Nov 20, 2018 - Justin Emond

Afterpay: Still Crushing Ecommerce in 2018; Worth Your Attention

Back in April, we made some bold claims about Afterpay. Maybe too bold.

  1. “2018’s biggest digital commerce payment trend.”

  2. “Solutions like AfterPay are on the path to dominate digital commerce across the globe.”

  3. “Retailers who adopt the newest online payment method will be rewarded with major sales growth.”

Or maybe spot on. We’ve rechecked the pulse of Afterpay and it seems they are still on their path for digital commerce domination.

Do yourself a favor right now: Get caught up on why Afterpay is disrupting ecommerce and then get yourself in before the wave passes. As a refresher, Afterpay is worth a look— for these reasons alone:

  1. A staggering 86 percent of customers use the service a second time—at least.

  2. Merchants are seeing conversion rate and sales increases between 20 and 30 percent.

Here’s what happened since we last wrote about it:

Afterpay has processed 289% more commerce sales in FY18 than FY17.

The fact that there are crushing sales is one of the most important signs of their continued success.

Over $2.18 billion of total underlying sales were processed through the Afterpay platform in FY18 (a 289% increase over FY17) with approximately 16,500 retailers and approximately 2.2m customers having transacted on the Afterpay platform since inception. Source

Afterpay has already proved that its business model has potential, but its sustained adoption in the marketplace shows that it’s becoming ubiquitous soon, the idea of digital layaway will be just another way to pay anywhere, not an innovation concentrated on a few sites.

After a successful entry in the US market, Afterpay has its eyes on the UK

Afterpay was born in Australia in 2016 and launched in the US less than two years later (May 2018).

Afterpay has grown their US-based merchants by 15x in less than four months, from 28 merchants in May 2018 to 422 merchants as of August 2018. source

Since Afterpay launched in the US, it has processed orders from more than 150,000 unique customers. Afterpay is successfully getting new business from both sides of its audience: the companies that pay Afterpay bills, and the customers that make the companies want to pay Afterpay’s bills.

Just a few months after its US launch, Afterpay has set itself up for success in the UK.

In its push to establish a presence in the UK, Afterpay announced on 23 August that it had completed its 90 percent acquisition of ThinkSmart subsidiary ‘ClearPay’, a UK-based payments firm similar to Afterpay. source

Afterpay doesn’t expect to make serious investments in the UK until later in 2019, but because the UK is the third-largest e-commerce market in the world and has a ripe market for the service, it’s a logical next move—and one that’s likely to be very successful.

OCF looking strong despite major investments

To prepare for the UK acquisition of ClearPay, and to build up reserves to handle ever-increasing sales, Afterpay has raised some serious cash in the last few months.

Afterpay closed its institutional placement at $117 million, exceeding its target of $108.1 million by nearly $9 million. source

Strong investor growth is good, but the most important part of this story is about Afterpay’s operating cash flow.

Afterpay’s Australian operations are expected to generate material underlying operating cash flow in FY2019. source

The company’s Australian operations are at a point where they can support the main expenses of the business, allowing the company to pursue even faster growth, which results in more sales and so on. The team is making huge investments and expanding at an insane pace.

And let’s not ignore Afterpay’s leading employee growth

Over the last six months, Afterpay grew its headcount by 29%, from 246 employees in April 2018 to 317 employees as of October 2018.

What’s interesting is how this growth compares to other leading buy now, pay later services:

  1. Zippay grew its headcount by one percent over the past six months

  2. Bread grew its headcount by nine percent over the past six months

Growing a team isn’t indicative of future success, but this stat does illustrate a distinction between Afterpay and its competitors. And because Afterpay is investing more heavily in 2018 and 2019, this might be where the gap starts widening even further.

We don’t know how else to say it: if you’re a retailer, get on this trend before your competitors to test whether this is a potential growth option for you. And if you’re still not sure, at least put more thought into how the growth of Afterpay and decline of credit might impact your business over the next five years (though we bet it will be even sooner than that).

Disclaimer: After the first article I wrote in April, I decided to buy stock in Afterpay— I was that impressed by the company. That doesn’t change any of the stats above, but in the spirit of full disclosure, I’d like to acknowledge that I’m rooting for them to succeed because I have a stake in their success :)