With Buy now, pay later (BNPL) gaining popularity among young consumers, the temptation to introduce the BNPL option in luxury brands is taking over.
Convenience is the new normal in today’s world. Consumers desire everything that makes the entire experience easier, whether buying from the comfort of their home or payment flexibility. Transformative technology is facilitating this convenience. With the advancement of technology, there has been a significant shift in consumer shopping behavior and eCommerce.
Consumers have always looked for payment flexibility in their purchases. BNPL is a relatively new method on the horizon. It is, however, gaining popularity among young consumers who harbor a desire to enwrap themselves in plush buying, but their desires are averted due to payment issues. A burgeoning population of Gen Z and Millennials prefers to purchase high-end items. They may, however, be unable to shop using traditional payment flexibility alternatives such as credit cards. BNPL is a godsend to such young customers, allowing them to indulge in luxury purchases.
What does data show?
Data corroborates this growing curiosity of Shoppers. According to a study conducted by PYMNTS in collaboration with Zip, 56% of luxury store and specialty boutique shoppers were “highly interested” in using installment payments for online purchases.
Sensing the pulse of the young consumers, many luxury brands are jumping on the BNPL bandwagon to entice more young consumers. Let’s understand why this payment option is gaining popularity and why your brand should introduce the BNPL method.
- Adding incremental sales: Many aspects of consumers’ purchase behavior were altered due to the pandemic, including payment. Throughout the pandemic, several retailers abandoned layaway in pursuit of the BNPL model, which became popular during the crisis. In 2021, the worldwide consultant Accenture produced a report commissioned by BNPL technology supplier Afterpay, stating that online spending via BNPL has climbed by 203 percent in the United States since the beginning of 2020.2
BNPL is a global trend that is fast penetrating the Indian market. The report titled “The India Buy Now, Pay Later Report 2021″ by Zest Money corroborates the trend that BNPL use among Gen Z went up by 232% in 2021.
Payment in installments eases the financial load of the consumer, allowing them to manage their budget more efficiently. As a result, the two parties’ trust grows, resulting in incremental sales, a higher frequency of purchases, and higher average purchase sizes.
- Attract New Consumers: For a long time, luxury buying has been reserved for the economically privileged. But technology is democratizing and making luxury affordable. The BNPL model is a gamechanger in this direction, attracting consumers from different backgrounds to indulge in luxury buying. BNPL systems are recognized for generating average order values of up to 85 percent and a 20 percent repeat purchase rate, in addition to attracting a new type of consumer.
- Enhancing consumer experience: The BNPL method gives consumers the utmost flexibility to shop on their terms. Purchasers can decide on the first payment amount for the goods they buy. BNPL makes stress-free online shopping available to consumers of all spending levels, whether they are looking for big-ticket items or smaller purchases. Thus by offering this flexible, customer-centric shopping experience, retailers can make the customers empowered to shop on their terms. This, in turn, enhances brand loyalty and customer satisfaction.
- Higher Conversion: BNPL is emerging as a proven method to improve conversions. This revolutionary weapon in the retailer’s arsenal helps split up the total cost of purchase into multiple installments. Enabling shoppers to afford luxury items and make more frequent or higher value purchases. This approach aids conversion by reducing friction throughout the funnel. Customers examine product prices at two key points: first, when they view a product page, and second when they check out. With the BNPL system in place, a shopper would be presented with an acceptable price at each of these important points, removing any hesitancy a customer might have while deciding whether or not to add something to their cart, as well as when they click to check out.
- Enhanced Growth Prospects: Evolving consumer mindsets, eCommerce growth, and enhanced digital skills brought about pivotal changes in the digital payments market. The global buy now, pay later market was estimated at USD 5.01 billion in 2021, with a compound annual growth rate (CAGR) of 26.0 percent projected from 2022 to 2030.5 Thus, it offers promising strides in the years to come for businesses who adapt to the technology. Projections have it that even Asia pacific countries are quickly adapting to BNPL.6
Convenience is the key. Brands must live by this maxim and incorporate it into every aspect of their operations, including payments. The BNPL technique is beneficial to customers. Why companies should use it, though, is a question that retailers are pondering. Due to the pandemic’s impact on consumer spending and rising prices, the BNPL model can help consumers afford luxury purchases by providing a no-cost deferred payment option. For premium brands, incorporating this means of payment can be a game-changer in increasing client loyalty and sales.