From June 21-25, National Retail Federation (NRF) hosted its Retail Converge event, featuring groundbreaking keynotes and deep dive sessions from retail’s leading experts.
During his Retail Converge presentation on June 21, Zip CEO Larry Diamond shared his thoughts with Zip VP of Marketing Shira Schwartz on the acceleration of buy now, pay later, digital wallet technology, and other alternative payment options in the U.S. during the pandemic.
We’ve compiled Larry’s top takeaways for retailers and merchants to leverage this change in consumer behavior to deepen customer relationships.
- Adapt your omnichannel strategy to meet changing consumer preferences.
The past year has accelerated a number of retail trends in the U.S. In 2020, there was a 46% YoY increase in online sales, which is 3x the average annual online sales growth in the last 10 years.
At the same time, we’ve seen a shift around fulfillment and meeting the needs of customers where they are. Pre-COVID, the rate of buy online, pick up in store (BOPIS) purchases at 500 U.S. retailers was 6.9%. This jumped by 5x to 43.7% during COVID. In payments, there’s been a huge collapse in cash and enormous growth in contactless transactions (up 100% YoY).
Of course, the pandemic spurred these rapid behavioral shifts, but retailers should recognize that these trends are rooted in changing consumer preferences that will last long beyond this challenging period. Consumers have made their desire for convenience and flexibility in how they shop and pay known—and the retailers that best accommodate these desires will come out on top in the long run.
- Embrace customer-centricity as a core business value.
At Zip, our first value is “customer first.” I encourage every retailer to ask themselves: how do you design your business around the customer experience? For us, it starts with listening to customers, internalizing and reacting to their feedback, and adapting our offering accordingly.
For inspiration, consider SHEIN—which turns around and ships TikTok trends within 4 days—and Amazon, which is constantly taking customer feedback and integrating it into the business. Gyms and fitness classes like Peloton have adapted from physical to virtual. These are things customers have always wanted, it just took a pandemic to encourage retailers to react.
This customer-centric approach extends to the payment experience, too. Consumers care a lot about how they pay, when they pay, and what they pay with. The pandemic has encouraged businesses to invest a lot more in the payments layer so that customers can pay on their own terms.
- Reduce friction at every digital touchpoint to drive conversion through the funnel.
Speaking of payments, buy now, pay later (BNPL) is an essential piece of the puzzle when it comes to increasing the overall efficiency of your ecommerce business. The following are the three challenges I hear most frequently from retailers across the globe—and how BNPL helps to address them.
How do we drive better conversion through the checkout?
U.S. ecommerce sites have a 96% cart abandonment rate. That’s huge! The moment of truth when the shopper is on the product detail page and considering purchasing the item is when BNPL really comes to life. Instead of $160, you can pay $40 x 4. That drives the customer to buy now, buy more, and buy better.
How do we find new, incremental customers at a lower acquisition cost?
We invest an enormous amount in the Zip app in the U.S. to refer customers to our retail partners through data-driven methods and personalization. Our recent Zip Fest sales campaign drove an average of 40% of new customers to Zip brand partners via the app.
How do we drive overall sales revenue?
We see a 30-50% increase in AOV compared to other forms of payment. We genuinely believe BNPL is a fantastic product for all segments (not just fashion!) looking to serve the millennial and Gen Z customer.
- Buy now, pay later is good hygiene for retailers.
We looked at a survey recently of millennials asking, “what does financial success mean to you?” 60% said “being debt-free.” Less than 20% said “being rich.” This one statistic tells a fascinating story, and every retailer aiming to reach a younger demographic should take it to heart.
Millennials are no longer signing up for credit cards—the average age of a credit card holder is close to 50. At the same time, BNPL has become extremely popular, and it’s clear to see why. It allows you to pay for a purchase in 4 equal, installments over 4-8 weeks. The product is fair, transparent, and easy to understand.
Here’s why you should care: 30% of customers abandon their carts at checkout if their preferred payment method isn’t available. If you’re going after millennial and Gen Z consumers, it’s important to have BNPL at checkout and across all your payment journeys—online, in-store, and in app.
- Australia is a bellwether for the U.S. payments landscape.
If you’re not quite sold on the value of BNPL, I encourage you to consider the payments landscape in my home country of Australia, where the concept of BNPL and delivering affordable credit at the point of sale really got its start.
Only 2% of online ecommerce sales are currently going through BNPL in the U.S., vs. 20% in Australia. U.S. ecommerce is expected to exceed $1.8 trillion by 2024. If we look at Australia, where 20% of transactions are via BNPL, that’s an addressable opportunity of about $400 billion in the US.
Zip has grown over 200% YoY since inception as customers gravitate towards these products. Even though the U.S. is a bit late in the game, its potential to accelerate is massive and we predict that BNPL will soon be mainstream.
I’ll leave you with this vision for the future of retail: payments should be an afterthought. We need to make the moment between “I want to buy that item” and paying for that item feel like magic. A fully integrated BNPL experience is the first step towards bringing that vision to life.
Hilary Krutt oversees all content strategy and creative copywriting efforts at Quadpay. An avid reader, she kicked off her career in the publishing industry and has since led editorial efforts for a variety of clients across healthcare, higher education, and retail as well as in the insurtech space.