H&M has a new strategy to avoid retail's deadliest mistake


Business Insider/Mary Hanbury

Discount rails at H&M.

  • H&M is launching a buy-now, pay-later service in the US this fall.
  • Customers will be able to keep an item for 30 days before deciding if they want to keep and opt to pay for an item in four installments. There are no fees to use the service.
  • This is a smart way to appeal to cash-strapped teens and encourage more customers to pay full-price by spreading the cost.
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H&M is the latest retailer to launch a buy-now, pay-later payment program to could encourage shoppers to spend more money at its stores.

H&M has partnered up with Klarna, a global payments provider - that counts Afterpay as a competitor - that allows shoppers to purchase an item and have 30 days to decide whether they want to keep it and to pay for it across four installments. Advertisement

A spokesperson for Klarna said there are no fees or interest on the service; H&M said this is service expected to launch in the US in the fall.

Read more: The clothing industry is adopting a time-tested strategy to win over cash-strapped Gen Z and millennial shoppers

Urban Outfitters and Abercrombie are already offering similar payment services at their own brands. And while it might seem like a good alternative for cash-strapped teens who want to splash out but don't have the disposable income, it also works in the favor of the brands too.

Aterpay's CEO, Nick Molnar, previously said that paying in installments with this service can help to "increase conversion rates and incremental sales by 20-30%." This is because the retailer is more likely to encourage customers to pay full-price as installments make the total cost seem less overwhelming. This, in turn, could curb the level of discounting in store, one of the biggest issues plaguing the retail sector.

This is especially true for H&M, where sales racks have become a mainstay in recent years. In an interview with Business Insider earlier this year, Martino Pessina, H&M's president of North American operations, said that scaling back on discounting was a key priority for the company; this is one way of doing so.