With the federal government set to announce today plans to regulate buy now pay later (BNPL) products under the Credit Act, it could be timely for local independent retailers to pitch LayBy.
The use of LayBy dropped away as BNPL like Afterpay, Zip and others offered shoppers easy access to finance for immediate purchases. While BNPL is used for many products outside the scope of LayBy, I expect the use of LayBy to increase once the BNPL regulations are in place.
While the ACCC defines the LayBy arrangement, LayBy is regulated at the state / territory level. In Victoria, for example, the regulations cover the contract, cancellation, price chan get and more. The level of regulation varies between the states / territories.
There is sure to be plenty of noise about the regulatory changes. I can hear some apologists for the BNPL businesses calling the moves those of a nanny state, lobbyists for the BNPL companies themselves saying that misbehaviour by a few has led to this and oh, self regulation would be better.
As a retailer, I like the BNPL products in that they helped drive terrific sales growth and they provided a level of shopper stickiness with regular BNPL users choosing shops based on their acceptance of the payment method. In one of my online businesses doing close to $500,000 a year, BNPL is the payment method for more than a third of all sales. At Christmas time that can jump to 50%.
In physical stores, the use of BNPL varies by retail channel, but it is a popular payment method, but often expensive to the retailer. Whereas credit card payments today typically cost retailers less than 1%, BNPL payment can cost as much as 6%. The benefit to the retailer is that there is no risk should the shopper default.
The anticipated BNPL regulatory changes give local retailers the opportunity to re-pitch LayBy. But first, we need to ensure our processes are fit for purpose, smooth, understandable, appealing to shoppers and economically viable for us. This is where retail management software comes into play. POS software can offer easy structuring of terms and conditions, managing the appropriate deposit, set different expiry terms for a LayBy based on the products in the LayBy, track payments, following up missed payments and tracking where LayBy products are stored. Plus, you can edit a layBy once commenced – by adding and removing stock, and you can manage partial collection of items in the LayBy.
Introducing a LayBy service fee could be a good way to qualify the LayBy shopper and cover some of the costs involved. There are retailers in Australia charing from $3.00 (Target) to $15.00 (Big W) in LayBy fees. Depending on how you structure it, this could be in addition to a cancellation fee.
My advice to retailers is to focus more on the expectation that all LayBys will be fully paid and collected on time, to consider LayBy as a positive service by the business and opportunity for the customer. Promote it. Welcome its use. Make managing it easy for you and the shopper.
Local retailers can make decisions around offering LayBy that could differentiate their businesses from bigger retailers.
News outlets will carry stories of the BNPL regulatory changes as they make their way to reality. This is why now would be a good time to pitch LayBy in-store and on social media.
Spot on Mark. Ill be glad to see less people sucked into the buy now pay later products. I’ve heard stories of awful pain and people have to be responsible but no regulation has made it like a gold rush for some of the companies I think.
My daughters used one service and it helped them manage their budget but they stopped once I told them how much it cost the shop owners. They grey up in my shops and want to support the retailers.