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China’s online shopping thrives thanks to “buy now pay later” programs

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In December, Campaign Asia published a detailed report about how China’s consumers are spending their money. China’s online shoppers have come up with the term “尾款人,” a self-deprecating name referring to those who still have to pay the balances on purchased items come November. Before Halloween this year, some consumers joked that they were “the ghost of poverty” due to the debt they still owed Alibaba and its third-party vendors. It is no secret that Chinese consumers love online shopping.

The pandemic has only accelerated this trend, exemplified by the US$74 billion in sales achieved by Alibaba over the 2020 Singles’ Day shopping festival. As shoppers become increasingly comfortable with online shopping, they are also growing more concerned about their financial situations. Today’s Chinese shoppers are seeking flexible and responsible ways to pay when they shop, especially when it comes to luxury items.

Installment payment plans aren’t a new concept in China, but the flavor of today’s installment plans are quite different than they were in the past. Instead of waiting to take a purchase home the way shoppers did with layaway plans, today’s installment plans (also known as “Buy Now, Pay Later” plans) provide shoppers and retailers with a new way to pay that offers them immediate gratification.

As the world’s largest social media and mobile payment app, WeChat launched a “Buy Now, Pay Later” credit feature in April, allowing the platform’s one billion-plus member community to defer full advance payment. For those who don’t have a high enough spending limit or enough credit available to make big-ticket purchases, “Buy Now, Pay Later” offers consumers the ability to budget for more expensive items with a designated period of payments that fits their budgets.

For retailers, “Buy Now, Pay Later” provides a wide range of benefits, including less cart abandonment. On average, around two-thirds of online shopping carts are abandoned, which adds up to a lot of lost sales for e-commerce brands. But brands that add “Buy Now, Pay Later” options at the checkout are seeing a sharp drop in their cart abandonment rates, which has led to a boost in their profits without any significant cost increases.

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