For most of the existence of online shopping, consumers have preferred to use credit cards for making online payments but a recent shift in consumer behaviour has shown that the younger generation of online shoppers are far less comfortable with the idea. An overwhelming 67% of young buyers don’t have a credit card. The idea of extended credit and the hidden fees that go with them puts them off, which creates a big problem for Ecommerce stores. This has resulted in an increase in abandoned carts and lower overall basket values as these consumers now have a limited purchasing power at their disposal.
You can offer every payment method out there, but it’s not going to help if your customers don’t have a credit card or can’t afford to pay the full price of your products, and dropping the cost isn’t a viable solution if you want your business to thrive. The answer could lie in offering a financing payment option to your customers. It may seem like a risky venture that would incur a lot of extra admin, however there are existing third-party apps that can make this extremely convenient to offer to your customers.
Financing actually empowers buyers
Offering an alternative payment platform such as a financing option empowers your buyers to manage their purchases in a way that suits their budget, helps them to budget, and gives them more purchasing power. 55% of abandoned carts are due to too high of a total cost of purchase, so being able to offer customers a financing option both at point of purchase and on your product pages can boost sales, increase conversions, and drive repeat business. It is also ideal for small businesses, whose average order size could increase by up to 120%.
Benefits of offering financing
There are a number of benefits to offering your customers a financing option when making purchases on your website:
1. Increase average order value
Financing immediately increases the Average Order Value (AOV) of customers, as they tend to make add-on purchases, as well as upgrade to the more expensive versions of products rather than settling for cheaper models. It has also been noted that 66% of customers who use financing come back and make an additional purchase of at least $500. Not only does it increase your AOV, but it also promotes repeat purchases and has a positive effect on customer loyalty.
A study from Retail Customer Experience shows just this with actual data.
2. Able to compete with larger retailers
Larger retailers threaten the livelihood of smaller businesses, but with financing you don’t have to sacrifice your product margin. Offering financing, especially if your product range is expensive, will enable you to compete with larger retailers.
3. Reduce abandoned cart rate
As mentioned before, more than half of abandoned carts are caused by too high a cost of a total purchase, which financing can easily take care of. If customers can pay off a purchase over 3 or 4 months, the monthly down payment is far more manageable to the budget.
Is Ecommerce financing right for your business?
Giving consumer credit has been done for years by the big-name stores, but it is far less common for small businesses or Ecommerce businesses. Before you decide to offer financing to your consumers as a payment method, determine whether it is right for your business. Use your sales and website metrics to track your most popular products and determine your average sale price to see if it will justify instilling an Ecommerce financing option.
If you’d like to increase your average order value or combat increasing cart abandonment, then offering this as another payment option will most likely be right for your business. In-house credit isn’t really an option for most Ecommerce stores, and comes with a lot of red-tape, so making use of third-party solutions is the best way to go.
Offer Sezzle to your customers for Ecommerce financing
What is Sezzle? It is a payment method that increases sales and order volumes by enabling shoppers to "Buy Now, Pay Later" with simple, interest-free installment plans. They break down the total cost of an order into smaller, more manageable installments - most commonly, 4 equal payments, each two weeks apart. Shoppers then get to pay a fraction of the order up front, but the funds are transferred to their Sezzle account right away - so they never have to worry about how much they have paid.
Sezzle enables customers to spread their payments over time while remaining interest-free. It also means that you as the merchant can offer financing without all the fraud and repayment risk. You are guaranteed upfront payment, making it completely safe for your Ecommerce business. Sezzle integrates seamlessly with Shopify platforms enabling merchants to sell more, increase their average cart size and value, as well as increase their conversion rate.
According to 4500+ merchants, Sezzle has shown great results including a 5.8% increase in shopping cart insertion rate (rate at which items are added to the cart) when the financing option is added to the product page. It also had a 41% increase on the Average Order Value, obviously due to the affordability of having the total split into 4 repayments. Sezzle also contributed to a 38.7% conversion rate increase when customers were able to select Sezzle upon checkout (being able to sign up without ever leaving checkout).
How does it affect the consumer experience?
As an Ecommerce merchant, your user’s experience is paramount - it can mean the difference between a sale or an abandoned cart. The payment process is a particularly important step in the sales cycle, when it comes to handing over the cash the customer needs to feel that it is secure and it must be quick and painless. Applying for store credit in a brick and mortar store can be quite admin intensive and is seldom immediately usable, but buying online is a completely different ball game.
Online shopping needs to be as close to instant gratification as possible, which is why Sezzle is a good option as sign up takes place while in checkout without having to leave the process. Creating an account is instant and secure for the customer, which means they can apply, sign up, and use their Sezzle account immediately to purchase from your store.
Your customers will browse as usual on your Shopify store, add items to their cart, choose Sezzle as their payment option, create an account, complete their order and pay off their purchase over time in four interest-free payments.
Our thoughts on Sezzle
Ecommerce financing can be a great opportunity for your business, as it allows you to give your customers more buying power and increase your sales overall. If you have a customer base that you can contact, you can always run a survey to find out what kind of need there is for an Ecommerce financing payment option as a part of your usual array of options.
While there are a few options out there to enable you to support financing, we have found Sezzle to be a reputable option that is fully integrated with Shopify stores. The great thing about using Sezzle is that you are guaranteed payment and also do not take on any of the risk. Also, the sign up for customers to use Sezzle all happens within your checkout infrastructure, meaning they don’t need to navigate off your site to apply for and use their Sezzle account. Find out more about Sezzle from their website. If you need help integrating Sezzle with your Shopify store or you need other enhancements, contact our team so that we can assist.