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Abercrombie & Fitch joins the growing list of retailers testing immediate payment options, paying later, with the goal of attracting younger buyers with less discretionary income.
The company – which, in addition to its eponymous brand, also owns Abercrombie Kids and Hollister Co. – announced on July 1 its partnership with the payment solutions provider Klarna to allow buyers to pay their purchases in several times. As part of this program, US consumers can choose to make up to four interest-free payments over a two-month period.
Seizing an opportunity to generate sales and reach new demographic data, Abercrombie is one of the many American clothing brands that are now experimenting with immediate purchase programs and later payment programs. In June 2018, Urban Outfitters announced that it would offer Afterpay, a competitor from Klarna also offering interest-free payment options, opening the program to all of its brands, including Anthropology and Free People.
Although services such as Klarna and Afterpay may seem like an attractive alternative to choosing an expensive dress or handbag, they can ultimately drive shoppers to pay more. Since multiple payments give the impression that a high price is more acceptable, consumers are more likely to pay the full price rather than waiting for sales or discounts. This is of course intentional – Nick Molnar, CEO of Afterpay, has already stated that it has been proven that the program increases conversion rates and additional sales by up to 30%.
Corey Pierson, CEO of the Custora customer intelligence platform, told Business Insider that the buy-now, pay-later is a smart way for clothing brands to reach Generation Z and Millennium buyers, 's inspiring methods used for a long time in other sectors of the industry, such as electronics and home goods.
"This helps clients who do not have a buffer in their discretionary income and budget, especially those in the population who overlap quite strongly with Abercrombie, aged 18 to 30," said Pierson. "They are not sitting on a huge amount of discretionary income where they can go to a store, lose $ 500 and not reduce it."
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Mr. Pierson added that it was particularly important to offer several options to young consumers who are used to being flexible in the way they shop and collaborate with brands.
"Consumers are waiting for a choice," said Pierson. "Today, they have the opportunity to rent clothes at places like Rent the Runway and they have different ways to buy.They grew up with a lot of flexibility.Therefore, see this in fashion and clothes do not seem unusual to them. "
While these programs may lead consumers to spend more in the future, they may be more beneficial to consumers than longer-term, long-term, and later-payment programs, such as Affirm . The microcredit provider, which Urban Outfitters worked with previously, requires a check of the credit score and charges interest that varies depending on your score.
Jonathan Treiber, CEO of the RevTrax Offer Management Platform, wrote in an email to Business Insider that he was planning an immediate buyout. Deferred payment plans will eventually replace store credit cards, which are declining in popularity but work in a similar manner to Affirm. buyers can make payments over a longer period.
"Solutions like [buy-now, pay-later] actually disrupt retailer credit products, such as in-store credit cards, which have proven less popular than younger generations, "he wrote. I would expect increased adoption of "buy-now", "pay-later" solutions in the following retailers for many years, largely at the expense of reducing the use of in-store credit cards. "
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