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Will H&M Attract New Customers With ‘Try Before Buying’ Payment Option?

Will having the option to receive clothing packages and model the garments yourself prior to purchasing one day be standard across fashion e-commerce?

With Amazon Prime Wardrobe leading the way and denim darling Kut from the Kloth among those already offering the service, anything’s possible.

Now, Sweden’s H&M is the latest fashion retailer to let online shoppers try before buying as part of a broader push into frictionless omnichannel shopping. In addition to taking an equity stake, the Stockholm-based apparel purveyor said it’s integrating solutions from payment technology firm Klarna in the next update of its core H&M mobile app, as well as H&M Club, the retailer’s digital loyalty program.

With Klarna underpinning payment technology, customers will be able complete in-store checkout with just their smartphones and use that same tech when ordering and paying online. An associate at the cash wrap will scan a customer’s loyalty app and ask if she wants to use the pay later option, an H&M spokesperson said. If she chooses to pay later, she’ll receive an invoice for the purchase, and use the H&M app to later decide how to pay—with her debit or credit card, bank account or in installments.

H&M did not disclose the size of its investment in Klarna.

Working closely to develop a solution that offered the same seamless experience in brick-and-mortar as on the web was a key feature of the Klarna partnership, H&M said, noting that it will be integrating the technology in 14 of the 71 markets in which it operates, starting with the U.K. and Sweden next year. The retailer said it’s not ruling out bringing the Klarna platform to additional territories in the future.

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One of today’s top payments innovators, Klarna offers people a number of options for how they want to pay for purchases, the most straightforward of which is storing credit and debit card info in sort of a digital wallet so shoppers can avoid re-entering this sensitive data every time they shop.

Beyond that, however, Klarna has a couple of ways to help cash-strapped and credit-shy millennials afford purchases, or at least encourage them to take the plunge online. One option to split the purchase total into smaller payments over time takes some of the sting out of the upfront price, while shoppers who choose the pay later approach, targeted squarely at apparel e-tailers, can order a number of items to evaluate at home before being charged for whatever they decide to keep.

In a survey of 2,000 consumers, Klarna discovered that 31 percent are interested in an option to pay later, regardless of whether they purchased in store or through digital channels.

Klarna vice president of communications Aoife Houlihan told Sourcing Journal the “pay later” option, already popular with many of Europe’s fashion retailers, “bridges the delta between the online and offline experience.” In a traditional four-walled store, shoppers have the luxury of ducking into a fitting room to check out whether the garments they’ve collected through browsing truly fit and flatter—and of course they leave behind the items that fail to pass muster. Pay later, Houlihan said, aims to increase the parity between physical and digital channels—part of what attracted H&M in the first place.

Despite the many conveniences of shopping online, returns remain an onerous part of that end-to-end process. H&M said Klarna will be a strategic partner in making pay later returns seamless; users of the retailer’s app can look up the nearest pick-up or drop-off points for their unwanted purchases.

An H&M spokesperson noted that though users of the pay later option are invoiced for their items 30 days following their order, they can further extend that timeframe by choosing to pay their balance in installments or delaying even longer.

More than anything, as shoppers’ needs evolve, it’s H&M’s responsibility to keep up, said Daniel Claesson, head of business development for H&M Group, in a statement announcing the news. “We want to make it possible for customers to move freely between the various channels and choose how they want to shop and experience our offering online and in store,” he added, describing the “try before you buy” service as “very relevant to fashion retail today.”

Shoppers, said Klarna’s U.S. general manager Malin Eriksson, are eager for their favorite retailers to master the fundamentals before chasing trendy technology. “What we can see is that shoppers want the basics to be done better and they don’t want their preferred fashion brands to favor fads over function through the introduction of technology that doesn’t improve their shopping experience,” she said.

News of the Klarna deal follows a few tough quarters for H&M amid mounting inventory losses, concerns over fair factory wages and increased experimentation as evidenced by the debut of a hometown concept store that departs from the standard H&M format in hopes of attracting a more affluent shopper.

Houlihan said Klarna will launch its pay later offering in the United States in a few weeks with stateside fashion sellers, but declined to specify which brands are on board or how many have signed up.

Klarna CEO and co-founder Sebastian Siemiatkowski described retail as an industry in transition. “The future of fashion retail is high-tech powering high-touch experiences for customers,” he said. “Customers will no longer be forgiving of unnecessary complexity or when their retail experience does not leverage the insight available to make their engagement smart, personal and easy.”