A family-run start-up company letting ecommerce retailers outsource their lay-by facilities has been growing fast since its launch in May. Here’s the lowdown on Laybuy.
The traditional lay-by model is “a royal pain in the butt” for retailers, says Laybuy founder and managing director Gary Rohloff. And Gary would know – as a senior retailer who’s been chief executive of Number One Shoes and Warehouse Stationery, plus managing director of Ezibuy, he’s overseen thousands of them.
When a retailer offers a traditional lay-by programme, they’re responsible for storing the product while it’s paid off; administrating the payments; and their cashflow is compromised before the payment process is complete. There’s also added complications when the item goes on sale or a cancellation is requested.
Beyond this, customers are changing - modern shoppers expect a seamless payments process and faster-than-light fulfilment. They don’t want to visit a physical store repeatedly and make incremental payments towards a lay-by item anymore.
The start-up business Gary has this year launched with his 20-year-old son Alex has solved all these problems for retailers. Laybuy is a fully-integrated payment platform that’s digitalised the traditional lay-by facility. With Laybuy, preapproved shoppers can purchase products and services online, receive them as soon as they can be delivered, and pay them off interest-free over six weeks.
Retailers pay commission on each Laybuy sale and receive full payment for the goods, minus a small commission fee, immediately.
Gary says Laybuy takes the responsibility for managing lay-bys off retailers’ hands, and benefits the customer by stretching their discretionary dollar while still getting their purchase to them quickly. His executive experience has taught him the vital importance of being flexible enough to move with the times: “Consumers have power unlike anything they have had before and retailers simply have to adapt and be nimble in adopting the products and services that their customers want, and in many cases, are demanding.”
From idea to execution
Gary first considered the appeal of a third-party, digitalised lay-by facility while in his former role as managing director of mail-order clothing company Ezibuy during the early 2000s. The technology wasn’t there to support this service at that point, but last year, Alex independently proposed the same concept while arguing with his father about an outfit he wanted to wear out one Friday night.
“Alex was bemoaning the fact that I was too miserly to lend him money to buy a pair of jeans,” Gary says.
Then a student, Alex told his father he wished he could get the jeans immediately and pay them off in instalments based on what he could afford from his part-time job. Gary mentioned that he’d already thought of a business based on this idea many years ago.
“In typical 20-year-old fashion, Alex challenged me to go ahead and do it.”
Gary took the bait. He retreated into his office and spent a few weeks producing a business plan, before deciding the business was viable. From there, he and Alex spent three months planning and shaping the details of the solution they wanted to offer.
Strategy and implementation company Spring carried out extensive research to validate the plan, and produced a 60-page ‘product specification’ document to guide the developers in building the software that drives Laybuy. After a tender process, local web design and ecommerce provider Blackpepper was chosen to create Laybuy.
Following a 16-week build, Laybuy launched on May 12 with two foundation retail partners, Hallenstein Glasson and Red Rat. Westpac and DPS manage the financial back-end, while Heartland funds its loan book.
Its success has been significant: in the two months following its launch, Laybuy signed up a further 150 retail partners; 18,500 consumers had joined the platform; and Laybuy had transacted just over $1.6 million.
Its retailer base is mostly independent clothing boutiques right now, but Laybuy hasn’t restricted its ambitions to apparel – it’s also talking to toy companies, a spa retailer and many others. Any retailer based on the Shopify platform can use it now, and it’s also building a Magento extension.
“Our strategic plan is actually world domination across any retail or service,” Gary says.
He intends to see Laybuy move into in-store payments as well.
Laybuy can’t release exact numbers around the sales and order value growth its retail partners have experienced for reasons of commercial sensitivity but Gary says the average percentage uplift for all of the above is in double digits – “and I’m not talking teens.” He confirms that this is consistent across all retail partners.
Laybuy will embark on a capital raise at some point, but currently, it’s working on continuing its rapid growth streak and consolidating that progress. Gary, Alex, plus wife and mother Robyn Rohloff are excited to work together as a family to build Laybuy into a company that supports retailers and helps customers shop.
“We’ve got big aspirations and we’re a little New Zealand company that is going to fly,” Gary says.
How Laybuy works
1) The shopper spots a product they’d like to buy online. In this example, we’ll say it’s a pair of jeans costing $120.
2) They sign into their Laybuy account, or sign up as a new customer. Each new customer has their credit checked by Centrix, and must supply a credit or debit card from which payments are automatically debited. They’re automatically assigned a limit of $120-$1200 based on their credit score.
3) The shopper selects ‘Pay by Laybuy’ at the checkout. They pay a sixth of the cost – in this case, $20 – and the full purchase price is released to the retailer, minus Laybuy’s flat commission.
4) The shopper receives their jeans as soon as the retailer can deliver them.
5) They pay off the remaining $100 over six weeks.
Credit options that suit Millennial shoppers
Appropriately for a company with a 20-year-old executive on board, Laybuy targets Millennial shoppers. Founder and managing director Gary Rohloff quotes recent Spring research reporting that only 20-25 percent of Millennials have a credit card.
“A vast majority are shopping with debit or Eftpos,” Gary says. “Many Millennials do not want to use credit cards, they cannot get their heads around having to pay 20 percent plus interest and all they want is an opportunity to spread payments over a short period to better manage their cashflow.”
His son Alex Rohloff is operations executive at Laybuy. He agrees with Gary about credit cards’ lack of appeal, saying a number of his social circle have been scared off interest-bearing debt by bad experiences.
“There’s one person I know who has a credit card, and he’s racked up $1,000 in debt,” he says. “No-one’s touching them because of that.”
“Twenty-year-olds want to only spend what they’ve earned,” Alex says.
Laybuy is free of interest or charges, and offers a disciplined six-week payment schedule that’s transparent. Consumers can repay their total balance at any time.
Gary notes that while consumer debt can be a burden, credit itself is an important tool that’s difficult to avoid. Banks, landlords, utility companies and even companies which sell mobile phone plans all use credit scores to inform decisions which can significantly affect the consumer’s quality of life.
“What Laybuy has done as an unintended consequence, it’s given young people an opportunity to get on the ladder of building a credit score.”
The consumer-led change that’s driving payments innovations like Laybuy is comparable to the introduction of Eftpos to the Kiwi market in 1989, Gary says.
“I am old enough to remember when Eftpos was introduced to New Zealanders and everyone decried the idea as crazy, would never work and that cash was and would always be, king. Look how that’s changed! Laybuy is an Eftpos equivalent - it’s relevant, timely and the way of the future. Why not spread your purchase payments over six weeks when it’s interest free? It just makes absolute sense and savvy shoppers are buying into this and fast.”
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