FROM THE DESK OF DEBORAH WEINSWIG

Square Buys Now, Pays $29 Billion Later for Afterpay Shockwaves reverberated this week through the fintech industry with Square’s announcement of an agreement to acquire Australia-listed Afterpay for US$29 billion in stock. The acquisition is set to close in the first calendar quarter of 2022, contingent on approval from regulatory agencies and the shareholders of both companies. Afterpay recorded A$671 million in revenue in 2020, so the transaction value represents nearly 60 times Afterpay’s 2020 sales. While Square is most commonly known as a provider of tablet-based point-of-sale (POS) terminals, the company bills itself as empowering businesses and individuals to participate in the broader economy. Sellers use its platform to interact with buyers online and in person, manage their business, and access financing. Square also owns the Cash App platform, designed for sending, storing and investing money—as well as the TIDAL global music and entertainment platform, which was founded by rapper Jay-Z. Square CEO, Chairman and Co-Founder Jack Dorsey is also CEO and Co-Founder of Twitter. Afterpay is a leader in the buy now, pay later (BNPL) industry, whereby consumers collect their purchases immediately and pay for them in subsequent interest-free installments, alongside competitors Affirm, Klarna, PayPal and Sezzle. The company has more than 100,000 retail partners and more than 16.2 million customers as of June 30, 2021. Square’s $29 billion offer provides a clear validation of the promise of the BNPL segment. The services are especially popular among millennial and Gen-Z shoppers, who often do not want credit cards or to take on traditional consumer debt. According to a proprietary Coresight Research survey in October 2020, nearly one in five US consumers had used BNPL services in the preceding 12 months, driven by consumers in the 30–44 age bracket, and 10% of respondents planned to use BNPL for holiday shopping. We see multiple opportunities for synergies between Square and Afterpay, combining consumer, business and personal payments, POS terminals, credit and media to form new payment and shopping platforms outside the traditional banking infrastructure. The two companies could combine Square’s strength in POS with Afterpay’s appealing nontraditional credit to enable consumers to sign up for and receive credit approval right at the POS terminal. There is also an international angle, with US-based Square and Australian Afterpay active in North America, Asia Pacific and Europe, each with complementary offerings. Perhaps the acquisition was designed to fortify Square’s position amid rumors of plans by heavyweight competitor Apple to enter the BNPL space. Apple Pay is accepted at 85% of US retailers, according to the company and partnered with investment bank Goldman Sachs, which has entered the consumer banking sphere, to offer its Apple Card in 2019. Apple is now reportedly working with Goldman Sachs on BNPL service to be called Apple Pay Later, with the launch date yet to be released. Consumers will reportedly manage payments from within the Apple Wallet app. We expect speculation regarding Apple Pay Later and the latest move from square to validating the BNPL category, likely setting off a scramble to find partners among the remaining independent BNPL providers. Greater financing capacity enables consumers to afford more goods, which is a positive for the retail sector. Still, this alternative credit is outside the traditional credit-reporting system, and consumers could become overextended if creditors cannot develop a holistic view of an individual’s creditworthiness. This week, the NY Federal Reserve reported that US consumer household debt rose to nearly $15 trillion in the second quarter of 2020, up 4.8% year over year—although nearly two-thirds of this debt stems from housing. Bucking this trend, credit-card debt declined by nearly 4% year over year, as consumers likely took advantage of stimulus payments and lockdowns to reduce their debt levels.

US RETAIL AND TECH HEADLINES

Bed Bath & Beyond Partners with Kris Jenner To Launch Safely Brand (August 2) Company press release

• Bed Bath & Beyond has partnered with reality TV star Kris Jenner, offering her homecare and cleaning brand Safely at its stores. Jenner first launched the brand in March 2021, with model and TV personality Chrissy Teigen and Emma Grede, co-founder of clothing brand Good American.
• Safely will debut in over 750 stores under the company’s banners Bed Bath & Beyond, BuyBuy Baby and Harmon. The collection will feature glass cleaners, hand cream, hand soaps, laundry detergents and sanitizers. Bed Bath & Beyond stated that the partnership will help the company to capitalize on strong demand for green cleaning products.

BigCommerce Names Sezzle as Its Preferred “Buy Now, Pay Later” Partner (August 3) Company press release

• BigCommerce, a Texas-based e-commerce solutions provider, has announced a partnership with fintech company Sezzle for buy now, pay later services. The collaboration will allow BigCommerce’s small and medium merchants to offer interest-free payment plans to a wide range of customers, including high-risk borrowers.
• Sezzle will be integrated into the BigCommerce platform as a payment gateway. When customers pay with the service, Sezzle will collect 25% of the order price at the time of purchase, followed by three automated 25% installments over the following six weeks.

Foot Locker To Acquire Shoe Store Chain WSS (August 2) Company press release

• Foot Locker has entered into a definitive agreement to acquire California-based footwear retailer WSS for $750 million. WSS has a large Hispanic customer base and operates 93 stores in Arizona, California, Nevada and Texas. The company generated $425 million in revenue in its fiscal 2020, with a three-year CAGR of around 15%.
• Foot Locker noted that it would benefit from WSS’s differentiated market positioning and plans to expand the company’s store footprint into new geographies in North America.

GrubMarket Acquires Wholesaler Grant J. Hunt (August 3) Company press release

• Online direct-to-consumer grocery retailer GrubMarket has acquired Grant J. Hunt, a San Francisco-based fresh fruit and vegetable wholesaler. The financial terms of the deal were not disclosed. Grant J. Hunt’s current management will continue to lead the organization.
• GrubMarket stated that the acquisition will help it to build a more robust supply chain network, expand its customer base and further strengthen its supplier relationships on the West Coast in many specialty categories. The deal marks GrubMarket’s eighth acquisition this year.

Rite Aid Partners with Dunnhumby To Revamp Its Promotion and Loyalty Programs (August 3) Company press release

• Drugstore chain Rite Aid has partnered with data science company Dunnhumby to improve its pricing strategy, including its promotions and loyalty programs.
• The two companies will use customer data models and consumer insights to optimize Rite Aid’s investments and improve customer value perception at its stores. Dunnhumby has existing partnerships with brands including Coca-Cola, Meijer, Proctor & Gamble and Tesco.

EUROPE RETAIL AND TECH HEADLINES

Bennet Acquires Carrefour Hypermarket and Shopping Mall in Lombardy (Aug 4) ESMMagazine.com

• Italian hypermarket and supermarket chain Bennet has acquired a Carrefour hypermarket, and the shopping center it is located in, in Lombardy, Italy, taking its total store count to 74. Bennet will replace the Carrefour banner, launching its private-label products and loyalty program in the store.
• The hypermarket has a sales area of around 79,000 square feet. The shopping center includes 20 other shops and extends for over 177,500 square feet.

The Hut Group Acquires Cult Beauty (Aug 4) DrapersOnline.com

• British e-commerce company The Hut Group (THG) has acquired UK-based online prestige beauty retailer Cult Beauty for £275 million ($383 million) from private shareholders, on a cash and debt-free basis.
• THG expects Cult Beauty to contribute sales of around £60 million ($83.5 million) and adjusted EBITDA of about £3 million ($4.2 million) for the remainder of fiscal 2021. The company stated that Cult’s portfolio of approximately 300 independent third-party brands, including Charlotte Tilbury, Living Proof and Molton Brown, is a compelling addition to its beauty segment.

Joules Sees Rise in Profits with Strong E-Commerce Sales Growth over Fiscal Year (Aug 3) Company press release

• British apparel brand Joules saw its total revenues increase by 4.3% to reach £199 million ($277 million). in its fiscal year ended May 30, 2021. The company reported a profit before tax of £2.0 million ($2.8 million) compared to a loss of £24.8 million ($34.6 million) last year.
• The company stated that key reasons for its strong performance include e-commerce sales growth, with its e-commerce sales increasing by 48% to £122.0 million ($169.9 million), or by 43% excluding the acquisition of home and garden retailer Garden Trading in its fiscal year.

Lidl UK Set To Launch a Self-Scan “Lidl Go” App (Aug 4) ChargedRetail.co.uk

• In the UK, discount retailer Lidl has announced plans to launch a self-scan and payment app, Lidl Go, allowing customers to purchase products by scanning them with their smartphones. Customers can also use the app to purchase unlabeled fruit and vegetables by scanning a barcode at the weighing stations.
• A pilot scheme for the app will launch at Lidl’s store in Fulwell, in Southwest London.

Wolverine Worldwide Acquires Sweaty Betty for £294 million ($410 million) (Aug 3) UKFashionNetwork.com

• American footwear giant Wolverine Worldwide has acquired UK-based premium activewear brand Sweaty Betty for £294.4 million ($410.2 million). Sweaty Betty operates around 65 shops in the UK and has strong links with retailers worldwide.
• Wolverine is known for its footwear brands including Hush Puppies, Keds, Sperry and Stride Rite, among others. With the acquisition, the company aims to capitalize on significant growth opportunities in the gym-to-street apparel segment, which it expects to remain active even after the pandemic subsides.

ASIA RETAIL AND TECH HEADLINES

Alibaba Maintains Revenue Growth in First Quarter but Sees Profits Decline (August 3) Reuters.com

• Alibaba reported a 34% rise in its revenues to ¥205.7 billion ($32 billion) for its first quarter, ended June 30, 2021.
• However, the company’s net profit attributable to shareholders fell to ¥45.1 billion ($7.0 billion), compared with ¥47.6 billion ($7.4 billion) one year earlier. Alibaba has recently increased spending to bolster its retail platforms, as it faces rising competition in China’s e-commerce market.

Flipkart’s Shopsy Announces Zero-Commission Marketplace (August 3) BusinessStandard.com

• Indian e-commerce giant Flipkart has announced that it will not charge commission on its platform Shopsy, a new marketplace for small sellers in the apparel, fashion and home segments.
• Since the platform’s launch in July, Shopsy has onboarded over 200,000 users and Flipkart expects the commission-free initiative to drive its e-commerce growth.

Reliance Retail in Talks To Acquire Subway India (August 3) MoneyControl.com

• Reliance Retail, the retail arm of Reliance Industries Ltd, is reportedly in talks to buy the India franchise of American fast-food company Subway, for $200–250 million.
• Subway is currently undergoing a global restructuring process as its sales decline, with plans to move its headquarters as well as cut costs and its workforce. If the discussions are successful, it will Reliance Retail will operate over 600 Subway stores across the country, marking its entry into the quick-service restaurant business.

Thai Department of International Trade Promotion Pursues Walmart for Thai Exports (August 3) BangkokPost.com

• Thailand’s Department of International Trade Promotion (DITP) is looking to collaborate with Walmart to improve Thai exports.
• The department has invited nine Thai trade associations for talks with the US retail giant, aiming to increase sales channels and access for Thai goods in international online marketplaces, with a focus on Canada, Mexico and the US. According to DITP’s Director-General Somdet Susomboon, Walmart has recognized that imported goods from Thailand helped it to meet demand in the US amid the pandemic.

Vietnamese Startup Loship Receives $12 million in Series C Funding (August 3) DealStreetAsia.com

• Vietnam-based e-commerce startup Loship has raised $12 million in Series C funding, taking the valuation of the company to over $100 million. The company’s pre-Series C round was backed by Hong Kong-based investment firm Sun Hung Kai & Co and investment firm BAce Capital.
• Loship has gained traction in Vietnam’s growing e-commerce ecosystem in with its one-hour delivery service. The company currently has a network of over 70,000 riders and 200,000 merchants and serves over 2 million customers.