This presents more opportunities, but also comes with considerable challenges – in particular around payments. Many retailers are now exploring consumer financing and deferred payment options at the online checkout, and shoppers will increasingly become used to paying after delivery or in installments.
But is it really viable to offer this in-store – effectively allowing shoppers to leave without paying?
I’m going to preface this by saying that this is something we as a business are working on at the moment at Klarna, so I may be biased. But we’re not the only ones experimenting with new bricks-and-mortar payment solutions – the industry is striving to align in-store with online.
However, the figures speak for themselves, and here’s why I think we’re going to see more retailers adopting similar systems.
They help you offer next level customer experience
Previous in-store credit solutions have typically been long, drawn-out processes, with customers often uncomfortable giving away personal and financial information to shop staff. It almost felt like the process was about getting as much information from the consumer as possible. And then there were clumsy obstacles shoppers had to jump through to be approved, like having to bring in their passports.
But the new breed of credit and deferred payment solutions are more straightforward and simple when facilitating a relationship with the consumer and have a far shorter approval time – sometimes instantaneous.
Building on the popularity of our Pay later and Slice it offerings online, at Klarna we’re working on bringing these options to the in-store environment – taking friction out and offering consumers choice around how they manage the way they pay over time for a purchase. We’ve run some initial pilots in the Nordics and will be rolling-out in the U.K shortly.
In Klarna’s case, our product works much in the same way as our existing online process: Once the item is scanned through the terminal, the customer has the choice to use Klarna. To do so, they just need to give the cashier their mobile phone number so they can be sent a link to an online portal, here they can then checkout and pay Klarna over their preferred installment time frame.
You can boost customers’ spending power
Solutions like this are great for big ticket purchases like electronics, furniture or discretionary spending, whether that’s a designer handbag or a new bike. But rather than saving for months to afford items, customers can get their hands on products immediately, and then pay them back in installments over several months. For retailers, that means more sales – particularly of higher value items.
It’s also hugely helpful for unexpected expenses. In the Nordics, a big percentage of Klarna’s market share actually comes from dentists, plumbers and car mechanics – to cover unplanned costs. Another benefit is that our system allows for remote payments, meaning customers don’t have to queue to pay for their car repairs, or wait for an invoice from their plumber.
Retailers reap the rewards
Though many online retailers offer Klarna payment options, the majority of retail transactions still take place in a physical location. That’s a lot of retailers – and consumers – who would do well from an offline version of flexible payment options. Shoppers get a better, more personalised experience, and that translates to direct benefits for merchants.
These deferred payment solutions also help to bridge the gap in the online-offline journey. Retailers who use similar payment systems on their website and in-store can join up customers’ data and use this to offer a more tailored experience across platforms.
Finally, deferred payment solutions in-store can also help smooth a retailer’s cash flow. In-store, there is still a traditional spending peak around payday – which can make managing stock levels difficult.
Will it take off?
That depends who you ask. Some may say the idea – allowing customers to leave your shop without paying for their purchases right then and there – might seem crazy. But we were told that at Klarna when we launched Pay later online.
We’re seeing good uptake with our pilot merchants – and with so much now riding on customer experience in-store, merchants must re-evaluate their priorities or face the consequences. What’s also clear, is that the traditional payments rulebook is being re-written.