In a landscape marked by economic uncertainty, Sally Beauty is witnessing an interesting shift in consumer spending patterns.
During the third quarter, Sally Beauty announced that the inclusion of the Klarna buy now, pay later payment option has led to an increase in average order value, while also introducing a fresh and younger customer demographic to the Sally Beauty platform.
Younger shoppers are turning to the buy now, pay later (BNPL) model, to satisfy their beauty cravings while keeping their finances in check. This week, PYMNTS reported that BNPL is gaining traction as a budgeting instrument, notably among millennials. This trend coincides with the imminent conclusion of the suspension of student loan payments.
This autumn, when those payments recommence, PYMNTS research suggests that millennials carrying student loans could witness a reduction of 6.5% in their available spending capacity.
Additional findings from PYMNTS research highlight a trend over the past few months: Younger consumers, including millennials, have transitioned a larger portion of their expenditures to credit cards. This shift suggests that managing debt obligations is poised to become even more challenging.
According to Sezzle CEO Charlie Youakim’s conversation with Karen Webster, there could be a temporary reduction in spending in the upcoming period. However, it is anticipated that BNPL will experience a broader adoption, as consumers acclimate to their altered financial circumstances.
“We’ve seen this since the start,” Youakim said. “Budgeting is top of mind … and BNPL is a budgeting tool.”
Read more: BNPL Used as Budgeting Tool, Especially by Millennials, Says Sezzle CEO
The surge in BNPL usage resulted in Sally Beauty eCommerce sales rising 7%, to $34 million, representing 6.4% of segment net sales for the quarter.
“We recently launched Klarna on our eCommerce site. And the buy now, pay later opportunity is bringing in new customers to us, and it’s actually increasing basket as well,” said Denise Paulonis, president and CEO, board director at Sally Beauty, during the company’s Q2 2023 earnings call on Thursday (Aug. 3).
The increased basket size can be attributed to the inclination of BNPL users to make larger purchases in a single order. This behavior is driven by a sense of comfort rooted in the concept of mental accounting. When people earmark money for specific purposes like monthly installments, they compartmentalize their financial resources, making it simpler to justify bigger expenditures. By fragmenting a transaction into smaller, more manageable portions, shoppers using BNPL perceive the total expense as less daunting.
In the third quarter, Sally Beauty recorded consolidated net sales of $931 million, a 3.2% reduction year over year (YoY). There was a decrease of 352 stores in operation YoY.
Global eCommerce flourished, rising 3% YoY to $83 million, equivalent to 8.9% of the consolidated net sales for the quarter.
Consolidated comparable sales grew 0.6%, propelled primarily by Sally Beauty’s sales recapture rates, an outcome of the company’s recent store optimization.
The third quarter’s consolidated gross profit stood at $474.7 million, a 3.2% decrease from last year, when it was $490.2 million.
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