Klarna: The Retail Revolution
Klarna is a Fintech payment company that allows online patrons to ‘buy now, pay later’.
Their bright and eye-catching advertising along with their easily accessible platform attracts the lights of a range of different bodies including the huge marketing target of the millennials and Gen Z.
In 2020, millennials have been predicted to spend an astounding 1.4 trillion US dollars on online merchandise alone meaning now is the time to adopt the revolutionary ‘buy now, pay later’ scheme offered through Klarna.
Klarna is currently available on just over 190,000 online retail sites throughout the UK, Europe and the US and is rapidly growing in custom, engaging around 55,000 new customers every week.
Klarna offers online customers the chance to purchase a product and either pay 30 days after the order has been made, pay in 3 equal installments or pay for the product(s) in equal installments in 3 months to up to 3 years.
All this, paired with low interest rates, might just explain its rapidly increasing customer appeal.
Why Should Klarna Be Used By Online Retailers?
Recent research has shown that by adding Klarna to your online shopping platform, you have the potential to increase the average order value (AOV) by 68%.
As customers are offered the option to either pay for their goods either 30 days after the purchase or in installments, it seems they are filling up their baskets and getting their money’s worth!
Research also shows that customers are likely to spend 10-20% more when using the Klarna service than if they were using a credit or debit card.
Customers who use the ‘pay later’ option have been monitored and it appears that these customers have a 20% increase in purchase frequency than the average customer.
By introducing the Klarna platform onto your online store you can tap into Klarna’s three million plus UK customer base, meaning you are targeting the spenders resulting in repeated business for you as a retailer.
There are also benefits as to why you should choose Klarna as a retailer over other ‘buy now, pay later solutions’.
This is because Klarna is practically risk free in the sense that once an online shopper chooses the ‘klarna’ payment option, Klarna will pay you up front and immediately for the cost of the purchase.
Klarna will then take on the risk of the finance themselves rather than you as a retailer taking on that responsibility.
Klarna Has Multiple Benefits For The Customer Too.
Not only does Klarna allow retailers to increase their sales but it also has advantages for its customers. Klarna is almost interest free and also creates an easy and smooth checkout experience. 85% of customers say that Klarna is a better checkout experience than other check outs they have used.
Customers will also benefit from Klarna’s return policy. It allows the customer to order a variety of different sizes/styles and then send back the unwanted items, without their bank account being affected.
Thus, giving the customer the ‘in-shop’ experience which is highly admirable.
Also when the customer makes the return, they then have to go back onto the retailer’s website putting them in a perfect position to make another purchase, since their bank account remains untouched.
Klarna has an app that optimises customer experience. Through the app, customers are able to make returns, access to 24/7 customer services, choose or change the payment method (including bank details) and also manage their purchases.
Alongside all this Klarna will notify the customer, that payment is due to be taken, 2 days before the payment will be extracted from their account.
So, if you’re a retailer looking for simple ways to increase your online revenue, traffic and shopping frequency Klarna may be just for you.
It’s Simple To Apply.
To get started you will need the following:
- An online store that is fully functioning and live.
- Authorised to use payment options in your online checkout.
- A store that runs on a supported or customer eCommerce platform, including
Shopify, Magento, WooCommerce and BigCommerce
The following stages of the application are simple and easy to follow, no wonder Klarna have a new merchant join the revolution every 8 minutes!
But don’t just take our word for it, here are just a few real life case studies…
Gym shark is an online gym apparel and accessory brand that is UK based and has followers and customers in up to 131 different countries.
Since introducing Klarna to their online store, have seen a 33% increase in AOV, not just through busy trading periods, such as Black Friday, but also during normal commerce months.
Gymshark have also disclosed that by introducing Klarna, despite what they originally predicted, they have not seen an increase in people just spending for the sake of it and then returning their items.
Daniel Footwear is an online luxury shoe, bags and accessory company that are stockist of famous brands such as Jimmy Choo, UGG and Micheal Kors. The company was noticing monthly dips in revenue during the middle of the month.
Being a luxury stockiest, customers only tend to purchase these goods in and around their payday, the start and end of the month. Since partnering with Klarna however, Daniel Footwear have noticed the AOV increasing as well as 1 in 5 customers opting for the ‘buy now, pay later’ that is now available to them.
Daniel Footwear have also noticed a boost in conversion rates particularly during their previous dips during the middle of the month. A balance in demand has resulted in the company being able to drive more Return On Investment (ROI) and optimise its operations.
Mark Buxton, head of e-commerce, has also explained that Klarna has restored customer confidence and they are taking more risky moves when it comes to buying products. They find the return policy a lot easier too as they are not waiting around for a return as they have not yet parted with their money.
Disadvantages of Klarna.
Before Klarna accepts a customer onto their loan scheme, they will check a customer’s eligibility. They do this by running a ‘soft credit check’. This does not affect a customer’s credit score however the customer must meet certain criteria to be able to qualify.
Klarna will take a small quantity (around £2) from the customer’s bank account upon application, which will be returned within a week just to ensure the bank details that have been entered are valid.
Although, even after the small fund has been extracted, customers can still be declined if they do not fit certain benchmark.
Someone being declined access to the ‘buy now, pay later scheme’ may leave unsatisfied customers that blame you as the retailer for declining their application over the payment processor.
Partnering with Klarna could also result in an increase in returns. People overestimating their budget and as the month goes by they soon realise they cannot afford the purchases and therefore send them back.
As they have not separated with the money, they are more likely to return the item as they will not be waiting 2-3 weeks for the money to go back into their bank account.
Customers could also start resenting the bills, especially if they have chosen to split the bills over a longer period. This could mean in turn that the customer may begin to resent your company name, however, this is fairly unlikely as it will be the finance company in contact with the customer for the outstanding payments.
Although collaborating with Klarna may run some disadvantages, here at Go Amplify, we believe the positives of Klarna certainly outweigh the negatives.
If you do choose to run Klarna on your site and you find that AOV increases, website traffic increases, customer satisfaction increases, then Klarna would definitely be worth the switch.