The buy-now pay-later sector is booming with some of the major players in the market now expanding into the US. It's partly been spurred by nationwide lockdowns, and while many customers are using it online, physical stores are also taking the service.
It's perhaps not the type of essential business that springs to mind during a global pandemic, but an inner-city pet store in Sydney has felt the benefits of the nationwide lockdown.
Pet palace owner, Aroop Banerjee argues he's seen a surge in business, as cat and dog owners spend more time at home.
But as customers become weary of their finances in the economic downtown, they are reaching for their mobile phones to purchase items with buy now, pay later services.
‘’They can afford to buy something which is a bit more expensive or buy a few more extra items which they wouldn't have generally bought and the advantage to us as a business is that we have more clients in and the value of sales goes up as well. The volume of sales goes up as well and we can also promote new products that we keep on adding, the new shelf items,’’ said Mr Banerjee.
He also said he's seen a 39 per cent increase in afterpay purchases at his store since October.
The platform allows customers to pay for their order in four equal payments every two weeks without interest.
‘’I mostly use it to keep money free in my account, in case something unexpected pops up. I mostly use it if the transaction is over about $100. I don't spend money I don't have but I do it so I can use it as a tool to make sure that if anything expected comes up like if the car breaks down or something, I'll have money free to use,’’ said Casey Clarke who is an Afterpay user.
Peter Gray is the co-founder of Zip, another buy-now pay-later service. He believes that many consumers who use his product take a mindful approach to avoid getting into financial problems, which is reflected in its popularity.
‘’I think it's a natural reaction with regard to negative economic sentiment. There has been a desire from consumers to repay debt. This was seen also throughout some pockets during the GFC. But I think we're genuinely seeing different repayments and different customer behaviour with these newer products. We also see customers also wanting to repay down so they can continue to use these products, what we've seen is not a reduction in transaction volume but a shift in where consumers are using. Higher penetration online and more purchases for everyday spend and categories such as home improvement.’’ Said Mr Gray.
The uptake of the sector has seen shares of the major players, Afterpay and Zip increase more than 60 per cent this year, and not just in Australia.
Afterpay announced it has surpassed five million users in the United States last month, a market which Zip is watching.
For business owners like Aroop Banerjee and his pet store, offering such payment options is particularly important to reach his customers in an economy smashed by the coronavirus.
‘’The advantage to us is of course we get more business. We have got clients who can afford to buy more items, which they did not think they could buy in the past. If we don't change with the times, if the business don't change with the times and then we'll become obsolete and we will not be meeting the clients expectations, so it has to be a synergy between what the client is looking for and what we can offer as a business’’, he said.
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