Buy Now, Pay Later Becomes Physical Attraction For Brick-And-Mortar Stores

It’s a year on from the onset of the pandemic, and consumers’ everyday lives have changed drastically since then.

PYMNTS’ latest research shows that consumers have come to appreciate the ease and convenience of working, shopping and ordering food from home so much so that roughly eight out of 10 of those who have made the digital shift no longer wish to go back to performing these activities out in the world as they did before the pandemic.

But what about shopping in physical stores? What about returning to the mall? As vaccines continue their inexorable progress, the question hangs heavily in the air for retailers everywhere: Will consumers come home to physical shopping, or thoroughly digitized, will they continue to eschew the physical store not because they have to, but because they can?

The brick-and-mortar business community is betting that when they can, consumers will return to at least some level of physical shopping. And it’s possible that when they do, new twists on payments will be one of the attractions. It was a topic of an On The Agenda conversation about the future of physical shopping post pandemic, led by PYMNTS CEO Karen Webster. On the panel: Mall of America Executive Vice President Jill Renslow, Afterpay U.S. CEO Nick Molnar and mall owner Unibail-Rodamco-Westfield Senior Vice President of Marketing Karen Strack.

“Consumers want to be in the physical space,” Strack said. “They want to be able to touch and feel products and not have to lean completely on online. That said, we’re really not going to go backwards. There were a lot of silver linings with 2020, and acceleration of innovation around different touchpoints, including new offerings like curbside or buy online, pickup in store, or buy now, pay later. There are all these different tools that now we can offer consumers to make it more convenient for them to shop.”

That convenience, Afterpay’s Molnar said, is something customers across the board are looking for in all of their shopping experiences. There is a popular misconception in the field that younger millennial consumers are all digital-only shoppers who have no interest in ever shopping in a physical store again. But that isn’t true. The top 10 percent of Afterpay’s customers are 75 percent omnichannel. They’re shopping anywhere and everywhere, across channels, and are looking for the merchants that can give them the best, smoothest, safest and more transparent journey along the way.

“What we’ve heard so much from consumers is about them really wanting to come back to a new experience,” Molnar said. “So, we’re taking a deep dive in regard to the journey, really making sure that we meet the customer where they are and producing an experience that is appropriate to each and every demographic and segmentation. I think that as we see more and more individuals be vaccinated, we’re going to see a lot of those behaviors continue to evolve.”

One of those evolutions, the panel agreed, is going toward buy now, pay later (BNPL) payment mechanisms that are already showing strong signs in the digital environment that are ripe to take on a starring role in the recovery of physical retail.

The Physical Evolution Of BNPL

Strack said the U.S. has been somewhat slower to the BNPL market than other nations, a fact the panel richly agreed with, with Molnar noting that BNPL is one of the few places where the U.S. is looking to Australia for innovation pointers. The powerful appeal of such payment configurations, Stack said, cannot be overlooked when it comes to reimagining the in-store shopping experience to provide consumers a better overall experience.

“BNPL allows everything to be accessible to all of the consumers,” Strack said. “And one of the observations that we have had is that a lot of the shoppers are graduating through that process. So, especially with a luxury client, they might actually just start with buying an accessory or a scarf. And then they start to really understand the value in that [they] can control their budget, and they’re graduating to handbags and higher-end prices. And from a retailer perspective, that’s creating lifetime value in your shopper. It’s a really big bonus.”

Strack said it is in Unibail-Rodamco-Westfield’s interest to leverage its own platforms — social media, digital screens in stores, or the Westfield apps — to promote those retailers that are making a BNPL offering. She said it is demonstrably true that as retailers diversify their payment options, they’re also diversifying their target audience and consumer base.

And more than merely promoting their BNPL retailers, Mall of America’s Jill Renslow said, the great retail return presents an opportunity for them to do even more in this arena to transition BNPL into the realm of physical retail.

“I can tell you from a mall perspective and a landlord, what we look to do is to create these relationships and opportunities that we can then bring that to our tenants,” Renslow said. “I think they’re all overwhelmed right now with a lot of the operational changes that have really peaked during COVID. So, when the landlord can bring these opportunities to them, to plug and play … we’re seeing success with exposure to these opportunities. And so, we’re excited to be able to have that opportunity to develop these partnerships with the buy now, pay later partners to roll that out more widely across the property.”

Opening To A New World Of Opportunity

The major challenge facing BNPL’s outward movement among merchants in the physical world, the panel agreed, is a perceptual one. Previous experience has created the perception that new payments integrations are always going to be a heavy technical lift, and after a year of fast digital pivots, the looming possibility of one fails to excite. The trouble, Molnar said, is that this is a total misapprehension, and the reality is the company has partners now who start using its offering in the physical world because the integration is so simple to get up and running immediately.

“There’s a real opportunity to lean into the contactless curve for retailers that is happening all around us,” Molnar said. “There’s a lot of opportunity in how different retailers can operate buy now, pay later products in the physical world. There aren’t a lot of online payment products that have successfully gone offline from online, but we already processed 25 percent of our Australian business in the physical channel. And there’s no reason why that can’t be our fastest growth channel for the next couple of years.”

And that physical channel, Renslow said, doesn’t necessarily need to be limited to retail. She noted that for her firm, which has extensive travel and leisure partnerships and holdings, the possibilities for binging in BNPL as the world is recovering on the whole are quite wide.

“We all deserve to treat ourselves, and we all want to get out and have fun and be able to take these vacations,” she said. “… this program is much more geared toward the younger generation that doesn’t necessarily have that discretionary income, but who still want and deserve to treat themselves. And when we look at the tourism industry, for us it is so important, and … we can package hotels with attractions and really look at that experience that we’re all hungry for right now. I love the fact that this is such a great option for travel.”

It’s also a great option for treating oneself, which the panel agreed uniformly the entire consumer world needs after a year of shutdown. BNPL is a tool that can do that — for an entirely new and emerging demographic of customers.