Buy now, pay later. Shines for clothing retail | Popgen Tech

Buy now, pay later is a must, even if you’re making and selling affordable children’s fashion.

That message came through loud and clear from Brayden Larsen, Head of IT at direct-to-consumer (D2C) children’s apparel marketplace Sparkle In Pink, and Sezzle CEO Charlie Joachim during a panel discussion at PYMNTS’ new PayPal SMB Series.

As Larsen tells it, this journey to small and medium business started with his sister’s entrepreneurial spirit and passion for design, a skill set that led her to handcraft her daughter’s clothes, then an Etsy shop and the explosive demand that spawned Sparkle In Pink in 2011. Brayden joined the team in 2016.

“Almost all the management members have the same last name,” he joked, referring to the rise of this growing family business. And the tagline of this family-run business is “Awesome Made Affordable” with an emphasis on “affordable” in a year when inflation has flattened out.

When they first came up with the installment concept, Larsen said, “Because our clothes are so affordable, we were hesitant to buy now, pay later, because our average order value is $70 to $80 and there aren’t a lot of people, who think you need to break it down into payments.’

However, subsequent customer surveys confirmed strong demand for BNPL.

Today, Larsen is a fan and says, “Now we see our AOV [average order value] for payments that go through these payment methods, above.

“Customers who buy [with BNPL] shop more often because they can afford more. Even if it’s $100, they say, ‘Oh, I can pay $25 at a time,'” Larsen explained.

Joachim said this corresponds to a major shift in how consumers use credit: “I think with ‘buy now, pay later,’ people love credit, but … they’re afraid of using credit cards. What they like about ‘buy now, pay later’ is that I get that time value of money, but I also have a scheduled repayment schedule.”

Read more: Bank Merchants can now offer the BNPL option to consumers

BNPL promotes sales growth in uncertain economic times

Larsen views BNPL through the lens of a budget e-tailer, noting that customers who buy quality children’s clothing at low prices feel empowered by BNPL.

“I think the customers who are looking for this may not have the best credit and are afraid of traditional credit cards, but they want to pay in installments because sometimes they are low-income families,” he said.

Sparkle In Pink’s own surveys show that many of its customers will not shop at sites or stores that do not offer the BNPL option. “I think it’s one of those things where consumers shop because they offer a certain buy-now, pay-later option,” he said.

Joachim said the story is all too familiar now. “If you’re looking to build a small to medium-sized e-commerce business, you should add a ‘buy now, pay later’ option to your site to allow customers in this demographic to shop with you and potentially buy more “.

For this layer of buyers, credit is also an important factor, which is why Sezzle Up was launched. Customers who sign up receive a BNPL repayment report from the credit bureaus, boosting their scores without resorting to high-interest revolving credit cards.

Larsen added that “it’s kind of become a necessity, and as family budgets get even tighter with high inflation and prices going through the roof, buy now, pay later, I think it’s even more important. Being able to offer clothing at an affordable price and also offer the flexibility of ‘buy now, pay later’ will help those families who are struggling.”

Read more: Sezzle signs new $100 million credit facility with Goldman replacement Bastion

Advance payments seal the deal for small and medium-sized businesses

With the economy oscillating between bad in 2022 and possibly worse in 2023, Joachim said interest-free financing options like BNPL’s will be in demand from existing and new users.

Larsen said, “Once people use it, they’re excited because it’s one of those things where it’s like, I can buy a lot more than I could before,” adding that predictable payment plans give them the confidence to what they buy they can afford to pay off.

Joachim added: “I think one of the biggest mistakes that traders make – we hear this less often now, but we’ve heard it before – was that, ‘I don’t want to add this option because it contributes to overspending,’ and I’d like to say it actually contributes to anything, but it doesn’t.’

By way of parting, Larsen said one of the big questions he gets from other small and medium businesses is the cost of adoption. Although the transaction fee is higher than for a card, Larsen said it’s “not a problem” because Sparkle In Pink gets the entire purchase amount upfront and Sezzle takes all the risk if the customer defaults.

“As a business, we get paid whether or not the customer pays it back,” Larsen said. “The business owner gets the money up front. Perhaps this is something that some businesses are unsure about. If a customer places a $100 order and has to pay in $25 increments, we don’t get paid in $25 increments.”

How consumers pay online with stored credentials
Convenience drives some consumers to store their payment credentials with merchants, while security concerns put other customers off. For “How We Pay Digitally: Stored Credentials Edition,” in collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze the consumer dilemma and show how merchants can win over holdouts.