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BFD Expert Voices - Retail Deals

BFD Expert Voices

The growth of buy now, pay later (BNPL) at the start of this year slowed significantly, though remained robust, according to the most recent data provided by Adobe, Richard writes.

Why it matters: Retailers have turned to BNPL to get consumers to spend more, in some cases even investing their own money in these payment providers (see Macy's five-year partnership with Klarna in 2020). 

But BNPL players (Klarna among them) recently have seen their outsized valuations slashed as investors cool on the once white-hot market. 

By the numbers: In January and February, BNPL orders grew 53%, while revenue increased 56% year over year, Adobe said.

This is down significantly from the fourth quarter: Orders using the payment option in October and November of 2020 grew by 528%, while revenue increased 412% from a year earlier.

Flashback: Early last fall, RBC Capital Markets estimated that a BNPL option increased retail conversion rates by 20% to 30% and lifted the average ticket size by 30% to 50%, per a CNBC report.

RBC, however, declined to say whether it had revised those figures since the slowdown seen this year. 

What they’re saying: Citing industry data, BNPL may be currently increasing the average shopping basket size between 15% and 20%, says Hemal Nagarsheth, an associate partner in the financial services practice of consulting firm Kearney.

He noted that retailers are using BNPL offerings to improve open rates for marketing outreach, which has attracted new customers, driven follow-up purchases and boosted the purchase of higher quality, higher margin goods.

Yes, but: “Given current inflationary trends and higher fuel costs, there’s some downward pressure on consumer discretionary spend that’s testing the resiliency of credit expansion on basket size,” he adds.

💭 Our thought bubble: Klarna's valuation cut and the recently canceled merger between BNPL players Zip and Sezzle spell choppy waters for BNPL — and we're wondering how retail players will pivot.

Apple Pay Later, the consumer electronic company's new BNPL offering wherein it lends off its balance sheet, raises the stakes and could prove to be an attractive alternative to the early entrants.

1 big thing: BNPL sees major slowdown, Adobe says

Illustration of a person holding a shopping bag made out of a calendar. 

The disclosure of hedge fund Elliott Management’s 9% stake in Pinterest via the WSJ could be a hindrance to the company’s e-commerce play, Kimberly writes.

Why it's the BFD: The recent move to bring on new CEO Bill Ready was a way to ready the ship (excuse the pun) and move Pinterest toward e-commerce.  

Catch up fast: The company tapped former Google commerce business exec Ready last month. He brings e-commerce chops from his experience at PayPal, Braintree and Venmo. 

Right before Ready took the helm, Pinterest snagged online fashion-shopping platform The Yes, bringing another retail heavyweight (Julie Bornstein) among its ranks.

The company recently rolled out a suite of new shopping tools to help merchants better reach shoppers on its platform.

Yes, but: Online consumer spending has declined lately and the technology sector is facing headwinds like climbing interest rates, inflation and international conflicts.

What’s next: As our Media Deals colleague Kerry Flynn notes, the big stake has drawn speculation for a future sale or other massive changes, similar to how Elliott pressured Twitter. 

Pinterest's potential acquirers could range from a social media platform to fintech companies, Kerry writes.

Among the possible suitors floated are Meta, Snap, TikTok, Square and Shopify (for which it has a partnership) and private equity.

Flashback: PayPal, still another possible contender, was in talks to buy the social media company for $45 billion. That effort was shelved following shareholder backlash, per the WSJ.

Threat level: Pinterest co-founder Ben Silbermann, who transitioned from CEO to executive chairman, owns an approximately 37% voting stake in the company, which could limit Elliott's power, WSJ reports. 

💭 Our thought bubble: Elliott’s stake suggests it could be taking the company on a different path — perhaps by reinvigorating its ad business. Stay tuned for more reporting!

2. The BFD: Elliott's Pinterest stake could poke hole in e-commerce

An illustration of a shopping bag with a hand icon, representing the intersection of digital and real-world commerce.

Amazon.com has been cutting back on the products it sells under its own brands, priming for the possibility of exiting its private-label business entirely, the Wall Street Journal reports.

The move was made in part because sales of the products were “disappointing,” WSJ says, citing sources familiar.

It also eases some regulatory pressure over claims the e-commerce giant sometimes gives its own brands the advantage over other vendors on its site.

Shein’s rapid climb as a fast-fashion juggernaut may actually be hurting its success, Bloomberg posits.

The Chinese fast-fashion giant has a valuation of around $100 billion and it hit at least $16 billion in sales in 2021.

“But Shein’s business model is also the source of a potentially toxic image problem that’s sparked allegations of environmental damage, worker exploitation, and copyright theft.” – Bruce Einhorn and Daniela Wei, Bloomberg

Hasbro and the New York Times are teaming up to bring the popular online word game Wordle into the physical dimension.

The companies said they will make a board game out of it. Now you can bring “Wordle: The Party Game,” as the title suggests, to parties with your friends.

3. Retail therapy

Illustration of a therapy sofa with five shopping bags positioned on the seats.

• Okendo, a customer review platform for ecommerce brands, raised $26m in Series A funding. Base10 Partners led, and was joined by Craft Ventures and Index Ventures. www.okendo.io 

• Hang, an NFT-powered provider of loyalty and membership software for brands, raised $16m in Series A funding. Paradigm led, and was joined by Tiger Global, K Thirty Five Ventures, Mr. Beast’s Night Ventures, Green Bay Ventures, Shrug Capital, Good Friends, K5 Global and Impatient Ventures. http://axios.link/aQTs 

• Medusa, a Danish e-commerce platform for Javascript developers, raised $8m in seed funding co-led by LocalGlobe and Dawn Capital. www.medusajs.com

• Aterian Investment Partners bought a control stake in Stein Fibers, an Albany, N.Y.-based maker of fiber products for markets like bedding, furniture and medical. http://axios.link/URa4

• Axcel agreed to buy Swedish pet food maker Voff from Systematic Growth. www.voff.pet

• Nintendo (Tokyo: 7974) agreed to buy CG animation company Dynamo Pictures. http://axios.link/8HAn 

• Hivery, a hyper-local retail assortment strategy simulation and optimization startup, raied $30m in a Series B round led by Tiger Global. Blackbird Ventures, AS1 Partners and OneVentures participated. http://axios.link/Kdxr 

• Flowers Foods, producer of Nature’s Own, Dave’s Killer Bread and Wonder, said it has invested in Base Culture, a gluten-free, grain-free bakery foods company. The amount invested wasn’t disclosed. http://axios.link/wQ3M 

4. Retail transactions

• FAT Brands has promoted independent director James Neuhauser as executive chairman of the board. http://axios.link/0g5x

 • Instacart appointed Chris Rogers as chief business officer. Additionally, VP of Engineering Varouj Chitilian will be assuming the role of chief technology officer, replacing Mark Schaaf. Instacart also announced the promotions of Daniel Danker to chief product officer and Laura Jones to chief marketing officer. http://axios.link/NzDQ 

• Shang Xia has promoted Sophia Wu to CEO from COO, replacing founder Jiang Qiong Er, who will remain on the Chinese luxury brand’s board, WWD reports. http://axios.link/1US7

• Victoria’s Secret promoted Amy Hauk to CEO of the newly combined Victoria’s Secret and Pink brands from the CEO of Pink. She will report to Martin Waters, CEO of parent VS&Co. Meanwhile, Christine Rupp was named chief customer officer of VS&Co, while Greg Unis was promoted to chief growth officer from the head of the beauty businesses of Victoria’s Secret and Pink. http://axios.link/sOrn

5. It's Personnel

🛍 Situational awareness: Retail sales are showing strong consumer demand, up 8.4% in June from a year earlier.

July 15, 2022

1 big thing: BNPL sees major slowdown, Adobe says