Amazon has started offering loans to customers buying products off its website in a move that could shake-up the UK furniture and electricals market.
The world’s biggest online retailer is offering a new “pay monthly” option on orders above £400, which can include multiple items.
Amazon Pay Monthly poses a new threat to established high street retailers such as John Lewis and could attract a wave of new customers to the website.
The loan can be spread over two, three or four years depending on the size of the purchase, with Amazon charging interest at an advertised rate of 16.9%. Customers do not have to pay a deposit, meaning the first payment is their opening monthly instalment.
One source close to Amazon said it was a “gamechanger” for the company.
The retailer has signed up Hitachi Capital to run the service. Hitachi also works with John Lewis, which offers interest-free credit on furniture.
The UK is thought to be the first country in the world where Amazon has offered instalment loans, although shoppers in the US can buy on credit using an Amazon store card.
The loans are available on total orders of more than £400, including single or multiple items. However, only products sold and dispatched by Amazon are eligible, meaning that products sold on Amazon by third-parties are not included.
The pay monthly option is offered to customers under a list of payment methods when they proceed to the checkout page on Amazon’s website. Customers are then invited to apply for a loan, and an online credit check then takes place.
In a statement, Amazon said: “The new Amazon pay monthly programme provides our customers with further payment options to suit their needs when shopping on our website, and it is easy, convenient and offers competitive rates and flexible terms.”
Amazon pay monthly is the latest in a series of customer initiatives launched by Amazon over the past year. Earlier in 2015 it introduced one-hour delivery in major cities on thousands of items.
Gerald Grimes, managing director of Hitachi Capital Consumer Finance, added: “Our new trial with Amazon is all about giving people the fastest and most seamless experience when it comes to point-of-sale credit.
“It means you can go straight from choosing a new dishwasher or fridge to accessing finance options through Hitachi Capital to pay monthly, all while staying on the Amazon website. This means no visible break in the customer journey.
“Amazon is famous for its ‘1-Click’ service, allowing you to place an order literally at the click of a button with pre-stored payment details and delivery addresses. This is part of boosting that customer experience and could signal huge changes for the online retail industry.”
The Guardian revealed earlier this week that Amazon is expanding the range of grocery products it sells in 2016, putting more pressure on struggling supermarkets.
Christopher North, the UK boss of the online retailer, said Amazon planned rapid development of its Pantry service.
Amazon Pantry, which launched in November, allows customers to buy from a range of 4,000 grocery and household products, including brands such as Kellogg’s, Ariel, Colgate and Kronenbourg. The service means households can quickly stock up on items, with Amazon charging £2.99 for one delivery of a large box.
“We are really happy with the early numbers,” North told the Guardian. “In the new year we are going to be adding a lot more products.”
Amazon achieved a record day on Black Friday in 2015, generating 7.4m orders compared with 5.5m last year. It also added millions of users to its Prime membership scheme, and signed up Jeremy Clarkson to a new series that will launch on its video streaming service.
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