Afterpay Installment Service Morphing Into Shopping Gateway

More shoppers are starting to think payment plan first and fashion second. 

Australian installment payment firm Afterpay, which entered the U.S. market in 2018, referred 27 million shoppers a month to its retailer partners during its fiscal first half, ended Dec. 31. Over the Christmas rush in December, referrals spiked to 45 million.

The company has 8.1 million active users in the U.S. All together, people who used Afterpay to pay only a portion up front and make regular installment payments bought goods valued at $4.2 billion in North America during the six months.

Nick Molnar, cofounder and co-chief executive officer, told analysts on a conference call, “Our customer base is growing and these numbers now are very significant to be able to drive traffic to a retailer that, in many instances, [is] on par with the variety of their social media platforms.” 

Afterpay entered the U.S. with a focus on fashion and is now expanding into other categories such as home, growing its user base and expanding its platform. So far, the cycle has been self reinforcing, with new users making the service more attractive, which helps bring in more merchants and then more customers and so on. 

Globally, the company had 74,700 active merchants on its platform in the first half, year-over-year growth of 73 percent.

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Afterpay has also jumped the digital/physical divide and is offering its installment services in store. 

“Offline retail still does represent the vast majority of retail,” Molnar said. “So we’ve seen a lot of growth through our online channel. And as we accelerate into the physical world, we hope to prove that the product can work both online and offline, similar to what we have seen in the early days in the Australian region.”

Among the new names signing up are Dillard’s and Ashley Stewart online and Ugg, Carhartt and Steve Madden in store.  

The continued growth of Afterpay and other installment services shows a new solution to an old, but growing problem for retailers — customer acquisition. 

Getting shoppers into the front door of a store or to click on an e-commerce site is the highest hurdle for many brands. 

And Afterpay sees more potential. 

Chief financial officer Rebecca Lowde noted, “As a business, we’re serious about going after the 9.4 trillion Australian dollars [or $7.4 trillion] in retail markets that sit within our existing and soon to become international operating regions. To secure that growth and to continue scaling our platform globally, we’re investing in people, our customers and merchant relationships, our products and technology globally.”

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