Luxury retail took a nasty hit in 2020, as its intimate and consultative manner of conducting business in-person for big-ticket purchases was rendered nonexistent.
Combine the absence of physical retail for luxury goods with the sweeping job loss and economic destruction left in COVID’s wake, and luxury has landed in hot water for the moment.
PYMNTS’ October Buy Now, Pay Later Tracker(R), done in collaboration with Afterpay, explores the rising fascination with “buy now, pay later” (BNPL) installment payments in the luxury space, as consumers’ desires for fancy goods hasn’t decreased – but in many cases, their means have.
Luckily, the revolution in payments choice in just the past few years, to say nothing of COVID’s acceleration of any trend you can name, has proffered a solution to luxury’s woes.
BNPL is perhaps the most-watched payments trend of the pandemic, and for good reason.
“Consumers have continued to indulge in occasional luxury or “statement piece” purchases since the pandemic’s onset, but some shifts have resulted from consumers’ digital migrations,” according to the October Tracker. What’s more, “some customers — especially younger ones — have historically been intimidated by the prospect of entering brick-and-mortar luxury brand stores, but eCommerce can eliminate this barrier.”
Keeping Key Demos Engaged
Luxury consumers have gotten progressively younger in recent decades, and that works just fine when the economy is functioning properly and there are no plagues to contend with.
That’s not the case in 2020, but younger demos still crave designer labels.
“Staying in touch with younger consumers is a top priority for luxury retailers, many of which are working to appeal to these generations by offering them payment methods that align with their purchasing habits,” the Buy Now, Pay Later Tracker(R) states.
Nick Molnar, U.S. CEO and co-founder of Afterpay, told PYMNTS that “Gen Z and millennial consumers are focusing on sustainable and ethical fashion and retail more than ever, but these purchases can be seen as too expensive in a market flooded with cheaper alternatives. Some luxury retailers are combating this by turning to installment payment plans, which enable merchants to more flexibly accommodate consumers’ purchases.”
The October Buy Now, Pay Later Tracker(R) details several use cases along these lines.
Flexible Payments Give Lift to Luxury
With luxury malls in limbo and their future uncertain, as their employees have been furloughed or fired in the COVID cataclysm, it’s a little hard to see the way forward for the experiential luxury retail that people love. It’s now about luxury eCommerce and all the ways consumers can pay.
“Flexible payment options, like buy now, pay later, have become a powerful tool for luxury retailers to attract new customers during the economic slowdown. With BNPL, consumers are able to [make] bite-sized payments with their own money to gain access to higher-end items that they may have previously considered out of reach,” Molnar told PYMNTS.
He believes BNPL can be “a huge benefit for luxury retailers because they don’t have to discount or rely on promotions and sales for consumers to make purchases. Many of our key luxury brands see more than 50 percent new-to-file consumers when they launch Afterpay, reflecting our ability to drive new customers to their websites and their businesses.”