To win over cash strapped Gen Z and Millennial shopper, apparel brands are launching buy now, pay later programs taking a cue from electronics and furniture companies that have long offered similar programs.
Abercrombie & Fitch — which in addition to its namesake brand also owns Abercrombie Kids and Hollister Co. — announced on July 1 it would partner with payment solution provider Klarna to enable shoppers to pay for purchases in installments. As part of the program, US consumers can opt to make up to four interest-free payments over the course of two months. They are one of many brands that are experimenting with this. In June 2018, Urban Outfitters announced it would offer Afterpay – a Klarna competitor that also offers interest-free installment options — opening up the program for all of its brands including Anthropologie and Free People.
While services like Klarna and Afterpay may seem like an appealing alternative to shelling out for a pricey dress or handbag, they can ultimately lead to shoppers paying more. Since multiple payments make a hefty price tag seem more palatable, consumers are more likely to pay full-price rather than wait for sales or discounts. This is, of course, intentional — Afterpay CEO Nick Molnar has said previously that the program has been proven to increase conversion rates and incremental sales by up to 30%.
“Consumers expect choice,” Pierson said. “Today they have options to rent clothing from places like Rent the Runway and they have different ways to buy. They’ve grown up with a lot of flexbility, so seeing something like this in fashion and apparel doesn’t seem unusual to them.”
Why it’s Hot
Paying in installments isn’t only for big ticket products anymore. As we work with our clients, especially when partnering with our eComm friends at Optaros, it’s important that we consider the best payment strategies that will convert customers.