Since the dawn of shopping (or, as far back as the 1840s), postponed payment has been a compelling concept. Breaking large purchases into smaller installments is as attractive for the buyer who’s short on cash as it is for the seller seeking customers of all budget sizes.

“Buy now, pay later” as we know it today probably started with department stores like Nordstrom issuing private-label credit cards in the 1980s and 90s, and in the past decade, BNPL has grown into its own market.

“Retailers loved it at the time because it gave them visibility into customer purchases and history…it was like a de facto loyalty card. But managing the finance side was always a pain,” Nikki Baird, VP of retail innovation at Aptos, told Retail Brew. Enter: BNPL fintech startups.

• Affirm was an early adopter in the space, circa 2012, followed by Afterpay two years later.
• After 10 years operating in Europe, Klarna introduced its services in the US in 2015. Sezzle was founded the next year.

The time is now: These not-quite-credit services, trailing the 2008 financial crisis, have become more popular in 2021. Baird chalks it up to Covid-era “uncertainty,” people laid off from their jobs or fearing another disaster. Consumers want the opportunity to hedge and hold onto money, just in case.

• BNPL spending in the US is up 230% since 2020, per a September report by Accenture (that was commissioned by Afterpay). It’s estimated to total ~$226 billion this year, according to a Juniper Research report.
• PayPal claimed BNPL volumes increased 400% on Black Friday alone.

“There are fundamental shifts happening in how consumers shop, pay, and bank. The pandemic accelerated online shopping and demand for BNPL services, and the old banks and credit card systems have not kept pace,” David Sykes, Klarna’s head of North America, told us.

We’re buying

Retailers in turn are hopping on the BNPL train in droves. Klarna now works with 250,000 global retailers including Macy’s, Sephora, and Under Armour. Afterpay’s roster counts Nordstrom, Lululemon, Urban Outfitters, and even Amazon.

• Speaking of the tech behemoth, Amazon just recently partnered with Barclays to roll out an installment-plan service in the UK. (It also linked up with Affirm this year.)

“What buy now, pay later does is it takes all of the risk from the financial perspective off of the retailer…and it lets them outsource it,” Baird said. “The fee they ended up paying the buy now, pay later company, in order to work with them, is totally made up on the volume that they get out of consumers who maybe wouldn’t have made that sort of larger outlay all at once, but is more than happy to break that up over three or four payments.”

• Merchant fees per BNPL transaction can range from 1.5% to 7%, noted the Kansas City Fed.

It’s also a value add: Offering BNPL boosts retail conversion rates 20% to 30%, according to RBC Capital Markets estimates. Ticket sizes, on average, see a 30% to 50% bump.

“From a merchant perspective, they’re looking for new ways to attract a younger audience and a different audience,” Afterpay’s GM of North America, Zahir Khoja, told Retail Brew, “but also a higher basket size from a demographic that they may not have attracted in the past.”

It’s not just e-comm. BNPL is following shoppers (and Gen Z, in particular) back to the store. Click here to read more.—JG

While last-minute holiday gifters may still be recovering from any final, desperate shopping sprees (or finding stray gift cards in couch cushions), VCs have been putting startups in their carts all year long.

Across the world, retail funding totaled $5.1 billion this year, per PitchBook data, with 141 deals made in all. But which were the biggest? In the US, one industry dominated.

Here are the five largest rounds of the year (as of December 7). You’ll see a theme emerge pretty quickly.

5. Jokr: $260 million in December

Fifteen-minute delivery took over 2021 faster than we could finish this sentence, with the $$ following just as quickly. This round made Jokr a unicorn less than a year after it was founded.

CEO and founder Ralf Wenzel told us at the time that the investment will go toward creating “the ultimate shopping proposition.”

• “We want to be the biggest challenger to classical supermarkets and eventually to all of retail,” he said via email. “We are creating the most customer-centric e-commerce business in history.”

4. Instacart: $265 million in March

The delivery company has raised so many rounds of funding, coverage of this one didn’t even get a letter (I? K? R?). But it did get Instacart a $39 billion valuation.

Still, everyone is still wondering when Instacart will go public, which was teased out this year at one point. The latest? Next year, maybe—or even later, sources told The Information in November.

3. Weee!: $315 million in March

Perhaps that’s how the specialty e-grocer reacted when it landed this huge Series D round (we might’ve said, “Wooo!”), considering it valued the company at $2.8 billion. It also brought its total funding to $415+ million.

Weee!, which focuses on Asian and Hispanic foods, planned to use the capital to get into new cities and categories.

• Investing in warehouse automation was also on the list.

2. Gopuff: $1 billion in July

Don’t be surprised to see another delivery company here. Gopuff’s monster $1 billion Series H round, which included existing investors like SoftBank Vision Fund, valued the instant delivery company at $15 billion—nearly double what its last raise pegged it at.

Which actually brings us to...

1. Gopuff: $1.15 billion in March

Nope, that’s not a typo. This year, Gopuff was in serious competition...with itself, and landed two seven-figure rounds. It has big plans to expand across North America, the UK, and Europe.

• Gopuff currently has at least 450 locations, including 285 dark stores (as of July).

+1: You have to skip past the top 10 to see a round outside of the food-and-delivery space. At no. 12, Material Bank, a marketplace for architectural and construction products, raised $100 million in May.—JS

We’ll shout out Retail Brew’s most popular stories in our next newsletter, but we wanted to share some of the awesome work from our fellow Brews:

• Over at Emerging Tech Brew, read how Airbnb failed its own anti-discrimination team—and let racial disparities slip through the cracks.
• HR Brew looked at how companies are trying to reshape the work week—just maybe not to four days.
• And Marketing Brew questioned if marketing roles need to require college degrees.

Today’s top retail reads.

The snarled supply chain might have led to product shortages, but it also made for an abundance of stories. Here are some of our favorites:

Old ways: Lacking the ability to charter their own ships, smaller manufacturers turned to time-honored practices of lean inventories, and relying on shipments from alternate suppliers, to stay ahead of bottlenecks. (The New York Times)

Watered down: Menus got slimmer, ingredients were missing, and material costs skyrocketed—but diners hardly noticed as independent restaurants struggled to navigate shortages. (Eater)

Balls to the wall: Covid outbreaks across the Asia-Pacific led to massive cotton shortages that luxury fashion brands were able to better handle than most apparel manufacturers. (Vogue Business)

Sinking ship: Part of this year’s issues were a result of delays at major US hubs. Next year, ports plan on doing something about it. (Recode)

Dry fries: As the pandemic forced restaurants to convert from dine-in to take-out, ramped-up demand for to-go condiments left Heinz and its customers in a ketchup-packet panic. (The Wall Street Journal)

It’s a cycle: The pandemic led the global garment industry to cut costs and tighten supply chains—and workers face the brunt of the consequences. (Business of Fashion)

Holidaze: An interactive look at how some of the season’s most popular products (yes, artificial Christmas trees included) were caught up in the chaos. (The Washington Post)

Catch up on the Retail Brew stories you may have missed.

• Which trends were overlooked this year?
• Instant-delivery startups took over in 2021—but challenges remain for the long haul
• In a big year for retailers going public, here are a few companies that stood out