Why U.K. fashion retailers are rethinking their payments processes

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In recent years, the in-aisle payments and checkout-free stores have become increasingly common across the U.K. retail market, especially in the supermarket and grocery sector. Now High Street fashion outlets are coming under pressure to introduce faster and more convenient payment options to keep up with consumer demands.

Last year, data collected by Mintel revealed that almost 30% of British fashion consumers would choose one retailer over another if they had a faster checkout process, a figure that rose to 43% in the 16-24 age group.

2019 has already seen a series of high-profile U.K. fashion retailers experimenting with new payments innovations both in-store and online. Zara, Nike and Matalan have all trialed either self-service units or RFID powered assisted-service checkouts in various outlets.
“As consumers are increasingly looking for speed and convenience when shopping, a number of fashion retailers have been looking for ways to tap into this kind of purchasing behavior, and on a more basic level, simply looking to ensure they are meeting expectations,” said Samantha Dover, senior retail analyst at Mintel.

Other merchants are turning to payments providers such as Klarna to attract new online shoppers through smart payments services. One of the most popular new methods is "buy now, pay later." This allows the consumer to enter their mobile number at the point of sale, giving a 30-day window to try the item without paying interest or extra fees, before they must complete payment via a unique URL sent by text message.

But while stores are implementing these solutions predominantly with the aim of attracting younger consumers, it isn’t just millennials and Generation Z who are drawn to these options.

“A better payments experience, and more freedom to manage your money, isn’t a demand exclusively made by the under 30s,” said Luke Griffiths, U.K. general manager at Klarna. “Flexible payments is one part of a wider changing trend in shopping behavior, and as consumer expectations continue to rise, the demand for smoother and simpler transactions will only grow.”

This demand is also leading to more competition among payments providers, fueling innovation. New Zealand provider Laybuy entered the U.K. fashion retail market this year, partnering with brands Footasylum and ALEXACHUNG to offer flexible payments services through their digital platform.

But despite the array of options, a sizable percentage of U.K. fashion outlets are still lagging behind the new trends. Recent data from Klarna found that only 40% of fashion merchants have introduced smart payments services, while others admit that because they are so focused on improving the digital payments experience, updating their in-store payments options is not a priority.

One of the reasons for this is the cost of implementing technologies such as self-service units.

“While these may be proving popular with some retailers, what works for some brands won’t necessarily work for others,” said Griffiths. “Team that with the perceived expense, integration concerns or a wider belief that this technology isn’t 100% necessary, and it’s clear to see why some retailers are holding off on introducing self-checkout too quickly.”

In addition, many U.K. fashion outlets remain cautious that offering self-checkout and smart payments services will make them more vulnerable to theft, fears that are well founded. Last year, the British Retail Consortium reported a 15% rise in shoplifting across all retailers, a surge that has been attributed to self-scan units.

“Concerns over shoplifting will have undoubtedly delayed the introduction of self-checkouts as retailers wait for technology to catch up and offer more sophisticated solutions,” said Gary Rohloff, co-founder and managing director of Laybuy. “Over in Japan, where shoplifting is less of a concern, Uniqlo has introduced smart-tags — using radio frequency to scan items in the consumer’s basket — allowing for an almost instant checkout experience.”

But while some sectors of the industry are embracing novel payments solutions, the sheer breadth of the fashion world means that there is no single strategy that works for everyone. Options that work well in fast fashion may not be appropriate for the more luxury end of the market where consumers prefer more contact and guidance in-store when making a purchase.

“There will be certain environments, such as luxury department stores where personal service plays a very important role in the consumer journey, and so these retailers are unlikely to introduce faster payment options,” said Rohloff. “Ultimately, retailers want to be able to offer their customers the right kinds of choices, allowing them to shop and buy products in the way they’re most comfortable with. For some retailers, it may be suitable to combine traditional and innovative payment options if they have a wide customer base. For others, it may make more business sense to focus on one approach over another. Great retailers understand their consumers, and this should be at the forefront of any retail CEO's mind when reviewing their options.”

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