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Episode 28: Customers Choose BNPL Options




Announcer: Welcome to this episode of “60-second Retail” - a BDO podcast keeping you in-the-know on events and trends in retail and consumer products industry impacting your bottom line, in just a few short minutes.

Jennifer: Hello, my name is Jennifer Valdivia. I am the West Region, Retail and Consumer Products industry group Leader at BDO USA. In this episode I’d like to talk about some interesting trends we are seeing in the retail and consumer products space. – specifically, AfterPay.

Layaway plans are not new to retailers. The buy-now-pay-later concept allows customers to spread out their payments and entices consumers to make a purchase, especially on bigger ticket items.

What is new, however, is the number of retailers getting behind these types of payment options.  Earlier this year, 68% of retailers stated they had plans to, or already had implemented AfterPay options, according to BDO’s 2020 Retail CFO Outlook Survey.

This has become especially appealing since consumers are more cost-conscious in the current environment, and as shopping has shifted online due to the pandemic.

Studies have shown younger generations are less inclined to use traditional credit cards because of previous debt or to avoid paying credit card interest. Thus, offering installment plans means people don’t have to pay in full upfront, which is similar to credit cards, but without the added interest.

So why is AfterPay so important to retailers?

For one, many carts are abandoned each year due to pricing concerns. The average online shopping cart abandonment rate is nearly 70%, according to the Baymard Institute.

Secondly, offering installment payments is proven to increase checkout conversion rates, which in turn leads to more eCommerce sales, and less items left abandoned in shopping carts.

Finally, the strategy of offering buy-now-pay-later solutions has proven successful in encouraging repeat customers and reaching new customers. 

In a world where eCommerce is an absolute necessity, a retailers’ biggest challenge is to create and maintain brand loyalty as they work to translate the pre-COVID in-person experience online.  So, while retailers have historically offered AfterPay options around the holiday season, it’s actually in their best interest to offer them year-round to capture spending potential.

In conclusion, allowing for AfterPay can lead to an increase in sales, at little to no risk for the retailers, since outside payment services are responsible for unmade payments, not the retailers. And it encourages consumers to shop now, and not push off their purchases to a later date, which may never come. Thank you.

Announcer: And that concludes this episode of BDO’s “60-second Retail” podcast. Don’t forget to tune in for the next episode!  To find more information on our hosts, guests, BDO’s services, or listen to previous episodes of “60-second Retail”, please visit www.bdo.com/60-second-retail.
 

 
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