales. Approximately 28% noted a positive impact. That said, organizations that derived 50% or more of their sales from online services reported to be faring better amid the coronavirus than those that focus more on in-store sales.

"Those merchants that didn't have a significant online presence, or perhaps lacked a presence online at all, had to make a very short pivot as a result of the coronavirus outbreak," he said. "Those merchants that you could consider to be online-centric with 50% or more of their sales occurring online, appear to be much better positioned to accommodating increased traffic and increased sales volume."

McKee noted that some merchants' answers about the virus having a positive impact may be different today, given that the survey was fielded between the middle of March and early April, when many had not yet fully grasped the overall impact of COVID-19.

"Just about every merchant category has been affected, perhaps with the exception of pharmacy and grocery," he said.

Amazon vs. businesses

Businesses signaled concern over the threat that retailers like Amazon could have on them in the future. Some 36% of survey respondents noted that competition from retailers and marketplaces such as Amazon and Walmart was a significant inhibitor to their organizations' growth. Other significant inhibitors included the organizations' difficulty in finding expertise and staffing as well as legacy IT systems and logistics or supply chain issues.

But 41% of the surveyed organizations strongly believe that they can win back lost business from Amazon if they can cut their shipping times to two days or less, while 35.7% moderately agreed and 20.3% did not believe that to be the case.

Cutting shipping times will certainly be a challenge right now for businesses delivering a variety of essential and nonessential products, McKee said, adding that merchants must be realistic and transparent about whether they can follow through with promises to deliver goods within a certain time frame. Amazon itself has been unprepared for the recent surge in demand, experiencing delivery challenges in recent weeks.

"What we know is that speed and immediacy are key demands from customers," he said. "But the reality of the situation is that the vast majority of merchants are not going to be able to deliver on those expectations right now due to supply issues."

Payment flexibility

The coronavirus crisis has placed a spotlight on alternative payment formats, including options that require the least amount of contact possible.

The surveyed organizations noted that flexibility with payment options that go beyond cash and cards was of high importance for deepening customer loyalty, both through payment options as well as fulfillment options.

Nearly 35% of survey respondents indicated that flexible payment options such as installments, financing or pay-with-points programs were of high importance to keep customer loyalty. Other factors included flexible fulfillment options such as buying online or picking up in-store, fast shipping and price-match guarantees.

McKee noted that merchants are also gravitating to contactless payment options like Apple Inc. Pay and Google LLC Pay and credit cards equipped with tap technology that do not need to be inserted into machines to pay bills.

"Consumers are increasingly conscious about what we are touching," McKee said. "We are avoiding the usage of cash because that can be a vehicle to spread COVID-19. You're even seeing some merchants putting up signs asking their customers to use cards in place of checks for that same reason."

McKee also noted that merchants will be emphasizing seamless checkout experiences such as digital wallet systems that do not require customers to fill out laborious checkout forms and enter billing and shipping information. "It expedites and streamlines that whole process," he said.

On the fulfillment side, 51% of survey respondents noted they currently offer customers a way to buy online or in-app, as well as in-store pickup, while 10.3% plan to adopt that policy within the next year and 15.3% are hashing out a proof-of-concept.

Fraud prevention

Businesses will also be looking to prevent fraud. With more customers looking to purchase orders online, organizations are experiencing a higher number of fraudulent online transactions as compared to this time a year ago. Nearly 26% of survey respondents noted a significant increase in the volume of fraudulent online transactions, with another 31.6% experiencing a slight increase.

Retailers expressed concerns about fraud losses stemming from merchandise or charge-back fees that occur when a customer disputes a purchase. They also said they are worried about fraud's ability to create a negative customer experience and how much fraud management and anti-fraud technology costs their businesses.

The survey shows that reducing fraud is a major commerce and payment initiative of high importance at the organizations.

"They are looking to control losses at all costs, fraud, of course, being the key input into all of that," McKee said. "What we saw in the survey was a fairly significant increase in the volume of fraud attacks that merchants were experiencing year over year."

But it is important not to prioritize fraud prevention over the customer experience, which can result in turning away potential customers by "introducing friction on the path to purchase," McKee said.

"Yes, fraud prevention is important, but you also need to keep the customer experience in mind and prioritize some of those fraud-prevention approaches that don't introduce undue friction and keep those legitimate customers unscathed," he said.