The BNPL startup is promoting small retailers with marketing support to fee waivers
Why it matters:
- Buy now, pay later options have become an increasingly valuable way for retailers large and small to attract younger shoppers and boost sales.
- Sixteen percent of millennials, the nation’s largest buying group, have used BNPL at least once in the past year, compared to only 5% of baby boomers.
- BNPL platform Klarna is now positioning itself as a new way for small businesses to reach customers with targeted ads and promotions.
Klarna, the payments platform that lets consumers buy now and pay later, saw the sales of its largest e-commerce partners soar during the pandemic, while small retailers struggled.
As a result, Klarna decided to focus on being a better partner to small and medium-sized brands.
In July it launched an initiative that gave 100 SMB retailers in the U.S. free payment processing for a year, as well as marketing support.
Klarna is also positioning itself as an advertising alternative to Google AdWords, or Facebook and Instagram for small retailers.
The pandemic, and the accompanying surge in online shopping boosted sales for large digitally native brands, and Klarna benefited from those sales as well.
“We wanted to give back and support the businesses that were negatively impacted by COVID, and work with a really important constituency of ours – small businesses,” David Sykes, head of North America for Klarna, told CO—.
“When people think of Klarna, they always think Nike and Macy’s and Sephora – the big retail partnerships we have,” Sykes said. But in the U.S., of the 10,000 retail partners using Klarna, 80% are small and medium-sized brands. “In many ways, they are the core of the business,” he said.
Buy now, pay later tech: layaway for the digital age
Klarna was founded in Sweden in 2005. It is one of a growing number of digital wallets that let online shoppers divide purchase costs into smaller payments, without being charged interest for the delayed payments. Retailers pay a fee per transaction when Klarna is used, and they’re willing to pay it because consumers tend to spend more when they have the pay later option.
Buy now, pay later companies like Klarna, Afterpay and Affirm are taking on the credit card giants by giving shoppers a no-cost way to stagger payments.
Users also have the option to pay in full immediately, and fans of the Klarna app say it helps them keep track of their spending and stick to a budget.
Buy now, pay later, or BNPL, has become increasingly popular with millennial and Gen Z shoppers.
Sixteen percent of millennials have used BNPL at least once in the past year, compared to only 5% of baby boomers, according to payments industry research company PYMNTS.com.
Klarna has doubled its U.S. customers over the past year to 20 million, and counts 90 million customers globally.
