Plenty of beauty businesses already accept BNPL payments (like Body Cataylst with their “treat now, pay later”), but should you? In the recovery post Covid, it might make sense and millions of Australians (and growing) are using the payment service, particularly women.
Recent research reveals that 5.8 million Australians currently have at least one Buy Now Pay Later account and nearly half of Australians are already familiar with the program, it’s time to consider whether your business should use Buy Now Pay Later with dozens of companies now offering it (Zip, Afterpay, Klarna, Google Humm, Latitude Pay, Salon Pay et al).
Professional Beauty has covered expert opinion on BNPL in the beauty industry and the rise of Salon Pay as a way to keep clients from missing “their regular salon and clinic appointments slip during periods of financial strain, allowing them to book in, and split the payment over the coming weeks.” What was a niche payment when it launched looks set to become a mainstream payment option for millions of people in the coming years.
Which beauty businesses does BNPL work best for?
BNPL probably benefits businesses offering lumpy purchases (high-cost, infrequent buys) rather than low-cost, frequent purchases. Think several hundred dollars on fat freezing once a quarter versus a weekly mani-pedi for $40.
Ashlee Laura, CEO & Founder of Organic Rituals and Eden Spas, says “In my business we use both Zip and Afterpay. I personally thinks it’s great for salons and spas, as one of the main areas that brings in the profits is retail sales. Clients come in wanting to change their skin however might not have the budget to purchase all the recommended skincare products upfront. So having BNPL options you don’t loose a sale.”
But am I putting myself in financial jeopardy by not collecting the full payment at the time of service?
No, it turns out. Even though you aren’t collecting the full price of the service, treatment or product up front, the BNPL providers take on the risk where the consumer pays them, not you. You will be paid in full upfront by your BNPL providers, and the consumer then makes installment payments to them over time, usually in four installments with no interest and no extra fees.
Your business will typically pay between 2% and 6% to the BNPL provider for use of the service, assumed credit risk and the hassle of dealing with late fees on late installment payments.
How does this benefit my business?
In several ways. One way, says popular BNPL provider Zip, is that using Buy Now Pay Later “delivers not only an increase in the average order value but also fewer returns.”
The main benefit to you, though, is that you’re expanding your pool of potential customers to those who might have felt they previously couldn’t afford your services or treatments when they had to pay the full cost all at oncw (or those don’t qualify for credit cards) but now feel comfortable or capable of paying in installments. In particular, says Zip, “young shoppers are turning their backs on credit cards in favour of buy now, pay later services, which offer incur no interest on purchases.”
You can tap into the pool of potential customers who aren’t flush with cash, and it’s a surprisingly large swath of the population. Laura says “100% I think all business should have BNPL available for their clients. There are a lot of people that live week to week so BBPL allows them to purchase big ticket items and pay it off slowly.”
Though she doesn’t think it’s a good tool for professionals to use in a B2B capacity, to buy stock or devices. “BNPL for B2B I personally disagree with,” she says. “The business owner starts to chase their tail trying to pay off all their accounts. I have worked with too many salon owners that are in so much financial debt because of BNPL. So from a salon owners perceptive I don’t think salon owners should be using BNPL to purchase stock.”
“For business owners, implementing a Buy Now Pay Later option for customers can help meet expectations for diverse payment options and deliver a transparent, budget-friendly and responsible way to pay for large-ticket items,” says Zip. This results in not only greater customer satisfaction but also increased immediate sales and average order values for retailers.”
A note of caution
While it sounds like an easy decision to use BNPL, there are still some things to be aware of. Be careful of accidentally eating into your profit margins on services and treatments you would have performed or products you would have sold anyway. Sometimes it can be hard to really measure how much lift something like BNPL is driving. For example, if regular/repeat customers decide to use BNPL instead of paying at the time of service as they historically have, you could be in trouble as you’re now paying a fee on that service (of anywhere from 2% to 6%) when you would have gotten 100% of the price before. Laura agrees, saying “The negatives are that these companies take a percentage to process the sales, while its not large it all adds up.”
And as of now, the terms of service with some BNPL providers have prohibited surcharging for the service to offset the cost to you.
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