What’s the hottest product this holiday shopping season in America? Buy now pay later | small american business


Ssupply chain issues. Labor shortages. Rising prices. Hide mandates. These are some of the biggest challenges small businesses face this holiday season and I can tell you on behalf of many of my clients that it is not a very Merry Christmas. But there’s one thing that saves the season for thousands of business owners and no, it’s not Rudolph.

This is a financing program called Buy Now Pay Later, or BNPL. And its use has exploded recently, especially among small businesses.

“It’s one of the stars, in fact, of the holiday season for us,” Dan Schulman, CEO of the PayPal payment service, told CNBC. “During Black Friday, our volume on buy now, pay later increased almost 400% year over year. We alone completed some 750,000 transactions in one day. PayPal claims to have had more. 1 million users for the first time in a month and his BNPL usage is “well over 10 million consumers”.

BNPL has become so popular that a report by marketing analytics agency C + R Research indicates that approximately 60% of American adults have used it when purchasing products, and among those who have used it , 80% plan to use it to buy Christmas gifts. , according to data intelligence firm Morning Consult. Younger people also like the option. Almost 60% of Gen Z and Millennials purchased a product on social media using a buy now, pay later option, according to a StitcherAds study. The digital economy index from e-commerce company Adobe, which analyzes direct consumer transactions online, said revenue from buy now and pay after plans increased 21% compared to to a year ago.

So what is BNPL? It is not a new concept. In fact, your grandparents will probably recognize it.

That’s because BNPL is exactly like the old layaway programs they were using back then, but with a 21st century twist. In the past, layaway programs were only used for large purchases like a dining set or a new Zenith color television (with remote control!). But today’s BNPL programs are used for smaller transactions, both online and in-store, and consumers can walk away with the product after making their first payment. PayPal Credit, Affirm, Klarna, and Afterpay are some of the most popular platforms used by merchants of all sizes.

For a small business, BNPL is easy to set up. A consumer wants to buy something. The BNPL service is offered as a plug-in payment option on an e-commerce site or in-store by the merchant. The consumer usually has an interest-free period during which he makes installment payments over a period of a few weeks or months. Usually there is no credit check, and consumers can avoid using their credit cards to pay off their balance that month.

Of course, there are a few drawbacks. For consumers, late fees and interest payments can be high – up to 25% in some cases. Credit limits are smaller and credit reports can be affected if payment is not made on time. For merchants, most BNPL agreements still require a fee, which the Kansas City Federal Reserve says can range from 1.5 to 1.7 percent of the purchase value (including tax), relative to the cost of a typical debit or credit card transaction, which ranges from 1% to 3%.

But on the other hand, it makes it easier to sell the products. And research shows that when BNPL is offered, customers are actually buying more. In fact, BNPL users plan to spend on a gift what the average shopper plans to spend on their entire holiday shopping this season, according to the Morning Consult report above.

“I think there is an element of impetus to that and these companies are making a lot of money partnering with retailers,” Joe Buhrmann, senior financial planning consultant at eMoney Advisor, told MarketWatch. “There’s a lot of data that people spend more when they use buy now, pay later, [and] they come back again and again.

Is this such a bad thing? Perhaps for the unruly consumer. But given all the other headaches small businesses face this holiday season, BNPL offers (almost) as much joy as a glass of eggnog. If your business hasn’t signed up for one of these plans, you may be missing out on an opportunity.


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