Can You Use Buy Now, Pay Later When Dropshipping: Secrets and Tips Dropshippers Won't Miss

With the massive development of online shopping, online businesses are starting to boom. Firstly, it has led to a rise in the dropshipping business model that helps create a source of passive income. Secondly, we are experiencing feasible payment options, such as Buy Now, Pay Later (BNPL) model.

Buy Now, Pay Later model is an innovative approach currently on the rise. You can even use a service to offer BNPL without waiting for the money or risking your cash flow.

In this article, we have assessed the feasibility of applying a BNPL model to the dropshipping businesses. Start exploring.

What Is Buy Now, Pay Later

As the name suggests, BNPL is a model where you allow the customer to make a purchase without any pre-payment or on credit at the point of sale. This is achieved with the promise of paying back the amount later. Now, you may be wondering how this is possible.

Many businesses use Buy Now, Pay Later according to the loyalty or payment history of the customer. Based on the close evaluation, the company offers many options under BNPL, such as EMI, no-cost installments, or full-payment options after a certain period.

How It Works

The Buy Now, Pay Later model works in the following manner:

1. After assessing the customer’s purchase history with your brand, you offer a BNPL wallet. This can be based on the credit ratings of the customers (if you have relevant collaborations).

2. Once you know that you can give a BNPL wallet to a customer, you need to decide the limit. It is not logical to offer unlimited credit to any customer, as that may double or triple the risk of the business.

3. After the limit is decided, the customer can purchase products using a BNPL wallet. Whenever a purchase is made, that amount is decreased from the total limit and added to the pending amount. This is very similar to how credit cards work.

4. Now, you give the customer an option to choose between hassle-free installments (only with a certain amount of credit) or payback in a fixed period.

5. If the customer is not able to pay on time, interest is applied on a monthly or daily basis. After this, credit transactions (or any transactions) from the customer are not allowed until the previous bill is cleared.

Is It Safe

Buy Now, Pay Later credit model or payment model is safe, but only under one condition. It is about common sense. Would you offer credit to an unknown vendor in the market? We won’t. This is why we don’t offer credit or BNPL to just any customer. You need to create a model for the same.

How safe is BNPL? That is something you decide by understanding methods to mitigate your risks. There’s always going to be some level of risk in this payment model. However, you need to understand the basics behind recovering your money on time. Reminding the customer, holding a share of their credit card limit, setting up an autopay card in case of issues, and many other such methods.

What are the Payment Options

When you are offering Buy Now, Pay Later to a customer, what payment options can be offered to this customer:

• Pay in full in 30 days or more, depending on the level of trust.
• Pay in installments, around 3-6 installments without any interest.
• Split the pay with some interest.
• Pay half now and rest in installments.

Can You Use a Buy Now, Pay Later Supplier

One of the optimum ways to offer Buy Now, Pay Later is via a supplier. Many vendors in the market help you implement BNPL on their accounts. Suppliers will act as middleman. They are responsible for recovering the money or offering credit appropriately to the customers.

· The customer gets a pay later option.

· The dropshipping business gets the payment as soon as the purchase is made.

The BNPL service handles both sides of the business by offering a feasible solution to the customer as well as the dropshipping business. When you don’t have the appropriate infrastructure to manage BNPL in a risk-free or low-risk manner, it is better to rely on a trustworthy supplier.

Benefits from BNPL

You may be wondering what the benefits of BNPL are. Dropshipping businesses can improve their conversions and achieve better results with Buy Now, Pay Later.

1. Better Sales

BNPL payment model helps you improve your sales and convert more. For example, if you sell a product at USD 30 via one-time payment, then customers might refrain from paying that much at once. Even if the customer feels that your product is worth the price, they may not like paying so much all at once.

Contrary to this, if you provide an option for 70%: 30% payments, like USD 20 first and USD 10, then more users may make a purchase. Ideally, this is not only true for the dropshipping industry but also for many other industries, such as manufacturing, smartphone, retail, etc.

If you sell smartphones, paying in installments helps many more customers make a purchase. People are ready to pay a little more for this option, just because they are receiving more convenient payment options. Therefore, you can increase the payment a bit and offer the BNPL option to gain more sales and earn a considerable profit.

2. Enhanced Customer Experience

Millennials love to shop. Isn’t it? However, for an uncomplicated experience, you need to offer something extra, like loyalty benefits, reward programs, discounts, etc.

For example, you can pair a 5% discount on BNPL initially to introduce your user to the option. This will improve their satisfaction, and once the user understands the feasibility of a method, they would like using it over and over again. Now that improves the experience of your customers.

3. Repeat Business

The BNPL model is a feasible model for customers, which gives the them flexibility to pay at their convenience after a reasonable time. This brings you more repeat business.  If your competitor sells a similar product without BNPL, then your dropshipping business may be preferable because the customer has an option to pay in 30 days or via different methods.

For example, the user can divide the payments in installments or buy 30 days for the actual payment. This flexibility improves repeat business. It is a great strategy for customer retention and loyalty building.

4. Simpler Payments

The BNPL payment option is simpler. Customer needs to add in details one time and there’s an option for one-click payment thereafter. So, after selecting the product, there’s no hassle of adding card details, OTP, or any other thing. Just click on the BNPL account and instant payments are done. This saves time for your users by reducing the hassle of complicated payment procedures.

Conclusion

The Buy Now, Pay Later payment is beneficial for dropshipping businesses. There’s a certain level of risk involved, but it is there in everything. Even when you receive an order from the customer and deliver it directly via a supplier, you are risking the quality and type of packaging you are delivering.

Therefore, the risk of BNPL is worth taking if we consider the benefits it offers to your business. Simply try creating a model where you are building customer loyalty before using BNPL. This will mitigate challenges and increase the benefits of the model.