A massive shift to e-commerce has resulted in a competitive retail market.

In this changing retail climate, Affirm, a buy now, pay later solution has emerged as a differentiated player that caters to both shoppers and merchants. Affirm stands out due to their commitment to transparency, customer loyalty, and a dedication to evolving along with shoppers and merchants to meet their needs. massive shift to e-commerce has resulted in a competitive retail market.

Affirm told WWD that while total worldwide retail sales declined by three percent in 2020, retail e-commerce growth boomed with an increase of 27.6 percent. The company also pointed out that buy now, pay later is the fastest-growing e-commerce payment method globally – so it comes as no surprise that the category’s market share in North America is expected to triple in the next three years.

Here, Silvija Martincevic, Chief Commercial Officer at Affirm, talks to WWD about changes and trends in consumer behavior, the growing importance of omnichannel and the significant shift to e-commerce.

Fairchild Media Group: How is Affirm differentiated in the market? What sets it apart from other Buy Now, Pay Later (BNPL) options?

Silvija Martincevic: Affirm offers consumers a flexible and transparent alternative to credit cards through our unique ability to service a wide-range of transactions among a wide range of merchant partners – from low Average Order Value (“AOV”) to high AOV, online or offline.

Our network consists of more than 4.5M consumers and 7,900 merchant partners, across Home & Lifestyle, Fashion, Beauty, Travel, Fitness, Auto, and more. This includes major retailers like Walmart and Nordstrom, well-known brands like Tom Ford, Oscar de la Renta, and Neiman Marcus, and small and medium-size businesses like Cosabella and Alice & Olivia.

In order to sustain this network of incredible partners and consumers, we have always stayed true to our mission of putting people first. We are committed to delivering transparent information to consumers at checkout so that they understand their financing options and can make informed decisions. This includes showing the total cost upfront and never charging a consumer more than they agree to. In addition, Affirm never charges late or hidden fees — not even with our 0% APR offers, which have no fees or deferred, hidden, or surprise interest, ever.

Our consumers also benefit from the fact that we underwrite each loan individually (as opposed to extending a single line of credit), and consider data beyond FICO scores, such as transaction history and credit usage, to predict a consumer’s future repayment ability. This approach allows us to ensure we’re lending to consumers responsibly, while giving payment flexibility to as many people as possible.

FMG: E-commerce is surging due to swift changes in consumer behavior that stemmed in part from the COVID-19 pandemic. How does Affirm help retailers adapt to these profound changes?

S.M.: The recent surge in online shopping has forced merchants to upgrade their e-commerce strategy, and part of that has meant offering modern payment methods like Affirm at checkout. Merchants recognize that consumers, especially Millennials and Gen Z, are looking for alternatives to credit cards, and increasingly prefer more flexible and innovative and transparent ways to pay.

The value that Affirm delivers to consumers allows us to act as an efficient, powerful revenue accelerator and marketing platform for our network of approximately 7,900 retailers, regardless of size or vertical.

Offering Affirm at checkout results in several merchant benefits. The top three are as follows:

Reach: merchants are able to reach more customers and increase sales.

Demand: by solving affordability for consumers, we’re able to help merchants increase demand for higher net average order value (AOV) items — in 2019, Affirm merchants reported a growth in AOV of 85 percent.

Conversion: we help merchants increase purchase rates because we believe the frictionless consumer experience and enhanced buying power Affirm facilitates leads satisfied customers to repeat purchases. For example, approximately 20 percent of consumers from our January 2019 cohort made repeat purchases at the same merchant within twelve months.

FMG: Omnichannel has gone from “nice to have” to “need to have” for retailers. Would you elaborate on the importance of omnichannel in such a saturated and competitive market?

S.M.: The cost to acquire a customer and the cost to convert a sale are two of the biggest challenges facing merchants, and these costs are rising across almost every channel. For most retailers, it isn’t enough to only sell online or in-store.

Today consumers shop on their phones, pick up in store, and can return items from the comfort of their own home, so retailers need to meet consumers where they are by supporting the flexible, cross-channel shopping behavior that consumers prefer.

FMG: From your perspective, what are other notable trends you’re seeing in the retail industry right now?

S.M.: As the retail industry looks to bounce back this year, merchants must evolve, and many are focused on creative and innovative ways to engage consumers digitally as commerce moves online. It’s estimated that one in four global retail sales will occur online by 2024, and I believe mobile commerce is going to accelerate even more rapidly. Window shopping has moved to mobile devices, and merchants must deliver exceptional mobile experiences to engage customers and succeed. Great examples are apps like Wayfair that use augmented reality technology to enable customers to envision what a piece of furniture will look like in their space, and Warby Parker’s home try-on which allows customers to get a virtual sneak peek of how their glasses will look before they purchase them. Retailers will continue finding new ways to bring in-store-like experiences to customers at home with innovative
technology solutions.

I am also seeing more consumers lead with their values when choosing where to shop. A McKinsey study found that 15 percent of consumers are making purchase decisions based on a company’s purpose and values, and I expect this to continue. Merchants can develop lasting relationships with their customers by demonstrating their shared values.

FMG: What are your thoughts on how retail will fare in 2021? What changes do you think we might see?

S.M.: I expect the rapid growth of e-commerce to continue in 2021. The shift in online shopping is here to stay, supported by the NRF’s recent forecast that U.S. e-commerce sales will grow up to 23 percent this year alone. As a result, I believe retailers will increasingly invest in e-commerce and mobile, while upgrading their payment solutions to meet consumer demand for innovative digital payment options.

I think we’ll see the adoption of contactless payment options increase as safety continues to be top of mind for consumers. The U.S. has seen the steepest rise in contactless payments  – and this year I expect this to rise even more broadly across sectors like public transit.

Lastly, once the pandemic is behind us, all retailers will be fighting to get consumers back, and for this reason we should expect to see retailers employ digital engagement strategies like subscriptions, product bundles, and loyalty and rewards programs to engage with customers online. As in-store shopping has declined, reaching new customers and converting sales are even more top of mind for retailers. In fact, a recent Affirm survey revealed that 67 percent of consumers agree that the ability to earn rewards impacts where they spend their money. In 2021, it will be even more necessary to offer subscription and loyalty programs to encourage consumers to complete a purchase and keep coming back.

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