More E-Tailers Are Letting Consumers 'Bill Me Later'

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No cash down has long been a staple promotion for traditional merchants, so it makes sense that e-commerce players are increasingly offering this billing option as an alternative to upfront credit and debit card payments.


In one example, after ToolKing.com began testing the "Bill Me Later" payment system offered by I4 Commerce last fall, the retailer tracked 430 holiday season customer acquisitions back to the program for its wide-ranging line of industrial and do-it-yourself tools, a 5 percent increase compared to same period in 2004.


Perhaps more importantly, ToolKing.com's average orders via Bill Me Later were $300 during the holidays, while credit/debit tickets evened out at $200. The lift can be connected to the $250 minimum attached to the no-payments-for-90-days offer running at www.toolking.com, but the retailer said the results were equally related to freeing customers of the immediate responsibility of funding their holiday shopping while also eliminating the threat of stolen financial information. In the end, Tool King added nearly $130,000 in seasonal revenue because of the program.


"Obviously, the extra payment option has lent itself to a population of customers that we were not addressing," said Donald Cohen, founder and managing partner at the 28-year-old Tool King, Lakewood, CO. "Going in, we had no idea what to expect, but it appears to be a significant element of our business going forward."


Cohen said he expects his company to reach $27 million in sales this year, compared to last year's sales of $15 million. By being able to attack the ostensible card-not-present market, Bill Me Later will aid that increase, and more consumers will be attracted to the pay-later program, he said.


"It seems like a payment option people are looking for," Cohen said. "We were very impressed with what it was able to do for us."


To qualify for the program, consumers must enter the last four digits of their Social Security number and their date of birth. In turn, the I4 Commerce system for broadband users is designed to respond with an acceptance or refusal in three seconds or less. According to I4 Commerce, users with FICO credit scores of 710 and above are accepted. The demographic for Bill Me Later users skews slightly female and tends to make up a segment of affluent-but-infrequent e-commerce customers.


"Most of those customers are shoppers but not buyers, and we're hoping to translate that shopping activity into buying activity for our retail partners," said Bill Zielke, vice president of product management at I4 Commerce, Timonium, MD. "They are not credit-distressed customers. On average, they carry four credit cards in their wallet or purse. They're just not choosing to use that vehicle on the Web, but Bill Me Later gives them an option that makes them feel it is more secure or convenient to do so."


Consumers are sent a bill in the mail updating them about the status of their accounts in a manner similar to credit card companies. They can pay 3 percent of the balance each month or make good on their accounts with higher payments on the total sum. After the period of the no-interest offer comes to an end, they are charged the prevailing interest rate.


"There's not any ambiguity from the customer's perspective," Zielke said. "It's very clear what the payment expectations are. If they choose to defer, they have that right. But if they choose to pay it in full, which many customers do, they've really achieved a same-as-cash capability over that time."


Zielke said he has 200 clients signed up for Bill Me Later, including Wal-Mart, Overstock.com, Continental Airlines and eToys Direct. Such retail partners normally implement 90-day, 6-month or12-month no-interest programs. However, the programs can be customized to the retailer's needs.


For instance, eToys Direct ran a no-interest-until-February holiday offer that began when it dropped its catalog last fall. No matter if the customers ordered online or over the telephone, they have until February to pay the bill before getting charged interest.


"It's a very nice offer to give customers when you are sending out holiday catalogs in the fall," said Sheliah Gilliland, director of public relations at eToys Direct, Denver. "You can give them an offer to make their holiday purchases well ahead of time but not actually have to pay the bill until February."


Post-holidays, eToys.com has offered a 30-day, no-interest program. Gilliland said that eToys has seen its average order for Bill Me Later purchases to be 35 percent higher than its credit/debit transactions. In addition, she said I4 Commerce's referral program via www.shopbillmelater.com also has been a boon to eToys.com since joining it in 2003. Sales deriving from the referrals increased 516 percent last year when compared to the previous year.


"What we are getting from Bill Me Later customers versus other payment options and for about the same rate we pay the credit card companies has made us very happy," Gilliland said.


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