By Beata Roos | Principal Consultant

After commenting for a recent piece by Drapers magazine about the introduction of ‘try before you buy’ schemes by UK fashion retailers, I thought it was worth providing some more in-depth analysis of these types of propositions.

Payment by invoice or 'try before you buy' has been the norm in certain European markets. For those without that tradition, there’s also a case for considering it if you want to remove barriers to purchase, and/or flatten out the peaks and troughs in monthly trading that can happen due to consumers holding off making purchases in the run up to pay day.

Here’s what you need to know to help you decide whether try before you buy could work for your business.

First here’s some background. Catalogue businesses in Germany and the Nordics have allowed customers to pay by invoice for several decades, with customers having 30 days to pay for products they’ve ordered. A customer would have ordered their full new Summer wardrobe using a catalogue form, received all products at home (in Germany) or the local pick up point (in Sweden), tried them on, sent back what they didn’t like and paid for what they kept.

This allowed businesses without a store presence to give customers a chance to try things on before buying them, as they would if they went to a physical store. This type of payment is still very popular in Germany.

However, it can cause difficulties because very few retail businesses are set up to run profitably with more than 50% returns rates or late influx of cash and complex reconciliation (there can be a delay in payment to the retailer from the payment/credit provider).

Why ‘try before you buy’ now?

The recent growth in popularity of such services has come off the back of a concerted effort by payment platform Klarna to introduce its services to the UK market. ‘Try before you buy’ is a much more appealing call to action than ‘pay by invoice’.

The need for a smooth and frictionless mobile checkout experience is also a deciding factor.

Brands who are keen to capture Continental European audiences are becoming more mindful of the payment and delivery options that are attractive to consumers in those markets.

Globally we are seeing the arrival of businesses such as Warby Parker, Trunk Club and Outfittery, all who allow you to try on their products at home before you buy. In addition, Amazon is offering ‘try before you buy’ through Amazon Prime Wardrobe to customers in the US.

All of this is driving new consumer behaviour.

What kind of sales uplift can we expect?

Some claim that they can drive an increase in sales of between 10% to 30%.
However, against this you will need to consider the impact on the bottom line considering returns rate, returns logistics, warehousing costs, and cash reconciliation etc.

In addition to looking for ways to increase the effectiveness and minimise the cost of processing returns, retailers who want to adopt ‘try before you buy’ also need to revisit their performance reporting considering the delay in payment processing.

 
Is ‘try before you buy’ here to stay?

The short answer is yes, certainly for categories including fashion. Eliminating the need to pay straight away means customers are likely to order more.

In addition, the rise of new types of banking, such as Monzo, shows that customers are interested in more user-friendly ways to make payments and be in control of their spending.

Practicology assesses payment options, providers and preferences for our clients in different markets. If you are interested in an assessment of whether ‘try before you buy’ – or other payment options such as Paypal – could benefit your business, don’t hesitate to get in touch.

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