BNPL Offers Luxury Sales Lifeline as Economic Storm Gathers

When the recession hits — and a recession is looking more and more like a matter of when, not if — spending on luxury retail will come to a screeching halt.

Or maybe not.

Buy now pay later, increasingly on the radar for, and being embraced by, younger consumers, may be just the ticket to keep high-end retailers afloat on the rocky macro seas.

As PYMNTS’ recent data shows, 70% of U.S. millennials, 66% of bridge millennials and 65% of Generation Z consumers report a high interest in using BNPL — especially at luxury and specialty merchants.

Read Also: BNPL Finds Fans in Older, Financially Secure Consumers

Some Firepower

And in a nod toward having at least some financial firepower to keep filling the baskets, online and in-store, we found that 71% percent of BNPL users with annual incomes greater than $100,000 increased their usage of BNPL in the past year.

By and large, across more than 2,500 consumers surveyed in the spring, the items that would be most commonly bought at these high-end retailers are top of mind and top of wallet. The chart below shows that more than half of respondents use BNPL to buy clothing, shoes, accessories and electronics.

Source: PYMNTS.com (n=2,500, April-May 2022)

The phenomenon is hardly confined to the states — which we contend is a positive read-across for luxury brands that operate internationally.

BNPL solutions are the fastest-growing online payment method, not only in the U.S., but also in Australia, Brazil, the U.K. and many other countries, per the PYMNTS data.

Now, none of this is to say that amid a massive, global economic downturn, the brakes would not be applied to all manner of spending. But the ability to break larger ticket items into more manageable, “bite” sized payments over time (and in some cases, the timeframe is being stretched out over a longer period than just a few weeks or months) means that sticker shock can be avoided.

By way of example, as noted in this space earlier this year, Splitit CEO Nandan Sheth, told PYMNTS’ Karen Webster that consumers are also experimenting with pay-in-six and even pay-in-12.  Another PYMNTS survey found that 42% of consumers were interested in BNPL because of its ability to spread payments over time, but 33% said they were attracted by its ease of use and convenience. Those hallmarks may just offer some saving grace for high-end goods in an environment where inflation is making everything more expensive, and where payments stretched out over time feel more manageable.