Buy now, pay later is making its way into stores

While the service has exploded throughout the pandemic—especially online—in-store adoption is its next frontier in the US.
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Francis Scialabba

· 3 min read

Buy now, pay later: coming to a store near you, sooner rather than later.

While the service has exploded throughout the pandemic, especially online—BNPL spending in the US is up 230% since the start of 2020, per a September report by Accenture—in-store adoption is its next frontier.

  • “Retailers saw the benefit of offering BNPL on their e-commerce sites—now they want to capitalize on those benefits in the physical retail setting,” Nikki Baird, VP of strategy at Aptos, previously told Retail Brew.

Fever pitch

Klarna teamed up with Brookfield Properties, one of the largest mall owners in the US, just last month to exclusively offer its platform to tenants and stores.

  • Klarna is also working with retailers like Macy’s, Lululemon, Sephora, and Forever 21 to boost in-store BNPL capabilities.

Afterpay introduced its in-store offering in fall 2020, and since then, the company has seen “incredible demand from retailers big and small given the importance of an omnichannel approach to both retailers and their customers,” Alex Fisher, its VP of retail, told us.

  • From Oct. 2, 2021 to Dec. 27, 2021, in-store shopping for Afterpay grew 384% YoY, with Black Friday alone seeing a 442% increase.

So, why is now the time to bolster BNPL in stores? Well, it’s the trend these companies have seen overseas. Charlie Youakim, CEO of BNPL platform Sezzle, points out that BNPL, broadly speaking, has been popular internationally longer than it has in the US.

Looking back: Youakim believes in-store adoption of BNPL in the US will manifest similarly to how it did in Australia, where 60% of shoppers say they use the service, compared to 47% in the US and UK, per a September Marqeta survey.

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It started online, gained traction, and then customers and merchants asked about how to get into stores, he noted.

“Companies there would start to create in-store advertisements like pop-up placards—signs on price tags, signs over merchandise, signs at the checkout counter”, Youakim said. “It’s easier to advertise in-store when you’re at that stage, which is where we’re at now.”

Nearly three-quarters (73%) of consumers already said they want to be able to pay the same way in-store as they do online, according to a May Blackhawk Network report. And almost 22% of consumers said the availability of BNPL would encourage them to shop IRL, per Pymnts.

  • Still, everyone has their eyes on potential regulations: The Consumer Financial Protection Bureau, for example, is looking into how customers use BNPL services—and how they’re impacted.

Casting a wide net: David Sykes, head of Klarna US, said having similar in-store and online experiences is valuable for consumers and, in turn, a huge boost to BNPL companies who offer that flexibility.

  • BNPL raises retail conversion rates 20%–30% and the average ticket size between 30%–50%, according to estimates from RBC Capital Market.

“As our products become more and more available at different retailers, the behavior with which consumers start to use our products changes, and evolves from being this sort of irregular option that you use to just pay for something over time, to actually becoming the preferred payment method for customers,” Sykes said.

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