Buy Now, Pay Later is the Future of Luxury E-Commerce
Key Points
- BNPL limited to only volume driver products can foster brand love in a group of new, potentially lifelong customers.
- BNPL is the key to sustaining premium prices for both brand collaborations and inhouse design lines without eroding the brand.
- Marketers would have access to analytics on gender, shopping behavior, loyalty, and CRM data on the next generation of luxury consumers.
Believing the 2010 sentiment that e-commerce = erosion of brand value is to make the same mistake with buy now, pay later (BNPL) in 2022. The BNPL retail function is an untapped e-commerce opportunity for any brand, expected to grow by 45.7% annually to a value of $4 trillion by 2030 and exhibiting skyrocketing popularity with an 85% user base increase over 15-months and adoption by 50% of the US population.
In the luxury industry, where maintaining exclusivity across all messaging is paramount – you don’t “buy” Chanel, you “discover” it – how can brands leverage BNPL to their benefit without compromising branding?
Increase Masstige Access to Entry-Level Products
Luxury brands always market the hero and sell the volume driver – the Hermes Birkin vs silk scarf; Porsche 911 vs Macan; Tiffany engagement ring vs key pendant. The former epitomizes the brand and the latter is an entry-level product meant to engender future loyalty, yet high price points means that this strategy has driven only mass appeal, not mass access. For the average consumer, a $900 pair of shoes is out of the question – but what about $150 per month for 6 months?
Instead of dropping prices – a surefire path to brand erosion – luxury brands can bite-size them. When done right, BNPL can foster brand love in a group of new, potentially lifelong customers who will continue to upgage and upgrade within the same brand. BNPL limited to only volume driver products sustains premium prices with accessibility options, while hero products remain at arm’s length – or ten.
From a cash flow perspective, BNPL is an opportunity to make brand dollars spent on social media and awareness more worthwhile by improving the acquisition funnel and increasing product margins through interest on financing.
Let Consumers Afford the House Brand Instead of Brand Collaborations
More and more luxury brands are relying on their own design houses to sell products and accessories under their brand name. Just look at what Ferrari, Porsche, and Bentley are doing in the luxury automotive industry – using the power of their design houses (which all luxury fashion, skincare, and cosmetics brands have in-house), they are creating more products and accessories to expand their SKU and increase cart value. Bundle this with BNPL, and the house brand achieves the accessibility that was the aim of cross collaboration partnerships.
The same goes for collaborations with cultural icons like Gucci x Doraemon and Kartell x Tokidoki, which have broadened appeal to serve younger audiences but have not addressed price points. BNPL is the key to sustaining premium prices for both brand collaborations and inhouse design lines without eroding the brand.
Understanding Your Future Consumer Today
BNPL for entry products grants marketers with more analytics as to who future consumers might be. BNPL users are typically younger, with 80% being Millennials and Generation Z. This group encompasses the two most important consumers in the US right now – the 40-year old Millennial, who holds the most purchasing power, and the 24-year old Generation Z, who has the most sway in consumer behavior and will ultimately become luxury’s next high net-worth consumers. BNPL awards marketers with analytics on gender, shopping behavior, loyalty, and CRM data on the next generation of luxury consumers.
Accessibility, appeal, and analytics – this is the triple whammy that can be achieved by luxury brands if BNPL is used properly. With the likes of Gucci, David Yurman, Oliver Peoples, and Oscar de la Renta already offering BNPL, it is the next generation of e-commerce.
