Pay Later Popularity Buttressed by ‘Perfect Storm’ of Consumer Preferences
The global pandemic has had a transformative effect on consumer behavior, and trends that rapidly emerged in 2020 still remain in place this year, and will likely be permanent, according to presenters during WWD’s “The Power of Pay Later” digital event last week, which featured Ujjwal Dhoot, chief marketing officer of DXL; Greg Lisiewski, vice president of Global Pay Later at PayPal, and Alexandra Pastore, business reporter at WWD and moderator of the session.
The trends that are here to stay include a preference for online shopping, contactless payments, curbside pickup and buy online, pick up in store as well as buy now, pay later, which saw double-digit growth in usage during last year’s holiday shopping season.
Lisiewski said looking back, retailers who adapted quickly to these changes have “fared well” and noted the success of merchants who rolled out curbside pickup and buy online, pick up in store as the pandemic forced social distancing measures last year. Lisiewski and Dhoot said the acceleration of digital and physical transformation was unprecedented.
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Dhoot also noted that consumers “are adopting to new ways to engage with brands and the new ways are different for every retailer based on their vertical.”
“Strategically, think about the lifestyles that have been disrupted,” Dhoot said. “Some have been disruptive in a bad way and some in a good way. Where have our behaviors have changed forever? We’re going to buy more online, and we’re going to work from home more.” These disruptions are forcing everyone to engage in “rapid experimentation” methods, he said, adding that for consumers this means trying different and new things.
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This could be a new brand or product, or in the case of payments, BNPL.
With BNPL, Lisiewski said the payment option hinges on the “idea of taking control and having flexibility of payment while securing or procuring goods or services that are somewhere between needs and wants.”
From a household spending perspective, Lisiewski said BNPL emerged “mostly as part of a mitigation strategy by consumers not sure of what the future held. They were focused on managing cash flow and holding on to cash while getting access to things they needed to literally survive. [BNPL] accelerated because it gave people flexibility, but it also gives people control over how their cash leaves their accounts, and it gives them control over their spending.” Simply put, Lisiewski said consumers can manage their spending with BNPL while having purchases aligned with their cash flow.
Parallel to the growth of BNPL, Lisiewski said safety is also top of mind for consumers. This has lead to greater demand in physical stores for contactless payments such as tap and pay or POS QR codes. For the DXL customer, Dhoot agreed with Lisiewski’s assessment of these emerging and “here to stay” trends.
“In regard to the demand for flexible credit and the need for control, we see Generation Z and Millennials who are very likely to have credit cards, but at the same time, they are looking for flexible options,” Dhoot said, adding that these demographics want budgetary control and flexibility, “and that’s the balance between the needs and the wants.”
In regard to a digital experience for customers, Dhoot said aside from curbside pickup and other options, virtual chat plays an increasingly important role. Overall, he said the convergence of physical and digital was “more aspirational” pre-pandemic. “And now these [technologies and approaches] are more table stakes — whether it’s virtual chat with a store near you, or it’s curbside pickup or flexible payment options, or having cashless transactions,” he said.
When asked about the preferences of Millennials and Gen Z amid these consumer trends, Lisiewski said Millennials were already shopping online and using these solutions prior to the pandemic and digital convergence. “It goes back to this idea of control and being budget conscious,” he explained. “They’re just quicker to adapt to new products.” In regard to credit cards, Lisiewski noted Millennials are getting and using them — despite media reports stating otherwise. “There are certain parts of life where it’s hard to live without credit cards. So, it’s not as much as an aversion to credit, it’s just a more about a conscious way of managing budgets and spending,” he said.
Lisiewski also noted how this preference for flexibility, contactless transactions and BNPL dovetails with Generation Z and younger Millennials’ penchant for subscription services. “They have grown up in a world where subscriptions is sort of a way of life,” he said. “Everything is turning into a subscription: how I get my content; how I get my clothes, and how I get various necessities.” So the notion of “managing purchasing on a sort of a subscription basis is a pervasive way of living for Gen Z — it’s just foreign to older folks like Gen X or Baby Boomers.”
He said the appeal of BNPL allows for managing money in a subscription way with monthly installment payments, which can be replenished with new product purchases. “It’s a re-upping of the subscription for the next pair of sneakers or the next graphic T-shirt or the next belt — whatever the item is,” Lisiewski said.
Dhoot and Lisiewski agreed that the emergence and success of BNPL is the result of a perfect storm of brand awareness (PayPal), comfortable and safe online shopping, and a desire for new tools and services that can help manage spending and cash flow.
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