Dive Brief:
- In the midst of the surging buy now, pay later (BNPL) trend in the US, retailer Belk has recently introduced Afterpay's BNPL payment service, available both online and in stores, as announced on Tuesday.
- Belk's initial results show a 50% increase in average order values for customers using the service, with majority being millennials and Gen Z shoppers.
- This new service, introduced during the holiday season, allows customers to split their purchases into four interest-free installments.
Dive Insight:
Belk collaborates with Afterpay to offer a "buy now, pay later" service
Amid Belk's ongoing turnaround efforts, the partnership with Afterpay constitutes one of the retailer's strategic moves this year. Previously, Belk filed for Chapter 11 bankruptcy with a debt elimination plan in February, which was followed by an emergence from bankruptcy with a new capital of $225 million in March. In July, Nir Patel stepped into the role of CEO, replacing Lisa Harper who moved to the executive board chair position.
The BNPL market is witnessing an uptick in retail adoption, with the payment method gaining favor during the holiday shopping season. Notably, Adobe reported a whopping 422% increase in BNPL spending in November compared to the same period in 2019.
Afterpay itself has experienced changes, such as hosting its fifth bi-annual Afterpay Day event in March featuring brands like Aveda, Vera Bradley, and Mac Cosmetics. Block (formerly Square) acquired Afterpay in August, underscoring increasing competition and growth in the BNPL sector. This holiday season, Afterpay has observed an increase in installment payment orders, with popular items including clogs, weekender bags, trucker hats, pajamas, and shoes.
"We always endeavor to provide the most convenient shopping options for our customers, and the Buy Now, Pay Later model has certainly resonated, particularly with younger customers," said Patel in a statement.
The BNPL market is anticipated to grow significantly, expected to expand from $44.7 billion in 2025 to $196 billion by 2032, according to industry reports. Retail remains the largest segment, accounting for about 72.5% of the market share, propelled by collaborations between major retailers and BNPL providers. Both e-commerce and point-of-sale (POS) channels are witnessing growing adoption. However, it's essential for BNPL providers to strike a balance between the benefits, such as increased sales and conversions for retailers, and the associated risks, like higher payment failure rates and consumer financial stress.
- As the BNPL trend escalates, the intersection of fashion, technology, and business is evident in the partnership between Belk and Afterpay, showcasing the role of AI in shaping retail strategies.
- The growing emphasis on lifestyle choices, particularly among millennials and Gen Z, underscores the impact of culture and demographic shifts on consumer behavior.
- The adoption of BNPL services in the retail sector is not confined to e-commerce alone; it extends to in-store purchases as well, highlighting the impact of technology on traditional shopping.
- The expansion of the BNPL market, expected to reach $196 billion by 2032, has caught the attention of financial institutions and policy makers, raising questions about cybersecurity and consumer protection.
- The integration of BNPL services into TV shopping channels could be the next frontier, blurring the lines between retail, technology, and entertainment.
- The rise of BNPL as a popular payment method during the holiday season, and the increasing competition among providers, signifies the potential disruption of conventional financing models in the coming years.
