Afterpay (ASX: APT) has announced a very promising UK update, how will the share price respond?
What is Afterpay?
Afterpay is the owner of the popular “buy now, pay later” app. As of 2019, Afterpay had over 4 million registered users worldwide, making it one of Australia’s true technology success stories. Afterpay is trying to emulate its outstanding success in Australia by expanding its reach into the UK, using the ‘Clearpay’ brand name, and into the USA, where it has signed major social influencers to endorse its service.
What did Afterpay announce?
Afterpay has released a Clearpay update in the UK. Afterpay said that there are now more than 1 million active shoppers in the UK using the service after a year.
Another interesting element about the update was that the UK customer purchasing frequency in the UK is outpacing the US when it was at the same stage of the lifecycle. UK customers have transacted more than eight times within the first year compared to six times in the US.
Afterpay boasted that Clearpay is one of the fastest growing ecommerce payment companies in the European market.
In the UK there is more than 1,100 brands and retailers offering, or in the process of offering, Clearpay to their customers. Some of the brands now using Clearpay include ASOS, Marks and Spencer, JD Sports, Urban Outfitters and Boohoo.
Customer number growth has accelerated during the COVID-19 times. In May 2020 Clearpay had more than 3 million app and site visits and Clearpay’s shop directory contributed over 1.5 million lead referrals to its retail partners. This is a 40% to 50% increase in the weekly run rate from January and February.
Clearpay said that on average, merchants see customer conversion rates increase by over 20% and average order values increase by over 25% compared to all other payment methods.
Afterpay and Clearpay Co-founder Nick Molnar said: “The world and the industry are changing at a rapid pace, and during this challenging time consumers are looking for ways to pay using their own money – instead of turning to expensive loans with interest, fees or revolving debt. We applaud our UK merchants who support the payment needs of British shoppers – especially as we head into a ‘new normal’ for retail.”
Summary
Clearly this is good news for Afterpay. To see the UK performing well on top of the US growth is impressive. I’m not sure how long it will be before Afterpay is profitable. Will its merchant margin reduce in the future? What about competition. There are a lot of questions that are hard to answer. But Afterpay’s share price just keeps climbing. I’m happy to leave Afterpay investing to other people. I prefer growth shares with a more obvious route to a net profit, like Bubs (ASX: BUB).
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
