Following the BNPL and the new economic landscape report we commissioned by Capital Economics, we’ve taken a look and deep-dived into 3 key trends that emerged from the pandemic and what it means for retailers.
1. Online retail is here to stay. But what does it mean for buyer confidence?
In 2020, online retail sales surged by 32% while online transactions jumped to over 30% of all retail sales from just 20% in 2019. Capital Economics, in the BNPL and the new economic landscape report, expects this trend to continue whilst spending in physical stores gradually declines as a result of remote working, and city centres facing the double challenge of reduced footfall.
As we shop predominantly online, what does this mean for purchasing confidence? Without the sensory experience of shopping in-store, consumers are putting their trust in retailers before seeing a product. Capital Economics research showed that consumer confidence in spending with less known sellers increased when buy now pay later (BNPL) was used.
As needs and priorities changed throughout the pandemic, consumers purchased goods they previously wouldn’t have. The reassurance provided by Klarna’s buyer and sellers protection has given security to many when making online purchases from unknown sellers – 78% of BNPL customers noted that the security provided by the provider when buying from an unknown seller was ‘fairly’ or ‘very’ important when making their purchase decision.
Particularly this was seen in the electrical & technological verticals, with a YouGov survey indicating that +30% consumers who used BNPL in the last year purchased an electrical or technology product that they would not have otherwise purchased – perhaps indicative of the increased reliance on technology for both work and leisure throughout the pandemic. On average shoppers spent around £378 per person on electronic goods and £77 per purchase since the start of the pandemic.
2. Goodbye cash. Hello digital payments.
Unsurprisingly, the rise of digital banking has meant cash withdrawals in the UK have dropped by 24% from 2012 to 2019. During the pandemic, however, the fall in the use of cash has been even sharper, with January 2021 volumes almost 50% lower compared to the year before.
At Klarna we know consumers are preferring debit cards, mobile wallets and BNPL solutions to make their payments. Whilst debit card volumes have tripled over the past decade, jumping to 17 billion in 2019 from just over 5 billion in 2009, customers are required to pay immediately when they make a purchase and don’t have a lot of protection. Cue the rise of BNPL – whilst consumers value the flexibility, convenience and security of BNPL, similarly merchants benefit from seller protection and are able to transfer risks of late or non-payment to their BNPL providers.
In 2020 over 10 million people used a BNPL option to make a purchase online in the UK, spending a total of £4.1 billion. As consumer appetite for flexible payments grows, so does the market opportunity for retailers. Klarna as a BNPL provider offers more than a checkout service, it is a full circle shopping destination that offers merchants the opportunity to acquire and retain customers within the Klarna ecosystem.
3. E-com tech will differentiate customer experience.
According to Worldpay, the UK’s e-commerce market is currently the third largest in the world and it is expected to grow by 37% in the next three years. To keep up retailers must tap into technologies that improve the online presence, and stand out from the competition.
Changing behaviours has brought out new needs, with shoppers demanding ever-more sophisticated interactions and human experiences across the digital channel mix. The explosion of omnichannel shopping personalisation should be a first point of call for retailers looking to improve their online offering. It’s clear to see that consumers are looking for alternative channels to shop on – the Capital Economics report showed that from January to July 2020 there were almost 1.0 million downloads of the Klarna app in the UK.
When looking to improve their digital offering, merchants should be looking to partners who make an impact across the customer journey. Partnering with Klarna does more than just add another BNPL option to your checkout. It’s the first step to driving customer acquisition and retention, whether it’s through social (154m monthly impressions), Klarna app (18m monthly average users globally), CRM, website or other owned channels and media services.
However it’s not all about us. At Klarna we partner with some of the best in the retail industry, from agencies to cross-border platforms. To learn about the retail partners and agencies Klarna works alongside, visit our partner directory here.