Against a backdrop of economic uncertainty, the retail and ecommerce industry has faced its share of challenges in recent years. With retail sales growth remaining low, leaders must have an even deeper understanding of how and what consumers are choosing to spend their money on. These insights must be coupled with an appetite for change, to allow for transformative tech solutions to be adopted quickly and efficiently by retailers that create seamless shopping journeys for consumers. 

Recently, Clearpay commissioned Oxford Economics to produce the ‘Economic Impact of Clearpay in the UK’ report, to investigate the rising adoption of Buy Now, Pay Later (BNPL). The report delves into how consumer spending habits are changing, the retailer benefits of adopting BNPL, and the positive contribution BNPL has made to the UK economy. As we gear up for 2024, these insights could be a key contributor to assisting retailers in unlocking business success and growth.

The rise of Buy Now, Pay Later

As technological innovations continue to revolutionise all industries, retailers cannot ignore the rising popularity of BNPL, which allows customers to split payments for purchases over a short period of time, interest-free.

Rich Bayer, UK Country Manager at Clearpay, said: “With the value of transactions facilitated by BNPL services expected to increase by around 11% per year in the next five years, reaching £44 billion by 2028, BNPL is increasingly becoming an everyday payment product of choice for consumers. While Millennials and Gen Z were the early adopters, older generations are also taking to BNPL as they recognise the benefits of paying in four instalments, rather than with a credit card that comes with the risk of revolving debt.” 

The report indicates that helping to mitigate against financial stress was a driving factor for BNPL use. Nearly four in five (78%) respondents said that the service helped them reduce the stress related to the cost of large purchases, whilst a further two-thirds (65%) said that it helped them manage the stress associated with festive spending. Respondents expressed that BNPL helped them reduce financial worries, especially when compared to credit card spending, and 45% of BNPL customers surveyed perceived the tool to be less stressful than credit card borrowing. 

The impact of BNPL expands beyond the individual too. It can be good for the UK economy by helping consumers to manage larger purchases at a time of inflationary pressure. Retailers are also seeing the benefits, through boosted sales in challenging times. Clearpay’s survey data suggests they've helped boost sales by nearly £1 billion for retailers, who would have otherwise lost an average of 18% of their BNPL revenues.

Timing is everything 

The advent of online shopping has fundamentally changed when we shop. Instead of having to fit around retailer opening hours, consumers shop to suit their daily routines. Despite economic hardships, the desire to invest in fashion and beauty products is still very much in play, with Clearpay seeing a fashion product purchased every two seconds and a beauty item bought every 12 seconds. Clearpay findings show that the most popular day to shop for fashion products is Thursday, whereas, for beauty products, it’s Friday. The peak time to shop for fashion and beauty products is 9pm, with the peak month for fashion occurring in July, while purchases for beauty products reach their height in November.

This type of granular data about the way consumers are shopping is essential for retailers so that they can create effective marketing and advertising campaigns that influence customers at the right time.

“Customer shopping habits are ever-evolving, creating an ongoing challenge for retailers that want to deliver an efficient shopping journey,” Rich Bayer said. “This is where payment providers can help by giving retailers real-time insights that they can use to create meaningful connections with shoppers at the right time, which helps to build loyalty and ultimately, a sale.

Shopping across generations and genders 

Despite the vast differences that have been identified regarding how generations shop in recent years, with baby boomers having the luxury of purchasing without seeking the best deals and Gen Z being influenced by reviews from their peers, there are still, perhaps surprisingly, many commonalities when it comes to what individuals are purchasing. Across the board in all age groups, the top product purchase was dresses, closely followed by makeup, t-shirts and shirts, which made up the top three in all age groups. When it comes to the gender split, the top products purchased by women were dresses, t-shirts and makeup, whereas for men it was t-shirts, shirts and shorts.

Rich Bayer commented: “It’s exciting to witness the vast changes in the fashion and beauty industry in recent years. For instance, gender fluid clothing, championed by leading British designers like Daniel w. Fletcher, is now more widely available. And within the beauty category, overall spending among men increased 77 per cent year on year between May and July, with male shoppers making up 21 per cent of all beauty purchases in Britain. Spotting trends like this and reacting early open up huge opportunities for retailers to stay ahead of the curve and reach new audiences.”

In 2024, we expect the demand from consumers for seamless experiences across digital, social and physical channels to be higher than before. Retailers should use trend data and tech solutions at their disposal to allow for quick pivots so that they can remain relevant to their customers in a fast-changing world. 

All data referenced is taken from ‘The Economic Impact of Clearpay in the UK’ report.

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