Amazon’s Pay Monthly service threatens retail competitors

Amazon has started offering a Pay Monthly service to UK customers spending over £400, creating greater competition within the retail industry. The service is offered in partnership with Hatachi Capital, which also works with retailer John Lewis to offer interest-free credit on furniture.

Depending on the size of the order, the loan can stretch over two, three or four years, charging an interest rate of 16.9 percent. No deposit is required as the customer’s first payment is their opening monthly instalment. The service excludes third-party companies, and orders are only eligible if sold and dispatched by Amazon.

Since Amazon’s expansion into the market, Ocado’s shares have been sliding

The UK is thought to be the first country where Amazon has offered instalment loans. According to The Guardian, a source close to the company said that the service is a “gamechanger” for the world’s largest online retailer, as well as for the UK furniture and electrical market. Retailers offering the same service, such as John Lewis and supermarket chain Tesco, will find their higher-end business facing strong competition.

Amazon’s aggressive expansion into new markets has had a disruptive effect on businesses in the process. Most recently, its entry into the grocery delivery business not only challenged the UK’s Big Four supermarkets, but also affected online competitor Ocado. Since Amazon’s expansion into the market, Ocado’s shares have been sliding, and were down 7.9 percent by December 30.

With sales of £5.6bn in the UK, Amazon has become a dominant player in the retail industry. The threat it poses to its high-street competitors is only going to increase.