Amazon Offers Shoppers Options of Paying Later

Discussion
Jul 09, 2008

By George Anderson

Amazon.com is now giving its shoppers the option of ordering goods and paying for them later with the addition of the Bill Me Later payment service to the website.

The e-tailer first announced last December that it planned to offer the Bill Me Later service. Amazon.com also made an investment in the company at that time.

“We are committed to providing our customers with the greatest possible selection, whether that’s in our 40+ stores, or in the selection of payment methods we offer on the site,” said Matt Swann, vice president of payments at Amazon.com, in a press release. “We believe our customers will appreciate having another convenient payment option.”

The Bill Me Later service enables consumers to shop online without using a credit card providing Amazon with the opportunity to attract new consumers who have not shopped the website before or perhaps used it sporadically.

Avivah Litan, vice president and distinguished analyst at Gartner, said, “Adding alternative payments is of widespread merchant interest as they work to offer consumers additional payment options. Our research shows high consumer interest in these types of alternative online payment instruments and evidence that they find them secure and convenient.”

Discussion Questions: How big an opportunity does the Bill Me Later type of customer represent for online retailers? What will the Bill Me Later service mean in practical terms for Amazon.com? Will Amazon’s investment in Bill Me Later negatively affect it in dealing with other online merchants?

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8 Comments on "Amazon Offers Shoppers Options of Paying Later"


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Mark Lilien
Guest
13 years 10 months ago

What’s most surprising: that Amazon didn’t already offer “Bill Me Later.” To maximize profits, retailers have to offer their customers every reasonable payment option. And “Bill Me Later” is often a lower-priced alternative for retailers than the ever-escalating credit card fees.

Liz Crawford
Guest
13 years 10 months ago

I’m not sure that the question is whether it’s an opportunity for retailers. I think it’s a way for consumers to get in trouble during hard economic times. Convenience be damned; it’s buy now, pay later for people who are drowning in debt.

Cathy Hotka
Guest
13 years 10 months ago

Retail competition is only going to get more cutthroat. Retailers will be smart to avail themselves of every opportunity to make a sale. I used to work at a layaway counter at a retailer!…and there was plenty of business there!

David Biernbaum
Guest
13 years 10 months ago

I’m speculating that Amazon would have much preferred not to get involved with deferred billing. It’s expensive and requires significantly more human attention to make it work. However, it is probably almost nearly a necessity given the evolution of what types of products are now purchased online at high price points and to make Amazon competitive with brick and mortar stores that sell the same types of items while offering deferred billing.

Kevin Graff
Guest
13 years 10 months ago

According to the Federal Reserve, approximately one quarter of all U.S. households do NOT have a credit card. In spite of all of the challenges faced with managing a deferred payment program, the possibility of expanding your customer base by 33% is too big of an opportunity to turn down!

Add to this the continued hesitation of many consumers willing to share their credit card information online and this initiative will be nothing but another winner for Amazon.

Alison Chaltas
Guest
Alison Chaltas
13 years 10 months ago

“Bill Me Later” is today’s take on the good old fashioned layaway plan. Remember the day’s of layaway at Bradlees, Zayre, Caldor or Kmart?

Deferred payments are a sign of our economic times. Auto, home furnishing and hard goods retailers have been doing it for decades on a promotional basis. “Bill Me Later” works for events and trial building programs. However, it is a dangerous proposition on an everyday basis for retailers and manufacturers. Cash is king for retailers, especially in a down market. Manufacturers are likely getting pushed to extend their terms and own the inventory in the system.

Amazon is savvy enough to understand the importance of cash flow. However, today’s economic conditions are new to existing financial modeling systems. As a result, it will be extremely difficult to predict the number of shoppers that will take advantage of the deal and default risks down the road.

Linda Bustos
Guest
Linda Bustos
13 years 10 months ago

This makes sense, since Amazon has equity in Bill Me Later since December, 2007. I’m surprised it wasn’t implemented sooner.

This may slightly boost new customers for Amazon, if the ability to check out with Bill Me Later reduces the friction and fears of customers who don’t want to surrender credit card information online, and otherwise wouldn’t make a purchase. I think the BML has more benefit for security and convenience than an e-layaway service. It’s not a true layaway, you get your purchase right away, and your payment period is only extended slightly (an extra 60 days or so) and your online purchases show up on a consolidated bill.

John McNamara
Guest
13 years 10 months ago

I would agree with Mr. Lilien, that if you accept credit cards you might as well offer the same service at a better rate. Mind you, Amazon is a well-respected online retailer and they could risk losing this status if they turn into online loan sharks.

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