Urban Outfitters buys into installment payment plan
Urban Outfitters Inc. has become the first U.S. retailer to use Afterpay, an Australia-based digital platform that offers interest-free installment plans to support online fashion purchases.
Through Afterpay, shoppers pay for products they buy online in four installments, with no upfront fees or interest.
“Afterpay helps shoppers get over that initial price hurdle by offering a platform to help budget for things that they want without needing to take out a loan or open a credit card,” said Nick Molnar, founder and CEO, in a statement. “This is particularly relevant for millennials who are reluctant to use credit cards and other forms of traditional finance.”
A 2016 survey from Splitit, another provider of installment plans, revealed that more than half of consumers polled (54 percent) preferred installment payments over free shipping. Nearly as many (53 percent) chose installments over a 10 percent discount offer.
Afterpay assumes all non-payment risk on behalf of retailers. The service is only available online.
Afterpay earns money from fees and commissions charged to retailers as well as late fees from shoppers. In Australia, retailers are reportedly charged 30 cents Australian (U.S. 22 cents) plus commission ranging from four to six percent for every transaction. Merchants receive payment within 48 hours, minus the commission and fee.
Urban Outfitter customers will be charged an $8 late fee for a missed payment and an additional $8 fee if the payment is not made within seven days. Late fees will not exceed 25 percent of the total order.
Mr. Molnar said AfterPay has proven to help retailers increase conversion rates and incremental sales by 20 to 30 percent.
Founded in Australia in 2015, AfterPay said it now processes more than 25 percent of all online fashion/beauty transactions. The platform has worked with more than 14,000 Australian retailers and brands, including Sephora, Estee Lauder, Lululemon and Myer.
Said Dave Hayne, chief digital officer at Urban Outfitters, “Preliminary tests in the US have shown promise, and based on the success Afterpay has seen in Australia, we have reason to believe our US customers will embrace this innovative new payment solution.”
- Afterpay Launches in the U.S. with Urban Outfitters, Anthropologie and Free People
- Buy-Now, Pay-Later Service Now Provides Shoppers in the U.S. with Payment Flexibility for Online Purchases – Urban Outfitters
- AfterPay Urban Outfitters – Urban Outfitters
- More than 50% of U.S. Credit Card Users Prefer Installments Over Discounts and Free Shipping, Splitit Survey Reveals – Splitit
DISCUSSION QUESTIONS: Would an interest-free installment loan platform offer much appeal to U.S. consumers and fashion e-tailers? Could interest-free installment plans become a bigger incentive for online purchases than free shipping?