June Quarter Results, page-7

Hi Gollys,

ShopPay is an interesting one. Sezzle does partner with many Shopify merchants, so it is a good question.

I don’t see it as a threat though. Shopify is the number 2 e-commerce platform in the US (behind Amazon, ahead of eBay), making up well under 10% of e-commerce retail sales (was 4.4% in 2018, I couldn’t find a more recent number). As it will be opt-in, what proportion of merchants will sign up, noting that they may already use an established BNPL provider? ShopPay may get access to a few % of US online retail sales. But what about in-store sales? I just can’t see the practical value to of ShopPay to customers, compared to Sezzle Anywhere, Quadpay’s similar product and the wide access of Afterpay and Klarna. Network effects are key, and if ShopPay can only access a fraction of the retail market, it will not sign up many customers, which means it will not sign up many merchants.

ShopPay has given the other players a big headstart, from which it may not recover. Look at Klarna in Australia – it has missed the boat I think. Part of this head-start relates to product development. Sezzle Up / Sezzle Anywhere and Sezzle Spend provide a unique competitive advantage over basic functionality that enables a payment to be split into 4.

Sezzle exists to financially empower a generation. It wants to boost their credit scores. It is a Public Benefit Corporation. I don’t think Shopify is thinking along these lines – I think it would be focused on helping merchants and making a buck. Which is why I think Sezzle and Afterpay will ultimately prevail.

I’d like to turn this fear about ShopPay on its head and say it will increase acceptance and awareness of BNPL, leading to faster growth for all players, pushing up UMS and valuations. So I see it as a positive for Sezzle! I’m actually surprised Shopify has tried to directly compete. Commbank, Ant Financial, Tencent, Amazon Australia have instead taken equity stakes and tried to work with BNPL players.