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Coronavirus Consumers Are Managing Their Cash Flow But Still Want to Treat Themselves, Klarna Says

April has seemingly been a kinder e-commerce sales environment for apparel retailers after a rough March as consumers get used to shopping for non-essentials online. And while they are staying at home, they are getting better acquainted with paying for clothing, footwear and other accessories in installments, rather than in one lump sum.

Apparel, footwear and accessories saw a 27 percent week-over-week increase in transacted volume in the week of April 12-18, according to research from Klarna, which lets shoppers pay for purchases in four equal installments. This represented a solid recovery for the categories, which saw a decline in share of all purchases made through the platform in the two-week stretch from March 29-April 11.

Overall, the constant change in week-to-week spending suggests that shopper behavior is more erratic, especially depending on demographic. For example, prior to the transaction volume jump, the share of all apparel and footwear purchases made through the Klarna app from April 5-April 11 actually decreased among Gen Zers and millennials and remained flat among Gen Xers.

“What is interesting is the variability in a way that we’ve never seen it before,” said David Sykes, head of U.S. at Klarna, told Sourcing Journal. “How customers are shopping week to week is changing dramatically since the start of the crisis. The trends where we’re seeing growth are in categories like athleisure, athletic footwear and all of the accompaniments to athletic footwear. It’s not surprising when you see the things that consumers are doing in the moment, which is wearing loungewear for example, given that a high percentage of people are working from home.”

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Klarna says the “buy now, pay later” payments option is becoming more popular across the board, with the Swedish fintech firm recording its second-highest weekly transaction volume ever during the week of April 12-18; only the week of Black Friday 2019 saw higher transaction volumes made through the app. Klarna has partnered with major apparel and footwear brands including H&M, Asos, Abercrombie & Fitch and Nike to operate their installment payments plans, which enable shoppers to split their purchases into four separate interest-free payments collected every two weeks.

“When I look at a whole heap of different elements of e-commerce, what I’m seeing is that coronavirus is just accelerating trends that were happening already,” Sykes said. “There’s a whole heap of consumers that probably purchases groceries online for the first time this past month. And now we’re seeing that with ‘buy now, pay later.’”

COVID-19, he added, has accelerated this purchasing trend for two reasons. “One is it’s become a major priority for retailers trying to get as much juice out of their one remaining revenue stream which is online,” Sykes said. “And then on the consumer side and why it’s attractive, it’s because consumers want to manage their cash flow. They want to be able to budget effectively, they want to be able to make aspirational purchases but spread it out.”

Other merchandise that had huge jumps in sales during the week include furniture and jewelry sales, which both saw an increase of 60 percent from one week to the next. In particular, furniture had been trending upward since the coronavirus outbreak hit the U.S., indicating that consumers have been focusing on making their homes more comfortable as they wait out stay-at-home orders.

Stores that sell electronics and musical instruments saw average daily transaction volumes rise by 37 percent each in the week ended April 18.

Sykes said the major jumps in furniture and jewelry may be attributed to the consumer mindset that they are treating themselves after what had been four or five weeks of being locked down.

“Another strong theory is that it’s people that are trying to make their home environment more comfortable, and there’s a pretty strong correlation between an increase in spending and the stimulus checks that started going out more than a week ago,” Sykes said.

Klarna is analyzing transaction data weekly to identify how the coronavirus outbreak is affecting e-commerce and consumer shopping behavior. The company has examined average daily transaction volumes for items bought through the Klarna app—which is designed to allow consumers to shop at any online store and pay via installment payments—to identify which product categories and online stores its app users are shopping most often as the coronavirus pandemic continues turning retail upside down.