Security and convenience. These are two of the critical themes of our 2016 Digital Commerce Benchmark report, which took an in-depth look at the state of SaaS and online services. The period between August 2015 and July 2016 indeed saw a number of interesting findings that are both relevant and valuable to software providers around the globe.
Here are 4 key takeaways from our 2016 Yearly Digital Commerce Benchmark, and their potential impact on your commerce strategy.
1. Security Comes First
Consumers of software—from all around the globe—are placing a distinct emphasis on security in their purchase decisions. In fact, security-related products, such as endpoint security and privacy protection, are among the most popular software in all of the three largest markets by sales volume (United States, United Kingdom, and Canada) Tweet. In all, seven of the 10 leading countries show security software as the most popular product.
2. Western Nations Dominant, but Countries on the Rise Offer Valuable Insights
Software sales remain focused on large economies. Only one out of the 10 largest markets, Japan, is not a Western country, while the other 9 are focused in Western Europe, North America, and Australia.
At the same time, the two biggest risers (Argentina and the Czech Republic) do not fall into the same category. Software sales volume in the two countries increased by 42% and 37% over the past year, thanks in large part to growing economies that have contributed to financial liquidity.
The fact that Malaysia (-7%) is experiencing declining sales volume amidst economic struggles further points to economic climate as a major factor in unlocking emerging markets.
3. Decreased AOV Points to Greater Emphasis on Subscription-Based Models
Two insights from this industry benchmark are particularly valuable for software vendors looking for their ideal business model. In the past year, average order volume (AOV) has declined by 6% globally, and now sits at $48 Tweet. This downward trend is occurring at the same time as an increase in subscription-based sales; between August 2015 and July 2016, 72% of all software sales are now connected to subscriptions, a 9% increase over the previous period.
For software providers, that means two things. First, software users increasingly prefer convenience in their payments. Rather than making an initial, high-priced purchase, they are willing to spread out their costs over a longer period of time, in exchange for continued software use. It also suggests the need for an emphasis on Customer Lifetime Value as an accurate indicator of sales revenue and growth.
4. Payment Methods Are Influenced by Local Markets
According to the Digital Commerce Benchmark Report, traditional payment methods still dominate. Over the past year, 70% of all software sales were processed using VISA and MasterCard, a figure that is consistent in both major markets like the United States (74%) and emerging markets like Argentina (76%) Tweet. Alternative payment methods like PayPal, which rose to 15.7% of global payments, continue to emerge.
However, a closer look at the trend also suggests the needs for localization in determining available payment methods. In China, for example, Alipay accounts for 53% of all software sales. Meanwhile, 36% of users in the Netherlands prefer to pay for their software using iDEAL. Understanding local market needs is a crucial part of successfully selling your software in individual countries. And software price matters, as well: AOV for bank and wire transfers, for example, sits at $224—more than 400% above other payment methods.
For further insights into global market trends, check out our Yearly Digital Commerce Benchmark Infographic here. The continuing shifts in the market are important to monitor, particularly for software providers looking to expand or establish a foothold in new markets.
Avangate powers modern digital commerce, solving the complexity of online commerce, subscription billing, and global payments for software, SaaS, and online services companies. Backed by a proven cloud platform, unmatched expertise, and a depth of digital commerce services, Avangate helps business service leaders drive the fastest path to revenue, maximize the value of every customer, and expand global reach. Contact us for more information about how our digital commerce services can help you grow your business
