Why Buy Now, Pay Later Is Retails Best Bet For The Holiday Season
With Black Friday and Cyber Monday on our doorstep Australian retailers are coming to grips with a challenging holiday ahead of them and realising how Buy Now Pay Later can provide retailers with a great advantage.
With many huge retailers like Walmart, Best Buy, and Target announcing store closures on Thanksgiving for health and safety reasons, 2020 seems poised to be the year we see door crushing sales finally replaced by online sales.
COVID-19 has seen our shopping behaviours change dramatically. COVID safe measures and ongoing lockdown have forced online shopping while eCommerce solutions have made it easier by instilling more confidence whilst doing so.
BNPL uptake has resultantly surged this year and anecdotal evidence shows broad support of BNPL for this holiday shopping season growing even faster than previous years. Here at home, Australians are the world’s leading BNPL users of companies like Afterpay, Zip and Klarna. This could give the rest of the world unique insights and trends poised to happen globally.
In 2019 over 8 percent of eCommerce transactions (used by nearly 2 million Australians) were done through BNPL apps and although this is a small fraction of the overall retail transactions it represents a broad shift in behaviour.
Australia's major BNPL vendors include:
- Afterpay
- Zip Pay
- Zip Money
- Klarna
- Splitit
- Openpay
- Sezzle
- Humm
- Brighte
- Laybuy
- Bundll
- Latitude Pay
- Payright
- And even a hair & beauty - focussed option, Salonpay.
Why is BNPL Surging?
As Millennial consumers have come of age with the expectation of cashless alternatives (ApplePay, web based payment apps), the move away from credit cards in what is quickly becoming a dinosaur in the industry. Nearly 28% of millennials use mobile wallet payments for POS transactions.
This year's remarkable economics of COVID, unemployment combined with Slow wage growth, and higher cost of living are also causing spending habits to change. Millennials are more focussed on their education, healthcare and lifestyle versus property ownership. Fintech sentiment is one of mutual distrust with over 35% of millenials with saying they don’t trust banks with their money.
In response, 57% of millennials are currently using BNPL services online and in-store. Merchants who support only credit or debit payments risk losing these shoppers to more savvy retailers. Once seen as an eCommerce only solution, BNPL providers are increasingly expanding offline enabling brick-and-mortar retailers POS options.
Requiring only a fraction of the products price upfront, paying off this debt incrementally and interest-free is far more palatable when purchasing something that might be outside of their current budget. Given slow economic growth, bushfires and unemployment rates its not surprising to see BNPL option in steady growth for items that are needed immediately but cannot be paid for upfront.
In fact, BNPL has been a boon to the retail industry. It’s been proven to boost average transaction value, helps grow a new customer base and increase repeat business decreasing the resistance to buy with easily integrated Digital wallets and Apps.
In addition a BNPL provider:
- Is a one-touch payment process.
- gives buyers instant gratification.
- lowers guilt and offers a more satisfaction to purchasing large ticket items.
- Makes the pain of paying seems less.
- Eliminates paperwork.
- Does not impact on customers credit score (except late payments as advised by individual vendors).
- Provides instantaneous approval. No need to fill in forms or wait.
- Provides budget security for customers.
- is more closely aligned with millennials values.
- Supports mobile payments.
BNPL for retailers
BNPL companies charge a fee that typically comes in the form of a percentage off the sale plus transaction fee to the retailer. Do your research on these costs. There are 16 BNPL vendors in Australia currently to choose from and each have their own specifics.
The benefits of using a BNPL payment option for your customers include:
- An increased average order value and repeat rate.
- Reducing financial barriers for customers.
- Creating a frictionless purchasing process.
- Short locked in contracts (typically 12 months).
- Fixed transaction fees (approximately 4%).
This year more than ever providing resistance to purchases in a difficult retail environment this holiday season should be a priority. Using a BNPL payment option can increase every business's bottom line not just for the season, but for repeat purchases. Australia is the world's most prolific users of BNPL systems and could be catalytic in this year's unknown retail environment.
If you’re considering how to improve or revitalise your eCommerce business, we would love to hear from you.
