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Buy Now Pay Later, BOPIS show holiday staying power

COVID restrictions are no more, but both services still saw an uptick in use on Black Friday weekend 2022.

Buy Now Pay Later, BOPIS show holiday staying power

(Photo via Walmart)

The 2022 holiday shopping season is still young, but there are already signs emerging that pre-pandemic patterns are returning. With COVID restrictions lifted and the supply chain unclogged, in-store foot traffic and heavy discounting resembles 2019 more closely than 2021.

Yet it is also true that we can’t go back. Tastes and habits changed over the pandemic. While we no longer have to stay home as much, the surge of ecommerce brought consumer shifts that will remain with us going forward. New elements of the shopping experience that provided more flexibility and convenience exploded. In particular, use of buy now, pay later (BNPL) and store pickup went from nice-to-have experiments to sought-after requirements for many retailers.

But with pre-pandemic habits beginning to return, it’s worth considering: Will these services remain just as popular going forward? With increased traffic and retailers putting their best foot forward, the holidays offer a great time to put that to the test. Let’s check in with results from Black Friday-Cyber Monday to see how these services are being used this year:

Buy Now, Pay Later: Stretching smaller purchases

A year ago, Buy Now, Pay Later was at the peak of its popularity. On Black Friday 2021, PayPal saw a 400% increase in volume for the digitally-enabled installment payments, proving to be a bellwether for buzzy growth that season.

Since then, BNPL has faced tougher sledding as the economic headwinds started blowing. Category-defining companies like Klarna lost value, loan financials got more difficult with rising interest rates and regulatory scrutiny brought questions about provider practices.

There are signals amid the noise, however, that BNPL is proving to be a sticky offering with shoppers, and Cyber Week offered plenty of evidence on that front.

According to Adobe Analytics, BNPL orders rose 85% compared with the prior week, while revenue from those transactions increased 88%. Block-owned service Afterpay reported that BNPL transactions grew 120% compared to the pre-holiday weeks across online and in-person shopping.

The holiday season popularity of the service is consistent, but the shift in context from year to year also matters. This year’s uptick in BNPL is taking place amid inflation. Consumers know it’s an option for convenience, but it is increasingly becoming one of utility.

This is bringing a dichotomy in the data: On a year-over-year basis, Salesforce found that BNPL transactions increased 5% over Thanksgiving weekend. However, the average order value decreased by 5%.

That indicates a different kind of trend for 2022: “Consumers are using it more, but they're using it to buy lower priced items,” Rob Garf, the GM and head of retail at Salesforce, told The Current.

“This phenomenon started on higher-ticket items like furniture, or consumer electronics or home appliances, where you wanted to finance a big purchase over time,” Garf said. “Now, it's being adopted for lower-dollar purchases. Consumers’ wallets are stretched thin, and they're finding new and creative ways to finance their purchases over time, even if it is a sweater or a toy for a family member.”

The Current's view: BNPL was already being used to spread smaller purchases such as household essentials over weeks or months before the holidays. With Amazon CEO Andy Jassy telling the New York Times Dealbook Summit this week that stocking stuffers are rising to the top of lists, the practice appears set to be supercharged during the holidays.

In the end, the continued use of BNPL is a sign that alternative payment methods continue to be attractive to consumers, despite the fluctuation of underlying markets. Adding new options will continue to be a way to allow customers to shop in their preferred method.

Store pickup: Less curbside, more BOPIS

Picking up an item at the store was once a matter of convenience, but the pandemic made it a matter of health and safety. As a result, in-store and curbside pickup services became table stakes for retailers that continued to operate brick-and-mortar stores at a time of distancing, and their use skyrocketed. Traffic to so-called click-and-collect services more than doubled in 2020, according to Insider Intelligence, and remained popular in 2021.

Now, these services are in place, and some are expanding them. Kohl’s implemented designated self-pickup areas for customers, allowing orders to be collected with only a mobile phone. Perry Ellis built on buy online pickup in store (BOPIS) with buy online, pickup anywhere (BOPA), which makes items available to retrieve at any of the retailers’ locations.

Retailers are all in on these fulfillment methods, yet the holidays offer a test of whether consumers will continue to find the options just as enticing as many masks are now off.

For Thanksgiving weekend, the results were mixed.

Curbside pickup was used less this year, according to Adobe Analytics. At retailers that offered the service, this method was used in 13% of online orders on both Thanksgiving and Black Friday, which Adobe called “modest.” That’s down 21% from 2021. On Cyber Monday, curbside pickup was used in 17% of online orders at those retailers, down from 18% in 2021.

BOPIS, however, continued to gain steam. According to Salesforce, BOPIS usage grew 9% globally from Thursday through Sunday of Cyber Week compared to the first three weeks of November. In-store pickup also brought incremental growth. Retailers in the US that had BOPIS during the week grew online revenue by 38% more than those that didn’t offer the option.

Shoppers are on the lookout for discounts, especially with prices rising. But they are taking advantage of options that cross online and in-store experiences, while offering ways to fit ordering and pickup into busy holiday schedules.

"Consumers want to scoop up the biggest deals, but they might not want to fight the crowds to get the product they want," Garf said.

The Current's view: The divergence between curbside and BOPIS signals a potential shift in how consumers want to access convenience through online ordering. When you take away health and safety precautions, it shows that consumers will still want to visit stores. That has been borne out in the return to in-person shopping throughout the year, and the rise of Thanksgiving weekend store traffic carried the trend forward. In the end, a swing toward BOPIS could play into retailers’ hands, as many studies have shown that when a customer enters a store, they are more likely to buy additional items.

As for curbside pickup, you typically want to see growth for a still-new practice. But it’s a time of big back-and-forth swings, so don’t write this service off just yet. With less reliance on curbside in the return to stores, retailers are taking new approaches, such as Walmart’s introduction of curbside dropoff for returns and Target's Starbucks pickup, so it could take time for these to pick up adoption. Curbside pickup is also proving to be sticky in grocery, where having someone bring large orders offers a bigger scale of convenience. Like plenty of other innovative approaches, this practice may just be in the midst of evolving.

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