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Modcloth Adopts ‘Buy Now, Pay Later’ from Klarna, Which Says Women’s Clothing Spend Up 20%

With ModCloth a newly independently brand after Walmart sold the vintage-style retailer to Go Global Retail in late 2019, one of the company’s first initiatives was to create more flexible payment options for shoppers. It looks like the millenial-centric apparel retailer has gotten its wish.

ModCloth, which offers unique and vintage-inspired women’s apparel, shoes, handbags and accessories, has partnered with installment payments platform Klarna to give shoppers access to an interest-free, buy now, pay later service.

With the technology, ModCloth customers can shop the brand’s entire fashion collection and full range of sizes and pay in four equal installments with no interest. ModCloth joins other major apparel and footwear brands such as H&M, Asos, Abercrombie & Fitch and Nike to operate installment payments plans under Klarna. The Swedish bank, whose valuation has reached $5.5 billion, is the largest private fintech firm in Europe and has continued to seek expansion into U.S. retail.

“As a digitally native brand, we are excited to expand and evolve our online shopping experience through our partnership with Klarna,” said Jeff Streader, co-CEO of ModCloth. “We believe that our core customer craves diversity and flexibility in her shopping journey and we are happy to provide new purchasing options for the styles that she loves.”

The partnership comes as Klarna released more transaction data to identify how the COVID-19 outbreak is affecting e-commerce and consumer shopping behavior. In good news for ModCloth, women’s ready-to-wear clothing saw a 20 percent week-over-week rise in average daily transactions made through the Klarna app, indicating that more shoppers are warming up to the fit and sizing measurements reported online.

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Klarna’s most recent demographic data from April 25 through May 2 shows that Gen Z and millennial app users increased their share of spending on apparel, footwear and accessories for the third week in a row. The apparel, footwear and accessories category’s share of all week-over-week purchase transactions made through the app increased 4 percent among Gen Zers and nearly 2 percent among millennials, while decreasing 3 percent among Gen Xers.

“As various states loosen their stay-at-home orders and more people begin to return to work, our data suggest that female consumers may be looking to refresh their closets with in-season ready-to-wear apparel,” said David Sykes, head of U.S. at Klarna. “Another interesting trend our data is revealing is that jewelry transactions are continuing to trend upward, rising by 35 percent week over week. That may indicate that consumers are treating themselves, or perhaps their loved ones, to little luxuries in the midst of the ongoing pandemic.”

The jewelry subcategory also saw average order value tick up 4 percent to $154 in the week ended May 2, from $148 the previous week.

All three age groups decreased their share of spending on health and beauty items week over week, but increased their share of spending on electronics, perhaps indicating they had stocked up on personal care and grooming items in previous weeks.

The company has examined average daily transaction volumes for items bought through the Klarna app—which enables 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 to alter shopping habits.

In its previous coronavirus-related research, Klarna already pointed out that apparel and footwear were starting to bounce back as of mid-April. Apparel, footwear and accessories saw a 27 percent week-over-week increase in transacted volume in the week of April 12-18. 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.