Clothing retailers looking to bounce back from sales declines are hoping for a Christmas miracle this holiday shopping season by offering flexible installment payment plans. In the Buy Now Pay Later Tracker, Daniel Demsky, co-founder of all-wool clothing retailer Unbound Merino, details how his company is leveraging BNPL to help make high-end items more accessible to consumers — and high cart totals more palatable.
Layaway was introduced during the Great Depression as U.S. consumers struggled to pay bills, and it became a common way to buy retail products and pay for them over time, interest-free.
A layaway plan has a store hold on to an item while the customer puts down a deposit and then pays the balance in installments, typically over two to three months, finally getting to take home the merchandise when all the payments have been made. The program began to disappear in the 1990s as credit cards grew more popular, but some retailers have continued to offer layaway during the holiday shopping season. Major retailers, such as Walmart, Sears and Marshalls, are now reintroducing layaway options amid the credit crunch caused by the pandemic.
Layaway is unlikely to gain a significant resurgence, however, given the rising use of buy now, pay later (BNPL). BNPL has emerged as a layaway alternative with the advantage of allowing customers to bring the product home before fully paying it off in installments.
A survey by PYMNTS and PayPal found that the biggest reason shoppers choose one merchant over another is the availability and acceptance of their preferred payment methods. Forty-eight percent of consumers who prefer BNPL services would not purchase items from retailers that do not offer it at checkout, in fact. The volume of downloaded BNPL mobile apps reached record levels this fall, with first-time app users growing 115 percent in September compared to the same month last year.
Toronto-based all-merino wool travel clothing retailer Unbound Merino has embraced BNPL by joining BNPL provider Afterpay‘s network. Unbound Merino Co-Founder Daniel Demsky told PYMNTS that the decision to add the payment method in October was a no-brainer to help customers pay for items, considering the shop’s average cart totals $170.
“I think, when you’re spending close to $200, BNPL can make it more palatable and make the items more accessible,” he said in an interview. “We suspect this is going to broaden the demographic.”
The Pandemic Effect
Demsky and two lifelong friends launched a crowdfunding campaign four years ago with the goal of raising $30,000 in pre-sales from what would become an all-wool online fashion retailer. The partners had nearly $400,000 worth of orders by the time the initiative was over. Wool products may be pricier, but they come with a variety of benefits, Demsky said, such as odor and wrinkle resistance as well as antibacterial and fast-drying qualities.
“The material is really, really expensive, and it’s really, really premium,” he noted.
The company’s luxury clothing items are now sold in more than 100 countries worldwide. The apparel industry was hit hard by the shutdowns caused by the pandemic, however, and Demsky said the company had to find its place in the new normal as sales plunged.
“We had a few months where things were really scary,” he said. “We focused on our existing customers, created new items and limited releases of new products and really engaged our emailing list. … People are traveling a little bit now, and they’re starting to shop a little bit more.”
Unbound Merino has started to see some semblance of normalcy as a result, and it will soon release sweatpants for the first time in an effort to help consumers live comfortably as they spend more time at home. Demsky said he only wishes the retailer had been offering the product in March, when many consumers began working from the safety of their homes.
A Rosier BNPL Future
The company turned to BNPL at a time when the payment method is expected to grow in use, especially as the holiday shopping season approaches and more retailers join the fold. Afterpay announced in October that its contactless digital wallet is being accepted in-store by major U.S. retailers, offering payments in four installments the same way they are carried out online. The nation’s largest shopping mall operator, Simon, also agreed in October to promote the BNPL provider in stores at its more than 100 malls. Afterpay said its merchant customers’ in-store purchases have increased by about 130 percent since the partnership with Simon.
Demsky said he is confident that BNPL will yield benefits for Unbound Merino, which has used BNPL for only a short time. The company’s collaboration with Afterpay will not only offer customers an option to pay in installments at no charge, but it will also add Unbound Merino to its merchant directory of 63,000 stores, expanding the company’s access to an audience of more than 11 million consumers who are eager to check off their holiday shopping lists.