7 Key Ecommerce Metrics You Can Improve By Offering Buy Now, Pay Later Financing

Benchmarks & Metrics | 6 mins

Buy now, pay later (or BNPL) financing is in the spotlight, and rightfully so—it’s a win-win payment option for ecommerce customers and merchants.

Your customers get to pay for purchases in manageable installments, rather than handling the full cost right away. It’s even more beneficial in a post-COVID-19 retail environment, when 77% of consumers have been impacted financially and 3 in 5 of them are avoiding adding more to their credit card balance.

On the merchant side, you receive full payment for the purchase up front and keep your bottom line intact, without absorbing the risk of consumer financing. Even better news? We can actually measure the impact of offering buy now, pay later to your business using key ecommerce metrics you’re likely already tracking.

The key ecommerce metrics that get a boost when you implement buy now, pay later

1. Total Sales Revenue

Total sales remains one of the best barometers of how well your ecommerce store is performing. It’s so valuable because it encompasses all the different sales-related activities you execute—product marketing, website optimization, customer service—to drive business.

As we’ll explore in the article, a buy now, pay later option directly improves the core metrics that affect your sales numbers, like average order value and customer lifetime value. CordaRoy’s, for example, saw a 136% increase in total sales revenue after adding installment options with Bread.

Merchants can also avoid the “race to the bottom.” Instead of lowering prices to beat competitors, you can make your products more affordable using installments. You’ll request 25% of the total cost instead of eating a 25% discount to win the sale.

2 and 3. Average Order Value (AOV) and Cart Size

Average Order Value (AOV) is the average amount a customer spends when they make a purchase from your business. It’s also one of the metrics that improves the most when businesses implement BNPL payments. Create Room experienced a 130% AOV increase on financed orders compared to unfinanced orders.

So, what’s going on? Smaller, spread-out payments give customers greater purchasing power overall, and data shows they use that power to spend more on each purchase. A Motley Fool poll showed that 38.37% of customers used buy now, pay later to make purchases that wouldn’t otherwise fit their budget. And nearly half of Gen Z and millennial shoppers report buying something more expensive than they were originally considering if financing was an option.

This is also true for cart size. When customers know they can divide their total cost into bite-sized payments, they feel comfortable adding more items to their carts. For example, shoppers who used financing with BBQGuys.com checked out with 24% more items in their carts, in addition to having a 32.6% higher AOV.

4. Conversion Rate

Conversion rate refers to how many of your ecommerce site visitors become paying customers. As a merchant, you need to make sure it’s simple and easy for customers to convert, or in other words, make a purchase on your website. They should also quickly understand their payment options and opportunities to save.

Noémie provides an excellent example of a streamlined end-to-end checkout experience. On their product pages, they include a helpful pop-up that offers 0% financing based on cart size, buying history, and more. As many as 71.5% of their customers that ultimately checkout prequalified from the product page. These simple additions alert customers to cost-effective options right away and effectively ushers them through the sales funnel.

This applies to all your sales and marketing channels—web, email, social media, and more. For the RTA Store, emails with a personalized financing offer saw a 3x improvement in email conversion rates, driving a 155% increase in revenue. Clearly, offering buy now, pay later options upfront is a conversion-driver.

5. Customer Acquisition Cost (CAC)

Customer Acquisition Cost is a key ecommerce metric that refers to how much it costs to win over a new customer, which includes the amount paid for your online search ads, marketing, and even the salaries that go into acquiring new buyers.

Essentially, you want to make sure you aren’t spending more to acquire a customer than that customer will ultimately spend. (For example, you wouldn’t want to spend $125 on a Facebook ad to win a customer that will only spend $80.)

Buy now, pay later improves your customer acquisition cost because it’s shown to boost conversions and AOV. When you’re turning more people into paying customers (and if they’re spending more money), you’re getting more value out of your marketing and advertising dollars—which translates to better CAC.

6. Customer Lifetime Value (CLV)

Customer Lifetime Value pertains to the total amount of money that a customer spends in your business during their lifetime.

Naturally, the more frequently someone buys and the larger their purchases are during those visits, the higher their CLV. We’ve already established that buy now pay later can boost your AOV, and when executed well, your BNPL program can also increase purchase frequency.

Giving people payment flexibility through financing improves the overall customer experience, which encourages repeat purchases.

7. Cart Abandonment Rate (CAR)

As an ecommerce merchant, you already know that cart abandonment plagues online shopping. Barilliance estimates that the average ecommerce store loses more than 75% of its sales to cart abandonment. The true number may be even higher.

A large portion of abandonments come from consumers who report they were just window shopping. But when we segment these customers out, the number one reason for cart abandonment is unexpected costs due to shipping, taxes, and fees. And 23% of customers complain about a lack of visibility into the total order cost upfront.

Here’s where BNPL options come in. First, installment payment plans are transparent by nature, breaking down costs into clear, specific payments for your customers. When customers aren’t shocked at checkout, cart abandonment goes down. CordaRoy’s, for example, saw a 25% decrease in abandoned carts after implementing customer financing.

Second, email is one of the most popular win-back tools for cart abandonment. After all, in 2019, cart abandonment emails receive a 43.21% open rate while the average ecommerce email has a 15.68% open rate and just a 2.01% click-through rate (CTR).

But if you aren’t including a buy now, pay later offer, you could be missing out on potential sales. The RTA store saw a 38% boost in CTR with emails that included personalized financing checkout links.

Ready to Boost Your Key Ecommerce Metrics Buy Now, Pay Later?

From average order value and conversions to customer acquisition costs and cart abandonment, there are tangible benefits to offering buy now, pay later options.

If you’re ready to see the improvement to your store’s key ecommerce metrics, request a demo of Bread.