Dramatic shifts are underway in the retail sector as it adjusts to consumers’ increasingly digital preferences.
Merchants are optimizing their eCommerce operations, but this is posing challenges for some, including luxury merchants. These retailers are accustomed to engaging with their customers in brick-and-mortar stores and building long-lasting relationships that lead to brand loyalty. Many consumers are shying away from physical stores, however, leaving these high-end merchants scrambling to develop strong online presences.
Luxury retailers are also targeting millennial and Generation Z consumers to expand their customer bases, with one report showing that millennials accounted for 35 percent of high-end retail purchases, for example. Customers from these generations often seek to avoid the debts and fees that accompany credit cards, too, making them less likely than older consumers to use credit cards. The latest Buy Now, Pay Later Tracker® examines how trends are therefore leading many luxury merchants to turn to flexible payment solutions such as buy now, pay later (BNPL) plans as greater numbers of younger consumers — and consumers in general — move online.
Around The Buy Now, Pay Later World
Installment payment providers have moved swiftly to capture the younger digital-first consumers who typically represent the greatest shares of their users. Existing worries regarding debt and other financial concerns have only grown among millennial and Gen Z shoppers during the pandemic, however, and this appears to be strengthening luxury brands’ adoption of BNPL options. Australia-based installment payment provider Afterpay, for example, has seen its revenues hit $3.8 billion this year — almost double last year’s total. This is partly due to the growing participation of luxury retailers that have signed onto the platform.
BNPL methods are also growing more popular for certain types of purchases, according to a study. It found that 19 percent of all digital beauty purchases and 18 percent of all such fashion transactions are conducted via installment payment methods. This trend is especially important for retailers in these industries to consider as the pandemic nudges more consumers toward eCommerce rather than brick-and-mortar shopping.
Most installment payment providers have designed their solutions for customers who want to break down payments into more manageable amounts, and the share of consumers in this group has swelled during the pandemic. This trend is pushing BNPL methods forward in the United States, with one survey finding that more than one-third of the nation’s consumers had used installment payment plans as of July.
For more stories on these and other BNPL headlines, read the Tracker’s News and Trends.
OAK + FORT On Navigating Changing Consumer Behaviors With BNPL
Many luxury retailers are facing challenges as they work to appeal to younger consumers in a tough financial climate. Offering flexible installment payment options could help these merchants put more expensive items within reach of more consumers, broadening their customer bases and helping reduce cart abandonment at checkout.
Offering these BNPL options in the U.S. has helped Vancouver, British Columbia-based accessible luxury clothing and accessories retailer OAK + FORT boost its sales, said Cooper Watts, the company’s director of IT and eCommerce.
Deep Dive: How Flexible Payment Plans Can Provide Consumers With Easier Access To Luxury Items
Merchants are facing a host of obstacles as well as opportunities in the rapidly changing retail market, and this is especially true for the luxury sector. Many are capturing consumer spending that would normally go toward travel- and hospitality-related purchases and transitioning their resources to focus on eCommerce sales that can sustain their businesses. There are still challenges they must confront, however, including learning to build deeper relationships with their digital customers and working to reach younger consumers.
This month’s Deep Dive examines how BNPL payment plans can help retailers expand their customer bases online and meet the needs of millennial and Gen Z consumers.
About The Tracker
The Buy Now, Pay Later Tracker®, a PYMNTS and Afterpay collaboration, brings you the latest news and research from the BNPL and retail space. It features expert analysis regarding changing payment trends as well as insights from top insiders within the retail and fashion industries.