Opinions

S'pore's Seeing A Rise In 'Buy Now, Pay Later' Services - Will It Help To Fill Retail's Gap?

As Singapore transitions into the fourth quarter of the year, it has become apparent that the retail sector’s recovery is likely to be slow and lengthy.

Within the first few months of 2020, Singapore saw various brands leaving its shores and opting to move online instead.

It was announced that Singapore’s retail sales in May fell 52.1 per cent – its largest drop since record-keeping began in 1986.

Associate Professor Lawrence Loh of the National University of Singapore Business School was quoted saying that it was probably “just the beginning, and not the end, of sales bottoming.”

More recently, Singapore’s beloved local bookstore BooksActually, and British fashion brand Topshop and Topman also announced their closures, and plans to move online.

However, even as brands are expanding their presence online, simply being online might not boost their sales significantly — consumer sentiment is still low, and many are tightening their purse strings.

Will Singapore’s many ‘buy now, pay later’ services solve this burgeoning problem in the retail sector?

What Is ‘Buy Now, Pay Later’?

‘Buy now, pay later’ (BNPL), is exactly what it sounds like —  services that allow consumers to break up payments on items into installments.

These services have already made their way into Singapore, and are typically available as an option when shopping online.

For example, Rely Installment allows customers to break up a purchase into three interest-free monthly payments. It is available in stores such as Secret Lab, Qoo10 and Omnidesk.

Another service, Atome, also provides similar services.

This September, Singapore startup hoolah launched a first-of-its-kind in-store Buy Now Pay Later solution.

To purchase an item at the store using hoolah, consumers can simply scan a QR code using the hoolah mobile app. They then enter the total order amount, which will be divided into three monthly payments and automatically deducted.

Since August, hoolah’s solutions have already been implemented at over 150 retail outlets islandwide.

Even Singapore’s ride-hailing giant Grab has hopped onto the bandwagon with “PayLater Instalments”.

Reducing The Rate Of Abandoned Baskets

buy now pay later solutions
Image Credit: Nouragoma.com

How many times have you filled up a shopping cart online, only to leave your items sitting in it for weeks on end?

According to Singtel MyBusiness, 25 per cent of consumers who abandoned their shopping carts did so because of high prices. Another 41 per cent were “not ready to purchase”.

This problem was also one of the defining factors that led to the founding of hoolah in 2018.

According to Stuart Thornton, co-founder and CEO of hoolah, up to 75 per cent of e-commerce consumers would abandon their online shopping carts after looking and adding items to them.

“This is a massive missed opportunity for retailers,” he said.

With the introduction of BNPL services in online stores, customers are able to get the items they require instantly, without having to pay the full cost upfront.

Since most BNPL solutions keep interest rates at 0 per cent, customers do not feel the pinch of having to pay extra for the same product, and are more likely to make the purchase.

According to a media statement by hoolah, its website visitors increased by 500 per cent over the past six months, with a sevenfold increase in total transactions made via the platform.

Furthermore, at the time of its launch, Atome already managed to partner with 500 merchants.

These numbers are a testament that BNPL solutions are well-received by customers, and possibly welcome as another lifeline for retail stores.

Improved conversion rates of shopping carts also show that these solutions are indeed showing results.

Hoolah said that it had managed to deliver a 20 to 40 per cent increase in conversion and basket size, while Atome saw a 230 per cent growth in online transactions during the circuit breaker period.

Taking Online Solutions Offline

buy now pay later solutions singapore
Orchard Road / Image Credit: Torque

A study conducted by Singapore Tourism Board (STB) and payments technology company Visa found that local brands were losing out to online alternatives.

As retail brands scramble to carry out their digital transformation efforts, implementing in-store solutions can act as a temporary buffer to boost sales.

It is even more critical to innovate around traditional practices, in order to help all businesses survive.

– Stuart Thornton, co-founder and CEO of hoolah, in an interview with The Startup Growth

Hoolah aims to “be at the forefront of driving the economy’s recovery” with its new physical in-store solutions.

According to Paulino Moreno, the Regional Managing Director of fashion lingerie and apparel retailer 6IXTY8IGHT, making BNPL solutions available in their online and offline stores enables the brand to reach out to its target market more effectively.

‘Buy Now, Pay Later’ Cannot Solve All Problems

The BNPL service has been common in Western markets for a long time, and some even posit that it’s what is keeping some retailers alive.

As BNPL services are typically targeted at millennials, there are concerns that this group of customers will end up incurring more debt in the long run.

Furthermore, Singapore has long promoted financial discipline and prudence as the way to go for both the government and consumers.

In a thread about BNPL services on financial community Seedly, most contributors said that they would prefer to pay upfront when they had the means to, rather than paying in installments.

Many also recommended not making the purchase if one did not have the means to pay for it in full.

This shines a light on the consumer sentiment behind BNPL services.

Even though the service might have taken off and become popular among select groups of people, it is unlikely that it will be come the holy grail for retailers to boost their sales.

Featured Image Credit: hoolah

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