Executive Summary
In the summer of 2023, NanoMarket, a newly established smart gadget webshop with plans for international expansion, introduced its own branded BNPL (Buy Now, Pay Later) service on its online store.
Following the introduction, we conducted an A/B test to measure the impact of BNPL, based on which we are publishing the following official statistics:
- Add-to-cart rate: 222.85 %
- Sales conversion rate: 651.78%
The Partner
NanoMarket is a newly launched Hungarian webshop that currently offers mobile phones, smartwatches, and other trendy tech products. HPH Electronics started its retail of electronic products exclusively online through the webshop, as they do not plan to open physical stores due to high fixed costs.
Their mission is to become experts in products following the latest technological trends in Central and Eastern Europe. They aim to transparently and impartially showcase the innovation, modern smart devices’ everyday value, and usability to customers in the rapidly changing market, providing accessibility at competitive prices. All of this in every country in the region.
Their current strategy is to maintain their prices within the top 5 in the market for the most popular mobile phones, thus gaining market share.
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The Problem
NanoMarket approached us as a newly launched webshop that wanted to differentiate itself in the market by offering services like BNPL, which is already well-known in the Czech market.
Additionally, they faced the following challenges:
- As a newly launched webshop, their main source of revenue was paid traffic (social media campaigns), but they noticed that over 95% of visitors acquired through a significant marketing budget did not make a purchase
- Every third customer service inquiry was about installment payment options
- They were not growing dynamically enough, despite being market leaders in pricing
The Solution
In the summer of 2023, we introduced the NanoMarket branded BNPL payment method on the webshop.
Based on our recommendations, the company’s management introduced the service in the following version:
- Structure: Customers can pay for products in 4 equal installments, meaning a 25% down payment.
- Pricing: The company decided not to charge any fees or interest for the service.
- Process: They opted for a four-step process with real-time, instant, and automated assessment, which takes only 5-10 minutes for the customer, providing instant results…
- Data Input: users have to fix only five datas manually ; no other self-declaration-based data collection is involved
- Electronic Bank Statement Sharing and Evaluation: Customer qualification is based on real banking data; there is no additional requirement for PDF or paper-based employer certification during the process
- Online Contract Signing: To ensure transparency and enforceability, an electronic contract is created and signed by the customer
- First Payment: The first installment is paid using a well-known credit card.
- Functionality: The company decided to introduce the complete functionality, including the following components, which offer added value compared to our standard BNPL package…
- “Score yourself, check your spending limit”: An indicative BNPL pre-assessment process that can be initiated from the product page, designed to provide visitors to the webshop with exact information about whether they can buy in installments and, if so, in what amount
- “Add more products to your cart and pay in installments”: Increasing the cart size through cross-selling is the goal. By making installment payments available only for purchases over a certain amount, customers are encouraged to buy additional items to reach the minimum threshold for 4 installments.
Methodology of the Case Study
Based on our recommendation, we conducted a post-introduction A/B test, dividing the time frame into two parts:
- Period “A”
- Period “B”
Both periods were perfectly aligned in terms of:
- Product range
- Pricing
- Marketing budget
- Applied marketing channels and ad structure
- Other payment methods
The difference between the two periods is that BNPL was not active during period “A,” while it was active during period “B”.
Key Metrics of the Case Study
We prepared daily reports, allowing us to track our partner’s entire sales funnel on a daily basis:
- Click-through rate (CTR): How many users click through to the webshop from the ads
- Number of visitors: The number of unique users visiting the webshop during a given period
- Add-to-cart rate: The percentage of visitors who add at least one item to their cart
- Average number of products in the cart: The average number of products in the cart
- Sales conversion rate: The percentage of all visitors who make a purchase
- Shopping cart abandonment rate: The percentage of users do not finish the shopping journey
- Average order value (AOV)
- Payment method penetration: Distribution between different payment methods like card payment, bank transfer
Results of the Case Study
In period “B,” when BNPL was available, we observed the following compared to period “A”:
- 10% more clicks to the webshop from Facebook ads.
- 2.2x higher add-to-cart rate.
- 6.5x higher sales conversion rate.
Contrary to initial expectations, there was no significant impact on the following two metrics:
- Average order value remained unchanged.
- Average number of products in the cart remained unchanged.
In summary, during period “B” when BNPL was available, twice as many customers added products to their cart, and significantly more completed purchases (6.5x). This indicates that BNPL not only generated interest in the purchase process but also led to more completed transactions, all while maintaining the marketing budget unchanged.
The 10% higher click-through rate can be explained by the fact that when customers encounter the unique benefits of BNPL and see the specific installment offers for individual products within the advertisements, they are more likely to click through to the webshop.
In conclusion, BNPL brought new sales and customers to NanoMarket, but it did not impact cross-selling.
Partner’s Evaluation
We asked Ondrej Hajdu – CEO of the company – a few questions, and here are some of his responses:
How do you evaluate the introduction of BNPL?
“It clearly increased my company’s sales, and I didn’t have to increase my expenses.”
What advantages do you see in BNPL?
“In the Czech Republic, this is already a known payment method, and I expect it to spread to Hungary soon. In the meantime, I want to leverage the advantage of having it available on our webshop!”
Why did you choose BNPL instead of a traditional point-of-sale loan?
“In the online space, the 20-40% interest rate structures don’t work, and I can’t and don’t want to cover the 8-10% that lenders charge for a 0% installment scheme. It simply doesn’t fit into my pricing. Not to mention, if I want to brand my webshop as the online marketplace for innovative and trendy products, I want to offer the most modern installment payment option as well.”
What were the results of the A/B test compared to your expectations?
“I’m not surprised that our marketing campaigns’ effectiveness and sales improved. But I was positively surprised that twice as many visitors added products to their carts, and cart abandonment improved. I still see areas for improvement, and the results will get even better.”
Customer Review
“I was satisfied with the process. It was straightforward, fair that there is no interest, no APR, no fees. The process might have taken around 5-10 minutes. I have already recommended it to several friends and acquaintances.” (G. Viktor)
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