Buy Now Pay Later Shines for Kid’s Clothing Retailer Sparkle In Pink

Buy now pay later is a necessity, even when producing and selling affordable children’s fashion.

That message came through loud and clear from Braden Larsen, IT lead at direct-to-consumer (D2C) children’s apparel marketplace Sparkle In Pink, and Sezzle CEO Charlie Youakim in a discussion for the new PYMNTS’ PayPal SMB Series.

As Larsen tells it, this SMB journey started with his sister’s entrepreneurial spirit and flare for design, a skillset that led her to hand-make her daughter’s clothes, then an Etsy shop and explosive demand that birthed Sparkle In Pink in 2011. Braden joined the team in 2016.

“Almost every management member has the same last name,” he joked while referencing the ascent of this growing family business. And that family business’s tagline is “Adorable Made Affordable” with an emphasis on “affordable” in a year flattened by inflation.

When they first encountered the installments concept, Larsen said, “With our clothes being so affordable, we were kind of hesitant about buy now, pay later because our average order value is $70 to $80, there’s not a ton of people that think you need to break that into payments.”

Subsequent customer surveys, however, confirmed a strong demand for BNPL.

Today, Larsen’s a fan, saying, “Now we see our AOV [average order value] for payments going through those payment methods is higher.

“Customers that are buying [with BNPL] are shopping more often because they’re able to afford more. Even if it’s $100, they’re like, oh, I can pay $25 at a time,” Larsen explained.

Youakim said that’s in line with a sea change in consumers’ use of credit: “I think what’s happening with buy now, pay later is that people like credit, but … they’re scared of their usage of credit cards. What they like about buy now, pay later is, I’m getting that time value of money, but I also have a planned repayment schedule.”

Read more: Bankful Merchants Can Now Offer Consumers BNPL Option

BNPL Is Sales Booster in Uncertain Economic Times

Larsen views BNPL  through the lens of an eCommerce merchant with a budget-conscious base, noting that customers shopping for quality kids clothes at low prices feel empowered by BNPL.

“I think the customers that are looking for this may not have the best credit and are afraid of traditional credit cards, but they’re wanting to pay chunks of it at a time because sometimes it’s lower-income families,” he said.

Sparkle In Pink’s own surveys show that many of its customers won’t shop with sites or stores that don’t offer a BNPL option. “It’s one of those things where I think consumers are shopping places specifically because they offer a certain type of buy now, pay later option,” he said.

Youakim said this story is now all too familiar. “If you want to start up an SMB in eCommerce, you’ve got to attach a buy now, pay later option into your site to enable customers that fit this demographic to purchase with you and potentially purchase more.”

To this stratum of shoppers, credit building is also an important consideration, which is why Sezzle Up was launched. Customers who opt-in have their BNPL repayments reported to credit bureaus, beefing up their scores without reaching for high-interest revolving credit cards.

Larsen added that “It’s kind of become a necessity, and as budgets get even tighter for families with high inflation and prices going through the roof, buy now, pay later I feel is even more essential. Being able to offer affordable clothes and then also offering the flexibility of buy now, pay later is going to help those families that are struggling.”

Read more: Sezzle Signs New $100M Credit Facility with Bastion, Replaces Goldman

Upfront Payments Seal the Deal for SMBs

With the economy wavering between bad in 2022 and possibly worse in 2023, Youakim said no-interest financing options like BNPL will see increasing demand from existing and new users.

Larsen said, “Once people use it they get become hooked because it’s one of those things that’s like, oh, I can buy so much more than I used to be able to,” adding that predictable payment plans give them the confidence that what they buy they can afford to pay off.

To that, Youakim added, “I think one of the biggest misconceptions from merchants — we hear it less now, but we heard it earlier on — was ‘I don’t want to add this option because it promotes overspending,’ and I would say it actually promotes anything but.”

For a parting thought, Larsen said one of the big questions he gets from other SMBs is about the cost of acceptance. Although there is a higher transaction fee than a card, Larsen said it’s a “non-issue” as Sparkle In Pink gets paid the full amount of the purchase upfront and Sezzle assumes all the risk if a customer should default.

“As a business, we receive the money regardless, if the customer pays it back,” Larsen said. “The business owner gets the money upfront. Maybe that’s something some businesses are unsure of. If a customer places a $100 order and they have to pay it off in $25 increments, we don’t get the money in $25 increments.”