Department store Myer will be implementing buy now, pay later service Afterpay in-store in 2020, in an effort to incentivise the 2.7 million active Afterpay customers to visit its retail locations.
“Our customers have responded positively to the Afterpay offering since we launched it [online] in April 2017,” Myer general manager for financial services Spencer May told Inside Retail.
“We now look forward to extending provisions of buy now, pay later services for our customers, with both Afterpay and humm in-store from late 2019.”
The decision comes amid Myer’s customer-first turnaround strategy, in which it seeks to bring customers back in-store by transforming the in-store customer experience, expanding the retailer’s ‘Only at Myer’ offering, and improving its online channel.
The plan seems to have started off on the right foot, having led to a 3.1 per cent increase in net profit after tax in the first half of FY19 to $41.3 million, according to Myer chief executive John King.
In-store is a growing segment for Afterpay, accounting for about 20 per cent of total ANZ underlying sales for the 5 months to May 2019, compared to 15 per cent over the first half of FY19.
Additionally close to a quarter of the service’s new customers are being driven by in-store, rather than online, sales.
Myer has been contacted for comment.
Buy now, pay later’s impact on retail
According to UBS analyst Ben Gilbert, the impact of implementing buy now, pay later services drives an incremental increase in sales, as customers that did not necessarily have the ability to purchase at that store are now able to.
However, this growth in sales tends to stabilise after 12 to 18 months.
“The emergence of buy now, pay later has been a key driver of both traditional and online retail,” Gilbert said.
“Growth largely reflects a shift to online, with retailers telling us buy now, pay later offers can make up over 50 per cent of online sales.”
UBS estimates that buy now, pay later providers Afterpay and Zip accounted for approximately 16 per cent of incremental discretionary retail growth in the first half of FY19.
Gilbert does raise the possibility that these extra sales have been brought forward, creating a risk to profit forecasts as customers buy early.
“While we have some concerns, we note large retailers have largely cycled this in their online sales, momentum has continued and retail sales are holding up better than feared, with (early) post-election feedback on trade positive,” Gilbert said.
“As a consequence we are becoming less concerned, [and see] an opportunity now to potentially try to negotiate better terms on the buy now, pay later options.”
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