Buy Now Pay Later (BNPL) is the latest buzzword in the retail industry. The media has been full of debates about the benefits and drawbacks of Buy Now Pay Later (BNPL) from the consumers point of view. However, when it comes to the point of view of the merchant or the seller, there has not been much discussion.
It needs to be understood that the pros and cons of Buy Now Pay Later (BNPL) financing are just as important for the merchant as well.
In this article, we will have a closer look at some of the common advantages of Buy Now Pay Later (BNPL) financing.
- Increase Conversion Rates: There is literally no doubt about the fact that Buy Now Pay Later (BNPL) financing helps retail businesses increase their sales conversion rates. Many surveys have been conducted in order to ascertain this.
In almost every case, more than 50% of the retailers have agreed that Buy Now Pay Later (BNPL) financing leads to higher conversion rates. This is because of the fact that this financing makes products more affordable to end consumers by providing them with the flexibility to make payments over an extended period of time.
Merchants who offer Buy Now Pay Later (BNPL) financing online have observed that customers who opt for such financing have a significantly lower rate of cart abandonment as compared to other customers.
- Increased Order Value: Retailers have also observed that not only do customers buy more products when they are offered Buy Now Pay Later (BNPL) financing but the products are also of higher value. This is generally because Buy Now Pay Later (BNPL) financing helps customers unlock purchasing power. Once customers have higher purchasing power, they become more concerned with quality than with price.
It is relatively easy to upsell to such customers by focusing on perceived higher quality of expensive products. Hence, retailers can generate higher sales and even higher margins as a result of Buy Now Pay Later (BNPL) financing.
- Increased Brand Awareness: If retailers do not subscribe to Buy Now Pay Later (BNPL) financing, then they are only able to generate brand awareness by spending their own money. This means that the retailer has to advertise in order to get any brand exposure. However, this is not the case when retailers begin to use Buy Now Pay Later (BNPL) advertising. This is because of the fact that Buy Now Pay Later (BNPL) service providers advertise a great deal themselves.
Almost all advertisements of such service providers also list their retail partners. Hence, retailers are able to get free publicity which increases their brand awareness amongst consumers. This is especially important for small and medium retail companies. It is also common for retail companies to see an influx of customers who are being redirected from the advertisement or website links created by the Buy Now Pay Later (BNPL) service providers.
- Higher Accessibility: The Buy Now Pay Later (BNPL) financing allows retailers to tap into customer segments which they have not been able to tap into earlier. For instance, Buy Now Pay Later (BNPL) financing makes the product available to customers with significantly lower income. Hence, such financing schemes allow retailers to make their products available to a wider audience.
For example, college students or young professionals are able to purchase expensive gadgets or fashionable clothing thanks to these financing schemes. Before the advent of Buy Now Pay Later (BNPL) financing, many of these people were window shoppers and not paying customers. Now, more people are driven to retailer stores. When this information is combined with point number one mentioned above i.e. higher conversion rates, we can understand why Buy Now Pay Later (BNPL) financing has become the darling of the retail sector.
- Encourages Impulsive Purchases: Several market research studies have shown that impulse purchases tend to produce a lot more revenue as well as margin for retailers as compared to planned purchases.
Buy Now Pay Later (BNPL) financing provides a route for the consumer to buy the consumer good that they always wanted or take that vacation that they have been longing to take for years.
In fact, retailers which sell products such as apparel, accessories and footwear have noticed a higher percentage of impulse spends coming from Buy Now Pay Later (BNPL) financing customers. It has been estimated that close to 60% of all millennial customers have made some form of impulse purchase using Buy Now Pay Later (BNPL) financing in the past year.
- Quick Turnaround Time: Last but not the least, it is important to note that Buy Now Pay Later (BNPL) financing does not add any time to the retail checkout.
The soft credit check happens almost instantaneously. As a result, the checkout experience is not inconvenient for the customers. This is also a key aspect since higher checkout times have been correlated with higher cart abandonment both in the online setting as well as in brick-and-mortar stores.
There is no doubt about the fact that Buy Now Pay Later (BNPL) offers some very attractive benefits to retail stores. This is the reason that the trend to use such financing has caught on like wildfire.
