What began online four or five years ago, depending who you ask, and is known today as the buy now, pay later (BNPL) phenomenon is now managing the rare feat of being in the moment while reflecting on the past — and planning for a potentially bright future.
A certain part of that future won’t be online — where BNPL found an ideal growth medium over the past two-plus years, in particular — but rather inside stores, where consumers are showing a marked preference for BNPL and become frustrated when they don’t find it.
Noting that physical stores did what they had to do to stay open and compete against the might of online ordering and home delivery during COVID’s worst, Zip U.S. co-founder and co-CEO Adam Ezra told PYMNTS in a recent interview that merchants know a trend when they see it.
“Naturally [stores are] wanting to see how they can implement these benefits across the entire business now, because offline commerce is still 85% of retail,” he said. “That’s where buy now, pay later can really have an impact by emulating what we’ve been able to do online.”
This comes into stark view in the new study In-Store Use Of Buy Now, Pay Later, a PYMNTS and Zip collaboration. Perhaps the most stunning finding is that physical merchants who are not offering and vigorously promoting in-store BNPL are leaving untold millions of dollars on the table.
It’s especially pronounced in luxury and specialty store settings, with 66% of surveyed bridge millennials and millennials saying they have a positive view of retailers offering BNPL as a payment option both online and in-store.
Seems like a love match, so what’s the problem? “Availability is part of the challenge,” Ezra said.
Many merchants now understand the upsell power of BNPL. Ezra said it’s also great “to deal with objections,” adding that successful retailers will invest not only in signage and marketing, but also in making sure store workers “understand this product so they can serve the consumer better when they’re in their stores.”
See also: BNPL Firm Zip ‘in Discussions’ About Buying Sezzle
The New Credit Calculus
While U.S. regulators have asked BNPL providers for more clarification around the product and whether consumers can get in over their head, we’ve seen an earlier version of this movie.
“If you think about credit, splitting [purchases] up over longer periods of time, or just the ability to pay over a longer time was actually more common previously,” via traditional credit cards, Ezra said. But many millions don’t qualify, and millions who do don’t like using credit cards.
“The short-duration product, the pay-in-four product, is what was really new and came to market four or so years ago,” Ezra continued. “At Zip, we’re actually in the process of rolling out a long-duration product. This just gives us the ability to expand the addressable market in terms of retailers we can work with, particularly as the prices or the purchases become larger.”
Consumer feedback to Zip — which acquired rival BNPL brand Quadpay last year — is that people “want the ability to split up, let’s say, a $3,000 purchase over 12, 18, 24 months,” Ezra said. “That’s something we’ll do, but the majority of spend is at much lower values.”
Access to zero-interest credit gives purchasing power to those with spending money without a revolving credit line, and is also being used as a spend management tool by more consumers.
“At the end of the day, it’s a far better, safer and more transparent alternative to traditional credit,” Ezra said. “Unlike other credit products, you can never end up in a debt trap.”
Related: Zip Debuts In-Store BNPL Payment Option in UK
Coming to a Register Near You
As physical retail traffic shows signs of increasing in 2022 despite COVID variants and winter weather, many merchants seeking recovery and growth are making BNPL a priority.
“How do you let the customer know that they can actually use this payment option when they’re checking out?” Ezra said.“ That’s where retailers are becoming a bit more creative, whether it’s signage, whether it’s on the way into the store, window displays, stickers, QR codes on collateral to make it really easy to download and learn about the product.”
The new study found that BNPL was available for roughly 50% of online purchases. Surprisingly, only 5% of consumers said BNPL was available in-store at businesses in their area, and 12% said the same of big box stores.
Those figures are finding new levels, however, as in-store BNPL demand and awareness grows.
“Over 15% of our transactions through the app are coming from in-store,” Ezra told PYMNTS. “We’re seeing similar lift in conversion, similar lift in basket size.
“The challenging thing, irrespective of industry, is really just doing it, making it available. There are benefits to retailers that are ahead of the curve here, because we’ve seen in the report that customers are prepared to [switch retailers], or they’re influenced by who they shop [with] based on whether or not buy now, pay later is available.”
Read more: Zip CEO Says BNPL Success Depends On Placing Merchants First
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