IKEA is letting U.S. consumers pay for all their furnishing needs in installments via a buy now, pay later (BNPL) program it launched with Afterpay.
Via the partnership, customers can opt to pay for their IKEA purchases in four installments over a six-week period, all without any negative impact on their credit scores, according to Fintech Finance News. This initiative aims to enhance financial accessibility for shoppers, offering them a budget-friendly payment option.
“Afterpay’s partnership will bring their flavor of BNPL to the nearly 500 million online and 70 million in-store shoppers at IKEA,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “The partnership is a huge win for Afterpay.”
The Allure of BNPL
The adoption of BNPL by a retail giant like IKEA acknowledges a profound shift in consumer behavior and preferences. Shoppers today are increasingly seeking flexible payment options that allow them to spread the cost of purchases over time without incurring interest charges. BNPL services have gained significant traction in recent years, attracting both consumers and investors. This move positions IKEA to tap into this growing market and cater to the evolving expectations of its customers.
“One might think that this BNPL offering would compete with IKEA’s credit products, particularly the IKEA Projekt credit card issued by Comenity Capital Bank,” Danner said. “However, we see the differentiation in credit maximum spend and rewards. Customers with the private label card will likely be able to finance larger purchases than those using Afterpay which has a per transaction limit of $1,500, although IKEA might set different limits. Card customers will also have access to rewards, which are unavailable to BNPL customers.”
IKEA’s move to BNPL also highlights the significance of omnichannel experiences in the modern retail landscape. Customers have the flexibility to shop for IKEA products in-store and online, and they can easily incorporate Afterpay into their payment methods no matter how they choose to pay. We covered how an omnichannel payments strategy can improve the customer experience and increase sales by reducing friction. IKEA is clearly following this playbook.