BNPL: A Win-Win for Retailers and Consumers as the Holidays Approach

With retailers already pushing out holiday sales to entice consumers to buy early and avoid delivery delays due to supply chain congestion, one tactic that they will lean on to entice customers is buy now, pay later (BNPL). Over the last few years, the retail industry has seen companies such as Affirm, Afterpay and Sezzle make their mark — and for good reason. In fact, the growth of BNPL is hitting record-breaking levels — in 2021 Cornerstone Advisors say that consumers will make nearly $100 billion in retail purchases using BNPL.

Millennials and Gen Z shoppers are driving this ecommerce trend forward as a result of tight budgets, low credit and a COVID-fueled increase in online shopping. In fact, Cornerstone Advisors found that Gen Z consumers using BNPL grew from 6% in 2019 to 36% in 2021, and millennials’ use of BNPL is up to 41%. Shoppers in every age bracket are starting to experiment with this new way to pay.

BNPL represents a permanent shift that will change retail forever, for the better. Innovative organizations that adapt their sales and returns infrastructure accordingly will reap the rewards of bigger basket sizes and repeat customers.

BNPL Can Have an Effect on Consumers and Retailers

BNPL is a financing option that makes sense from a consumer perspective. The service allows shoppers to buy higher-ticket items without committing to the full price upfront. Instead, they can incrementally pay for products through installments — often with zero interest and zero late fees. 44% of consumers say they prefer BNPL because it gives them more flexibility.


Tech-savvy cash-strapped millennials are embracing this freedom in a major way, and it’s only a matter of time before budget shoppers in every demographic discover the benefits. For the holidays in particular, this will be something that shoppers look out for to pace their cash flow, especially with the push to shop earlier than ever before.

Working with BNPL providers is also a no-brainer for retailers, despite their higher processing fees. Retailers pay BNPL providers upwards of an 8% to 10% fee per transaction. Still, the benefits outweigh the costs:

Convenience: Even though customers only pay a portion of the price upfront, BNPL providers pay the retailer in full and take responsibility for gathering the remaining payments from the customers. Additionally, BNPL providers take responsibility for losses associated with fraudulent transactions. According to C+R Research, almost 30% of BNPL customers use the service at least once per month.

Access to more customers and recurring customers: BNPL companies provide retailers with access to a trove of consumers who might not have otherwise shopped with them due to price point challenges. By opening access to a network of (potentially) millions more shoppers, retailers have the opportunity to grow their customer base.

Better conversion rates: BNPL frees shoppers from having to pay the full cost upfront, inspiring them to purchase items they may have previously left in their cart. During the holiday season, when many may prefer to do a one-stop-shop, this can help alleviate pressures of paying for everything up front, empowering consumers to buy what they want and be comfortable knowing they can pay it off over time.

Another aspect of higher conversion rates comes from undecided shoppers. Anecdotally, my sister recently told me that she ordered an item with Afterpay because even though she could afford the full price, she wasn’t sure if she loved the item enough to pay the full price immediately. By not having to pay upfront, she felt free to order and try it. C+R Research found that 57% of users have regretted making a purchase through BNPL because the item was too expensive. In addition to BNPL, if a retailer has a solid — and potentially longer — returns window during the holiday season, consumers will take notice. Flexibility on payments and returns is a key portion of retailer’s holiday success.

Higher ticket sales: The majority of BNPL purchases fall under the “split pay” category, which hovers at around $250 per transaction. However, BNPL companies also offer “installment plans,” which are similar to credit card terms. These purchases are generally much higher than $250, which can help bring higher tickets on every related transaction. According to Adobe, consumers using BNPL are placing orders that are 18% larger.

BNPL and Retail Returns

Repeat purchases and higher ticket transactions yield greater profits. But with more sales comes more returns and a greater responsibility to manage the process with sustainability and efficiency at the forefront. That responsibility is amplified as the holidays approach, and shoppers turn to the web for the majority of purchases. 81% of shoppers said they purchased more than half their holiday gifts online last year. This season, they plan to buy the same amount online, or more.

Historically, online purchases yield at least three times as many returns as in-store purchases. Luckily for retailers, BNPL companies oversee the financial logistics of collecting payment and issuing refunds. Still, retailers must manage the reverse supply chain logistics and resale strategy for the onslaught of unwanted items.

Retail Strategy Considerations

Retailers need a returns management approach that incorporates enhanced customer service to prevent returns upfront, and incorporates data to optimize the returns management process.

Retailers will also need to reconsider how to manage the inevitable growth in in-store and curbside returns resulting from BNPL purchases. Even though customers love shopping online, 45% of customers want to return to the brick-and-mortar experience, according to a survey from goTRG. Additionally, these customers want instant refunds. In the same survey from goTRG, consumers cited instant refunds as the most critical aspect of a seamless returns experience.

The problem is that retailers can’t provide instant refunds for BNPL purchases because they don’t directly process the payment or the refund. To ensure a positive experience for their customers, retailers will need to create a system that makes it easy for customers to drop off BNPL purchases in-store while informing them about the best way to request rapid refunds from the third-party platform.

BNPL is Here to Stay

BNPL is a trend that promises to endure because the market demands it. As a result of its success, Square said it would purchase BNPL giant Afterpay for $29 billion, acquiring its 16 million users worldwide. Affirm, valued at $12 billion, and Klarna, valued at $46 billion, are also significant players growing in this space.

While BNPL has focused mainly on retail ecommerce, experts predict it will broaden to various sectors as it continues weaving its highly disruptive and profitable web across society. I strongly urge retailers that haven’t already adopted the new payment model to consider implementing it and rapidly adapting your returns management strategy. Returns are costly and complicated, but the increase in forward sales is worth the investment.

David Malka is the Chief Sales Officer at goTRG, a global technology company transforming the way the world’s largest retailers and manufacturers process and manage returns and distressed inventory. Since joining in 2012, Malka has managed goTRG’s entire retail and wholesale sales pipeline and developed the company’s online marketplaces with retail partners like Walmart, eBay, Amazon, Wish and more. Malka also assists with goTRG’s software and business development initiatives, drawing on his deep expertise in ecommerce marketplaces. Prior to goTRG, Malka owned several online and digital delivery businesses and was an early adopter of eBay when it launched in 1995.

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