Afterpay, and now Flexigroup, are changing the face of consumer credit. In the old world, someone who didn’t have funds available for a medium sized purchase either went without or went into debt. Any costs associated with that debt was borne by the consumer. It was a customer-pays funding model.
Buy now, pay later has changed all that. The new world is a retailer-pays model. When a customer buys a new suit using Afterpay, the retailer pays a 30 cent transaction fee, plus a commission ranging from 4-6% of the sale price. That’s how Afterpay makes money – err, intends to make money – providing ‘free’ funding to consumers.
This is a hefty burden for the retailer versus the transaction costs associated with a more conventional sale, typically in the range of 1-1.5% whether by credit/debit card or cash.
Of course, retailers aren’t charities. They’ll try to push up the sticker price to compensate for the increased cost burden. Whether they’re successful or not, one thing is evident. Those of us with the ability and desire to pay upfront are subsidising the funding of those using the more expensive buy now, pay later approach.
Afterpay and now Flexigroup are changing consumer credit from customer-pays to retailer-pays. It's time those of us with the ability/desire to pay upfront start asking for discounts. Otherwise we're subsidising buy now pay later. 5% is about right. Don't ask, don't get.
— Gareth Brown (@forager_gareth) February 26, 2019
Retailers are clearly happy to make the sale via Afterpay even if their net proceeds are 3-5% lower. As a matter of principle, I’m going to start asking for 5% discounts for upfront payment wherever buy now, pay later is offered. I don’t care about the few bucks. But I do care about subsidising some snivelling hipster into trousers that are three inches too short. Enough!
Problem is, I’m not much of a discretionary consumer. A pair of jeans and a few plain t-shirts from Kmart annually, and a suit every few years. The rest goes on kids, rent and Sydney tolls.
So can we make this a collective effort? Let’s make the comments section of this post a depository of our successes and failures in getting discounts for paying upfront. Let us all know how you go.
As Mr Micawber once said:
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result – subsidising Millennials….
Or something. It’s time to end this rort.
10 thoughts on “Pay Now, Save Now”
I used to work for a sports store in the 1990’s while finishing my Commerce Degree. Selling running shoes was my niche (i.e. ASIC Kayano v Brooks Beasts). We used to always give people discounts that actually asked. Most people didn’t though. We’d only do it if they were paying more than say $200 but we had discretion. I’m married to a Greek so I can say this, … many Italians/Greeks asked for a discount and they were often rewarded with a “sure we can look after you”. Of course I’m generalizing, many nationalities asked us for discounts. We were instructed to throw in socks or other accessories in preference for a cash discount by management, given the net impact to the business was lower. But if necessary, we’d provide cash discounts. I actually found ‘Anglo Aussies’ asked for a discount the least. I found them stealing the most though! Not the same people of course 🙂 Anyway, apologies in advance for the politically incorrect tone of my account, … but it’s my actual recollection. A sad footnote: the business ended up going bust with the rise of Footlocker and Rebel. Physical retail is a tough gig.
Assuming that you’re paying by cash when you say upfront payment? And I’m not sure if the quote is intended to say Millennials are happy or if it’s another Millennial bashing exercise.
What’s wrong with Millennial bashing? Personally, I’m sick of waiting behind a group of them at the bar while they stuff around, each paying for their own drink with their debit cards or Apple Pay (and never tip!). God help us if they start demanding that the local pub introduce AfterPay. Use cash, or if you must use a card, run a tab. The rest of us might get a drink faster.
Pay a tip? What for? For doing their job? Or to compensate for a bar owner who is not paying the correct award wages?
As a baby boomer (or is it Gen X? Anyway, as an old codger) I would implore older generation to stop bashing millennials.
In Japan, millennials actually a lot thriftier than their baby boomer parents. They find it harder to find a full-time job, and as a result, they spend a lot less and are not interested in consumerism.
Things are getting harder for the generation soon to be replaced by robots and globalization, even in a slightly xenophobic reclusive economy like Australia (I think the attitude that Australian has towards their Asian trading partners is similar to US attitude towards Mexico rather than their attitude toward Canada).
Anyway, just my two pence. Great article. Now let see how many retailers will give 5% discount for people who are actually paying upfront…
Yeah I agree. I work with a bunch of intelligent, hard-working young-uns. But it’s so much fun to give them some stick. I’m working on it.
Hopefully those who use Afterpay will gain a better financial education and stop supporting this cycle. For their own interest of learning some good financial habits, and seeing through the mirage that the retailer pays. Hopefully regulators will be a bit faster to catch up with technology disruptors, who may find loopholes in credit rules/standards, and to make a more level playing field for those established players. ACCC needs to look at tech. monopolies too and the pricing power they can exert after having such a strong network effect, to ensure consumer interests are protected. I guess these rent-seeking platforms (including the food delivery, online travel booking etc) also make it much harder for small businesses to survive and just helps the large industry players/franchises who are more capable of somehow digesting the fees into their business model, so there are second order competition threats too. All that said, one also has to say well done to Afterpay, etc for exploiting the opportunity so successfully. I share the sentiment here but have not yet been compelled to ask for a 5% discount, might give it a try next time i’m at the KMart checkout, will be amusing …
I don’t know about the above comments but every time I shop I ask for a discount, it is part of my culture and my DNA. My Anglo Australian partner feels very uncomfortable asking for a discount and shopping with me.
My Anglo ancestor lived the Buy Now, Pay later Life. Steal, or buy a hanky Now, Pay later with Life in Van Diemen’s land