Try before you buy goes mainstream
21 May 2019
Instant gratification coupled with delayed payment is an increasingly attractive proposition for today’s demanding customers
Try before you buy (TBYB) has had a long and involved relationship with retail. For instance, you wouldn’t buy a new car without driving it first. Places like Germany, Benelux and Scandinavia have an established, happy history of catalogue selling where customers have 30 days to pay for items they’ve ordered or return them.
But tech powered TBYB is growing apace, particularly in the fashion market. ASOS, Arcadia Group and JD Sports Fashion are already there, the first two of which are built on and run by the Klarna payment system.
Klarna general manager Luke Griffiths told fashion industry bible Drapers that the “want-it-now millennial approach to shopping across mobile devices works well with pay-later initiatives for customers because of the ease and convenience but the retailer also benefits, as they are able to turn around and sell through product lines more quickly”.
In retail, a sure sign that a trend isn’t going away any time soon is when Amazon picks up and runs with it. Indeed, the global giant is bringing Prime Wardrobe, which has been very successful in the US, to the UK as part of its assault on Europe’s fast fashion market. The service gives Amazon Prime subscribers seven days to trial clothes at home and decide those they wish to keep and pay for. Shipping is free, both ways.
“Fit is an important factor when it comes to buying clothes and shoes, and with Prime Wardrobe, Amazon Prime members can try their purchases in the comfort of their own home at no extra cost,” says Amazon EU Retail VP Xavier Garambois.
How retailers view TBYB – opportunity or challenge – reveals a lot about their journey to digital.
Take three drivers
Let’s start with opportunities and specifically the changing consumer. Millennials are looking for seamless experiences rather than delayed gratification. The success of platforms such as Monzo is testament to the desire consumers have for new offers and options in payments. We’ve seen the checkout-free store, both the Amazon Go model and other app-driven offerings from independent retailers, and now we’re seeing checkout-free online shopping.
Then there’s infrastructure maturity. Click and Collect and other innovations mean many retailers now have the (often considerable) technology in place to handle returns confidently. The infrastructure is also in place on the delivery side. Consumers now have a wide range of delivery options including timed delivery slots, physical delivery lockers and local pick-up agents thanks to services such as Doddle.
Now look at the competitive imperative. Removing the need to pay straightaway means customers are more likely to order more. It’s that simple. And, as ever in retail, it’s all about the bottom line. Anecdotal evidence suggests 10-30% growth for retailers introducing TBYB. Ultimately, when consumers demanding choice are in the driving seat, TBYB is another weapon – another choice – in the retailer arsenal. As it gains momentum, you’ll have to be in it to win it.
Three Cs that may stop you saying “si”
Cashflow can’t be underrated and TBYB represents a risk, no two ways about it. It means retailers have to support and survive late influxes of cash and complex reconciliations, particularly as some credit providers are notoriously tardy. Even when customers choose to buy rather than return, payment may well be delayed as many will wait until payday to settle, which means cashflow spikes for retailers. Inventory management is another key concern and retailers may not love the idea of more stock being essentially out on loan for long periods.
Let’s talk about complexity. For those without the systems already in place to flex, introducing TBYB introduces whole new layers of complexity, not least on the quality/checking side where the retailer must make sure returned items are fit to be returned to stock. Retailers taking the plunge for the first time will find a lot to consider over and above the logistics of managing returns, including cash reconciliation and warehousing costs.
Control, or lack thereof is an issue. Some see TBYB as tantamount to a loss of control to capricious customers. Detractors regard it as another nail in the coffin of brand loyalty. Customers might choose what they want to buy, including the style, colour and fit, then return items so they can buy them somewhere else more cheaply. But frankly that’s a perennial consideration for retailers, regardless of channel.
One of the most exciting aspects of TBYB is the potential it unlocks for retailers to develop and expand on it with additional value and innovation. This recent blog from Shopify takes a more detailed look at how four different retailers are adding their own flavour to the proposition.
In challenging times for retailers when it’s hard to predict what the immediate future holds, I’m reasonably certain that TBYB is here to stay, although whether people adopt my FLA (that’s four letter acronym for those of you unfamiliar with the rules of management speak bingo) remains to be seen.