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Cart abandonment currently costs eCommerce merchants $18 billion in annual revenue(Yeah, we came out swinging on this one, sorry.) 

Abandonment is a convoluted issue, since there are tons of reasons would-be customers ultimately opt out of a purchase. However, the most common complaints include:

    • Extra/unexpected fees
    • Total purchase cost just too expensive
    • Being forced to create an account to check out
    • Complicated checkout process

If you’ve any hope of avoiding the monumental losses precipitated by cart abandonment, your checkout experience needs to be as seamless, swift, and affordable as possible -- with “affordability” looking different from one customer segment to the next. 

Price sensitivity might be the biggest consumer pain point, but you’ve still got to make your money, right? If you’re unable or unwilling to remove fees and/or reduce prices, you might still be able to make the overall cost to your customer more...manageable.

Enter: Buy Now, Pay Later (BNPL), also known as Shop Now, Pay Later (SNPL). 

What is Buy Now, Pay Later?

The concept is simple: a merchant enables their store with a third party BNPL provider, like Sezzle, allowing customers to pay for their purchase in installments rather than forking over the full amount up front. The merchant is paid in full right away (by the BNPL entity, less any fees charged for the BNPL service) and the BNPL service provider takes on the risk of the ongoing payments.

This idea of easing the purchase burden is nothing new. Credit cards and layaway plans have been around for eons. What makes BNPL unique is unlike credit cards, there are no fees or interest charged (so long as installments are paid on time); and unlike layaway, the customer gets the goods right away. 

Can BNPL Increase Conversions?

Answering this question is as easy as asking if customers prefer to pay in installments--particularly for larger ticket items. 

(Um, yeah. They do.) 

Nearly half (44%) of holiday shoppers in 2020 said that the ability to Buy Now, Pay Later was somewhat or very important in determining how much they’d spend, CNBC reports. An even greater percentage (48%) said that they’d spend 10-20% more with a BNPL option than they would with a credit card.

While customers have always sought convenient payment plans, the financial impact of COVID-19 has moved bite-sized, spaced-out payments from a preference to a necessity for many. Credit cards are no help, given that economic instability and record low unemployment have skyrocketed the average interest rate to 19.33%

Yes--a most excellent time to take on credit card debt. (We’d make a “NOT” joke here, but it is no longer 2006.)

According to research by Bankrate, young adults and people with less than $30,000 average annual income are shying away from using credit cards. What’s more, only 43% of those aged 18 to 31 (a group that spans Gen Zers and younger Millennials) have at least one credit card in their name.

Still, hairy post-COVID economics be damned--we need to buy stuff. We want to buy stuff. The market is ripe for a wider roll-out of BNPL solutions that put purchasers at ease at checkout without saddling them with tons of debt. Proof: 87% of consumers aged 22 to 44 have expressed interest in breaking large purchases into installments. 

So far, it looks like Buy Now, Pay Later is the way they want to do that:

    • Over 15,000 merchants or brands are offering or planning to offer BNPL to their customers
    • A Kearney research study shows that 67% of Millennials and 57% of Gen Xers use a BNPL service. 
    • According to The Ascent, 62% of users think BNPL could replace their credit cards.

These results speak to the rising demand of BNPL and, consequently, its importance for your online store. In fact, BNPL programs are driving significant additional conversions for the eCommerce merchants implementing them. 

So, we’ve established the answer to the question posed in the title of this article. (It’s “yes,” in case you were still hazy on that.) The next question is...how?

How Buy Now, Pay Later Can Increase Conversion

 

Reduces Cart Abandonment 

The average cart abandonment rate by the end of 2020 was 69.8%. Depending on your customer capture savvy, you could be casting tearful glances toward your abandonment rates or feeling rather proud of yourself, in comparison to that whopping 70%. 

Regardless of where you fall, there’s always room for improvement.  BNPL options are showing great promise for lowering abandonment and increasing revenue, without adding significant costs to either side of the transaction.

Case in point: Jared Lang, a luxury lifestyle menswear retailer, saw a 20% increase in sales upon adding the BNPL payment option to their checkout. 

Offers Better Customer Experience

There are a lot of ways to improve your relationship with your customers, but if there’s one thing we know about eCommerce, it’s that convenience is king. That includes ways to pay. When you give your customers more ways to spend, they’ll be more likely to spend.

BNPL options provide shoppers a new, easy, and trusted form of payment. And lo, the convenience pays off! Sezzle helped 686, an online apparel retailer, increase conversions by 16%.

Increases Average Order Value (AOV)

Image Source: AliDropship

This is the big one, y’all.

According to one Motley Fool poll, the most common reason shoppers use BNPL services is to make purchases that otherwise would not fit their budget. The line is not long between that statistic and using BNPL to increase your customers’ AOV.

For example, Melt Cosmetics' AOV increased by 30% when they gave shoppers the opportunity to pay in four interest-free installments with Sezzle.

Data from the UK takes it one step further by outlining specific price tiers at which BNPL becomes more effective:

    • 58% of shoppers would use PoS credit for a purchase over £250 (~$350), whether or not they could pay the full price up front – including 12% who would use the credit to trade-up and buy a more expensive product.

    • 26% would use 'buy now, pay later' options if they couldn't afford their purchase immediately, including 13% who would rather do this than save up for the item(s) they wanted to buy.
    • 37% said that if making a purchase costing £250 (~$350) or more, they would prefer to buy from a retailer that offered a 'buy now, pay later' option. This is especially true for younger shoppers – 51% of Millennials and 42% of Generation Z agreed.

What's that mean for you?

BNPL can help increase conversions by reducing cart abandonment, convenience-ifying (shut up it’s a word) the checkout, and making shoppers feel more at ease, thus spending more.

Next! 

Getting Started with Buy Now, Pay Later

One third of eCommerce businesses are already planning to add point-of-sale financing options in the next 12-24 months. Trust us when we say this is a gravy train you do not want to miss.

There are dozens of BNPL providers out there, but Tako highly recommends Sezzle for a number of reasons:

    • Stores that have partnered with Sezzle have seen a 38.7% increase in checkout conversion
    • It integrates with a long list of eComm platforms (yep, Shopify included)
    • Goodies for your customers, like -
      • No additional fees or interest*
      • No impact on credit scores and an instant approval process

*So long as payments are made on time, obvi.

To start, simply visit their merchant sign up page and fill out your information. They’ll ask some basic questions about your business, then, once approved, you can integrate Sezzle with your Shopify store in just a few clicks!


Questions about BNPL, Sezzle, or how we got so smart and cool? Drop us a line anytime.

Topics: Business