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‘Buy Now, Pay Later’ Platforms Marching on Fashion Magazine Territory

LONDON — Are “buy now, pay later” platforms becoming the new fashion and lifestyle glossies?

As magazines seek ways to monetize content online and offline, embark on e-commerce ventures and fight for readers’ eyeballs, buy now, pay later payment platforms such as Klarna, Afterpay, its U.K. sister company Clearpay and QuadPay have been rapidly working their way into the minds — and wallets — of Millennial and Gen Z shoppers, as well as digitally minded brands and retailers.

These sites offer slick imagery, campaigns and marketing content, hire celebrity ambassadors and actively engage with consumers, giving them the opportunity to curate searches and wish lists, discover new brands, track the trends and spread their payments, interest-free, across weeks or months, or to try items before they buy.

Like Instagram with its Explore Guides, these platforms are taking cues from glossy magazines. Retail websites like Net-a-porter, Matchesfashion, Farfetch and Alibaba seal consumers into a world they never have to leave, offering curated product imagery, video streaming, shopping and a variety of payment options in one place.

The payment platforms have morphed into shoppable online platforms, with an editorial bent, a point of view, global trend reports and product offers that stretch beyond fashion into home, tech, beauty and entertaining.

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In the U.K., Klarna has taken on Tan France of Netflix’s “Queer Eye” as its “inclusivity ambassador,” while the sites also work actively with influencers. Clearpay, meanwhile, publishes a biannual fashion and trend report, based on what its customers are buying, and dedicated surveys of consumer beauty trends, or Black Friday/Cyber Monday sales.

In doing so, they’re building communities and becoming trusted sources of information with a demographic that will make up half the workforce within five or 10 years — and half the disposable income. These platforms are also riding the crest of the direct-to-consumer and e-commerce waves, which have only gained momentum during the COVID-19 pandemic.

Unlike glossy magazines, with their attempts at e-commerce — see Condé Nast’s ill-fated — these buy now, pay later platforms began with a bottom-up, rather than a top-down, approach, putting the customer first by catering to their lifestyle demands.

“From a consumer point of view, these platforms are not only a budgeting tool, but a trusted source of information for Gen Z and Millennials to find digital-first brands, much like glossy magazines and guides like Lonely Planet were in the past,” said Mo White, a London-based business consultant with a background in online retail, digital marketing and brand building.

“For the brands, these platforms are also a new way of advertising. They tell the brands, ‘We are a discovery tool. Use us for customer acquisition, and your sales go up,’” White added.

How many magazines can say that?

The new platforms’ business models favor shoppers in their 20s, 30s and 40s who are debt-averse, eschew credit cards in favor of debit ones, and who often use these platforms like subscription services, or budgeting tools, with the staggered, interest-free payments that dovetail with the bimonthly, or monthly, arrival of their paychecks.

The platforms are also connecting with an independent-minded audience that won’t take direction from fashion editors telling them how to dress, or what the “hot” labels are. Instead, these customers are looking at their own friends and family, influencers and pop culture to inform their buying decisions.

They’re also hot financial property: Afterpay’s market cap is 45.19 billion Australian dollars, or $34.94 billion, while Klarna was valued at $11 billion last year, ahead of a possible initial public offering — and are evolving into powerful industry players.

The platforms are undertaking major sponsorships, supporting young designers across the big fashion cities, leveraging their gold mines of data and forecasting trends for consumers and trade alike.

Earlier this week Clearpay was announced as the principal partner of London Fashion Week in a significant two-year deal that will see it underwrite all of the British Fashion Council’s talent initiatives, support local designers and offer consumers greater access to brands and industry players. Clearpay has also supported the BFC in the past, contributing 25,000 pounds to the BFC Foundation Fund for the COVID crisis last year.

In October, Afterpay replaced Mercedes-Benz as the sponsor of Australian Fashion Week, and the multiyear deal will see the showcase rebranded as Afterpay Australian Fashion Week, or AAFW. The fact that a Melbourne-based buy now, pay later upstart, founded just seven years ago, could replace Mercedes — which had been associated with the event for 20 years — is telling.

Afterpay and its competitors are serving a generation of consumers who don’t see expensive cars — or credit cards — as status symbols. While their parents might have aspired to driving a luxury sports car or whipping out a gold or platinum credit card to pay at a Michelin-starred restaurant or hotel, these customers are different. They prefer to move with the likes of Uber, order takeaway from their mobile phones, holiday with Airbnb, and rack up as little debt as possible.

Last year, Afterpay also partnered with a Common Thread​, the philanthropic effort involving Vogue and the Council of Fashion Designers of America, and ​Baby2Baby​, which provides children living in poverty with diapers and clothing. Its U.K. arm, Clearpay, was one corporate donor to the BFC Foundation Fashion Fund, alongside Amazon, the Coach Foundation and Browns.

The Swedish fintech platform and bank Klarna has been a sponsor of the U.K. men’s wear and streetwear trade show Jacket Required and London Fashion Week.

Klarna has also been the most aggressive on the editorial and marketing front, naming the popular Netflix personality Tan France, whose family is Muslim Pakistani from Yorkshire, England, as its inclusivity ambassador. In October, Klarna worked with France on a diversity campaign asking consumers to “reconsider their views on fashion.”

It created a series of curated wish lists celebrating diversity within its app. France shared his own style choices, which were fully shoppable for Klarna’s app users. While Klarna may be popular with its core customer base of Gen Z and Millennials, the company said its fastest-growing consumer base is Gen X, who are 40 to 55 years old.

In the next months these platforms will be getting even more aggressive, using the data they mine on an hourly basis to fuel their content and commerce strategies.

Other payment providers such as PayPal and Affirm will likely follow suit, creating designer and brand marketplaces for people to shop.

Meanwhile, other digital service providers are upping their editorial game: WeTransfer, the data transfer site, has created a polished online showcase and newsletter called WePresent, where it posts original artwork, films, illustrations, literature, music and photography. All those indie fashion magazines with cultural and artistic pretensions should take note.

“We look at Clearpay as an ecosystem — a very rich ecosystem — that involves us, the retailers, the brands and the consumer,” said Carl-Olav Scheible, chief executive officer of Clearpay U.K., in an interview.

“We’re only at the beginning of communicating that, and trying to be good at making the world more accessible, especially at a time where we’re sitting at home. How can we bring the world to you? It’s a big challenge and a big aspiration.”

Scheible added that Clearpay wants to offer a sweep of retailers, from large ones like Asos and Reiss to small ones and even local businesses that might not be on most customers’ radar.

Since landing in the U.K. a little more than 18 months ago, Clearpay has signed on publicly listed mega companies Marks & Spencer, Asos, The Hut Group and its beauty platform, Lookfantastic. Clearpay’s smaller brands include Rixo, Jo Malone London and Hunter.

Like the big publishing groups, these platforms are competing with one another for consumer eyeballs, and advertising dollars, euros and pounds. In some regions, they’re even competing with the likes of Google when it comes to referrals to fashion and beauty brands.

Bringing The Hut Group on board was a major win for Clearpay in the U.K. and Afterpay in the U.S.

THG argued that if the four Clearpay payments are made on time, “they do not charge interest, which often leads to an increase in average order value. They focus on building and strengthening merchant relationships, and drive incremental traffic directly to the retailer.”

Some buy now, pay later platforms have fallen foul of regulators in certain markets.

The U.K.’s advertising watchdog has, in the past, accused some payment providers of encouraging consumers to load up on debt, while the Financial Conduct Authority published a ruling on Feb. 2 that buy now, pay later products, which are exempt from regulation, “should be brought within the regulatory perimeter as a matter of urgency.”

The Financial Conduct Authority noted the use of buy now, pay later products nearly quadrupled in 2020, and is now at 2.7 billion pounds in the U.K., with five million people using the products since the beginning of the coronavirus pandemic.

“The emergence and expansion of unregulated buy now, pay later products gives consumers a significant alternative to more expensive credit, but this also comes with significant potential for consumer harm. Regulation would protect people who use buy now, pay later products and make the market sustainable,” the Financial Conduct Authority said.

Asked about the impending regulation in the U.K. Nick Molnar, cofounder of Clearpay/Afterpay, said in an interview that “from Day One in Australia and the U.K., our motivation has been to be pro-regulation, and to make sure that the right, proportionate frameworks are created that align with consumers’ best interests.”

Molnar noted that in Australia, the credit regulator was granted access to regulate the industry — “which is something we proactively supported.”

Late last year the Australian regulator ruled that buy now, pay later companies, which usually don’t credit-check their customers due to the relatively small amounts on loan, will have to pay closer attention to the type of people they target, and keep a watchful eye on those who are regularly missing payments.

Globally, the Afterpay/Clearpay juggernaut has more than 64,000 retailers, brands and merchants selling fashion, beauty and lifestyle accessories.

“You can also shop cross-border,” said Scheible. “A U.K. consumer can shop on an Australian, New Zealand, Canadian or U.S. website if they’re looking for hard-to-find products or want to try something new.” He added Clearpay saw a 460 percent increase in brand referrals to global merchants last year, compared with 2019.

There is more to come: Scheible said Clearpay’s shop window will continue to evolve. The platform plans to increase search capacity, make the site easier to navigate, improve its ability to surface the right products, and make better shopping suggestions based on what happens to be trending. Read from source….