What is installments? And which are the benefits of enabling installments sales at your Shopify stor
Atualizado: 15 de ago. de 2022
Ecommerce customers are always looking for different payment options, in order to feel that the products are more affordable. One of these options is the possibility of buying with installments options at your Shopify store, and this benefit is attracting more customers each day.
What are sales with installments?
Installments sales (or buy now pay later options) are made through a gateway (or payment provider) which allows that the product’s total value to be divided in installments. These installments will be paid by the customer over the following months or weeks (depending on your setup).
For example: A 100 dollar product can have its value divided in 5 months, making installments of 20 dollars per month for the customer.
This payment option makes the sale more affordable even for the ones who don’t have the total product funds available at the moment of the sale.
The customer who chooses for this installment payment option will receive the product on the ecommerce normal delivery time, not after the total installments payment. Like a normal purchase.
The responsibility of receiving the split payment fund over the months is from the gateway that you choose to process the payments of your store.
For the store owner, the receiving process for the sale is normal: in a few days the total value of the sale will be released by the gateway, which collects a transaction fee as it happens with sales in cash (without installments). This fee for installments sales, however, might be higher due to this service.
But even with this higher fee, it’s worth it. Since it will help you to increase sales.
The benefits of offering installments at your Shopify store
Now that we know what a sale with installments is, let’s understand which are the benefits of offering this payment option at your Shopify store.
You are probably having questions about the effectiveness of offering the installments payment option at your store. In the meantime, markets where this payments option is already common, the store owners seizes benefits as:
· Expansion of the consumer market: if your product has a high ticket value and that makes the customer to think a lot before purchasing, with the installments option the sale becomes more affordable for more buyers and even helping with impulse purchases;
· Shorter sale cycle / Impulse purchase: if the customer is really interested in your product but you don’t offer installments option, the customer will have to wait until he has all the product funds to buy it. In a period of financial crises it might take a longer time to have it, and this means increasing the sale cycle – it increases the time between convincing the customer that your product is a good choice and the sale itself (this will help the impulse purchases);
· Increases market competitiveness: offering installments payment is one way of differentiating your store at the ecommerce market, a very efficient buying argument;
· Expand the average order value (AOV): Online stores with installments payment option have higher opportunities to expand their average sale value through strategies of cross sell and up sell, after all, the possibility of paying for the products selection in month’s installments increases the customer purchasing power;
· Meet a market trend: the emergence of several payment providers offering installments options in the USA shows the trend of the market to also use this method of payment to conquer new clients.
The trend of installments purchases
Without any question, the possibility of buying now and paying later is the main reason for the customer to buy with the installments payment method.
In a lot of scenarios, not being able to purchase with installments restrict or prevent the product affordability by many customers.
This situation often happens in markets where you don’t have the habit of building personal savings or even where there’s a low average salary.
Facing the necessity of having a product, the clear solution is the sale with installments.
That way, the product's total value is minimized in smaller installments being absorbed by the customer's monthly budget, instead of reducing it’s current available funds.
Brazil is one of the world leaders when the subject is sales with installments at the ecommerce and dropshipping business.
In a marketplace that makes around 14.4 billion dollars in online sales per year, 60% is made with credit cards, and over half of it, with installments.
Installments payment is one of the most popular payment methods among Brazilians: 62% pay their purchases in physical stores with credit card, and 58% of payments at digital platforms are with installments.
Not only have the customers felt the access benefits of this payment option, but also the digital entrepreneurs.
A NeoTrust, Conmpre&Confie e Ecommerce Brasil’s research shows that purchases paid in 4 installments or more have a higher order value than purchases paid in cash or in 2 or 3 installments.
All of these points fortify the benefits of offering installments options at your Shopify store. Installments sales offer access to expensive products and allow a larger order amounts.
In markets which have an emergent economy, such as Brazil, the installments payment option guaranties the access of consumerism, in the USA (with a different economy scenario); entrepreneurs can take the opportunity to increase their profit, from the optimization of a payment method already known by the market: the credit card.
In the USA, 78% of the population already makes online purchases and the credit card is the most used payment method – corresponding 47% of all online transactions and representing 348.74 billion dollars in annual sales.
Offering installments as a payment method is one of the tendencies to extend the sales volume and the revenues in each transaction.
How to implement installments payment at your store?
Despite what you are thinking, seizing all the benefits of offering installments at your Shopify store is not a hard task.
Currently some gateways/payment providers are offering this kind of payment processing and solution inside the Shopify platform.
So, if you are interested in using this payment method allowing your customers to pay with installments, it will be necessary to integrate your store with one of these special gateways, which allow your customers to select the number of installments to pay for the purchase.
Some of these specials payment providers for installments payments in the USA and other countries are:
In Brazil, for example, this payment option is already widespread enough that even the common gateways, as PayPal already offer installments options. In other countries, such as the USA, it is important to consider this implementation with a special gateway provider for payment procedures (like the ones mentioned above).
Together with this special gateway, it’s really important that your Shopify store uses an Installments APP to show your customer the installments of your product right away.
The main point of using this app is because the installments providers process the sale and release the value of it to the store owner but only show that info at checkout. Not showing this information right away makes you lose some opportunities to seize the benefits of offering installments options at your Shopify store. You need to show that info at your product page, home page or collections page to your customer before the checkout in order to your conversions.
This design option makes the product value more clear for the customer, your products more affordable and helps in terms of communication to increase your average order value (AOV).
With the INSTALLMENTS APP at your store, every time that customers accesses your product page, they will see:
· Value “in cash”;
· Number of installments and each value of it;
· Options with or without interests.
To be more familiar with the INSTALLMENTS APP, take a look at our Shopify APP page. You can customize the text displayed, the amount of installments, the interest rate and much more!