How Buy Now Pay Later is transforming retail turnover

A sales uplift?

Retailers offering BNPL options are seeing measurable benefits such as;

• 9% increase in purchase probability after introducing BNPL.
• 10% larger basket sizes on average.

This means that BNPL doesn’t just drive impulse buys; it has initiated long-term changes in consumer spending patterns. But why does it work? Research shows that BNPL reduces the psychological barrier of upfront payments. Consumers feel less financially constrained, even if their actual disposable income hasn’t changed and more in control of their budget through the option of flexible repayments.

However, for the retailer, providing a BNPL option comes at a cost as providers typically charge a fee per transaction where BNPL is used.  In return, retailers get paid in full upfront as the provider is responsible for collecting instalments, in turn improving cash flow and reducing payment concerns. For some industries, such as high-end retail and technology where the purchase price of the item is high, this seems to be worthwhile as sales are booming.

What retail stores are benefitting most?

Certain sectors are seeing particularly strong BNPL-driven growth:

• Fashion and luxury: Clearpay reports a 72% increase in designer fashion sales since 2021 due to the flexible payment offerings. BNPL makes it easier for consumers to commit to a purchase when they can stagger the payments.
• Workwear: Sales of trousers and blazers surged by 734% and 56%, respectively, as office culture rebounds.
• Tech and electronics: High-ticket items become more accessible when split into manageable payments.

The hidden cost: BNPL and the rise in returns

One of the less talked about side effects of BNPL is the significant uptick in return rates. Consumers now feel more comfortable ordering multiple versions of the same product—different sizes, colours or styles—with the intention of keeping only one. As they’re not paying upfront, there is less perceived financial risk, even if they end up returning the majority of the items.

For retailers, this shift can be costly.

• Higher return volumes increase the burden on warehousing and logistics teams.
• Processing returns—including restocking, quality checking, and refund administration—adds labour and operational costs.
• Cash flow can be disrupted if returned items can’t be resold immediately or are seasonal in nature.
• Packaging waste and shipping duplication also raise sustainability and environmental concerns.

Even though BNPL providers pay the retailer upfront, the return process still sits with the retailer, and the knock-on effects can be significant. In sectors like fashion and footwear, return rates have reportedly reached as high as 40–50%, with BNPL accelerating this trend.

Some retailers are now exploring ways to manage this:

• Charging for returns to discourage over-ordering
• Using customer data to identify high-frequency returners
• Limiting BNPL use for certain high-return items

BNPL may drive conversion, but it’s also fuelling a “try now, decide later” mindset. Retailers need to factor the operational strain of this behaviour into their wider BNPL strategy.