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You likely are aware of buy-now, pay-later (BNPL) programs, from Afterpay, Affirm, and Klarna, among others. It gained a foothold in online retail – "the hottest trend in e-commerce"– and has been especially popular in the UK and Australia. Now its availability to many more retailers may be accelerated with the proposed acquisition by Square of Afterpay. It is a trend we all need to watch carefully. Here's the deal. Once again, the retailer is the pickle in the middle. The benefits of increasing sales (and average transaction value) which are very attractive, must be weighed against the potential increases in hassle factors, particularly for your most valuable asset: your front line staff.
Let's quickly review this program. Touted to merchants as a way to increase sales and/or to reduce the need for promotional events, BNPL allows consumers to choose either split payments – four interest-free payments over six weeks – or for larger purchases, installment loans of six to 48 months. Depending on how the merchant funds the program, the installment loans may or may not charge interest to the consumer. Early results suggest that some merchants enjoy significant improvements in sales. As Alexis Leondis observed in Bloomberg Opinion,*
"Studies show buy-now, pay-later often induces people to spend more. Two-thirds of shoppers said they bought more thanks to buy-now, pay-later, and almost half said they wouldn't have made the purchase if that hadn’t been an option, according to a recent survey by LendingTree."
It also is especially popular among Millennials, who prefer to not use credit cards.
Be Prepared for Increased Returns
Consumers with buyers remorse – whether unhappy with the merchandise, or unable to keep up with the payments – can lead to an increase in returns. As Leondis noted, "Complaints to the Better Business Bureau and the Consumer Financial Protection Bureau show there are disgruntled customers who tried to make a return and had difficulties getting full refunds, especially if the store issued a credit." So, before you eagerly jump into a BNPL program, check out your return policies. Time for an update?
Do you offer refunds? In-store credit? In full? Is there a time limit? Must the customer have the receipt?
And, how do you make these policies known? Are they in writing? Posted? Straightforward? Or buried in the equivalent of "the fine print?"
Most important, remember who has to enforce these policies, and bear the brunt of the consumer's ire? Yes, your front line staff. Many of them may already have gone through the ordeal of dealing with customers on mask requirements during Covid. And now, given the delta variant of Covid, those tensions are not going away. Are you able to properly train them about the BNPL policies, and more important, train them on dealing with disgruntled customers seeking to return items? So, to enjoy the allure of increasing sales and attracting Millennials, best that you lay a strong foundation of clear return policies and support for your staff. ----- * Millennials Should Beware of Rising Payments Apps, Alexis Leondis, Bloomberg Opinion, August 5, 2021
Usually at this time of year, we would be encouraging you to remember that "the lull" is about to arrive. That is, that time span from Black Friday/Cyber Monday through early December is typically much slower for retailers. And then, come December 10th or so, the Christmas sprint begins! Ahh yes. That was then. And this is, well, 2020.
YOUR GOAL: QUICKLY GET TO A FIRST DRAFT. Face it. Sales are dropping. By how much? For how long? Nobody knows for sure. But, you can make some assumptions, some educated guesses. Put those into the 3-in-1 Cash Flow Calculator.
These totally volatile times cause a lot of opinions and fears to be swirling around. Seeing "what if...?" can be very helpful. All in just minutes. On your own.
Each year at this time, our thoughts turn to turkeys. No, not the ones that will adorn many dining tables on Thursday. But the "turkeys" lurking amidst your inventory. You know; non-selling, distressed, slow-moving, old, unappealing leftovers among your merchandise. But this year, frankly, our worries extend beyond the turkeys. Here are some of the reasons why.
As a result, in this environment, consumers are scaling back their discretionary purchases, and/or choosing to spend on travel, dining out, or other experiences versus retail merchandise. Not an upbeat prospect for retailers, is it?
A frequent recommendation for how to navigate the current economic uncertainty is to be more diligent about controlling expenses, and focus on profit. (You'll see; we challenge that below.) Hmm. Concentrating on profits is easier said than done in today's environment, with cost increases proliferating under the umbrella of inflation.
Each of us, our households, businesses and communities are in different stages of shutdown due to the coronavirus. While we cannot speak to when this will end, we do have some ideas for dealing with the "fog of uncertainty" that hangs over us all.
Some thoughts from Nordstrom leadership that are spot on!
That's what Nordstrom President and Chief Brand Officer Pete Nordstrom told Puget Sound Business Journal columnist Patti Payne on April 23, 2020. And what he succinctly stated is exactly the challenge – and opportunity – that is confronting all retail owners. In order to answer whether you should re-open once you can, you first must be very confident in WHAT kind of retail operation you will be re-opening. The only certainty of the aftermath of the pandemic is that everything will be different. Given that, what better time to re-imagine your business?
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