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Zip Profitability, page-331

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coppergaz

4,071 Posts.

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28/12/20

20:18

Post #: 49835651
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Originally posted by murdochVet: ↑

hey coppergaz

Sorry to shoot down your long post but I need to. You've stated that it's the integrated merchant that's experienced higher basket sizes orders and more sales. That's actually totally false.

It's buy now pay later that's resulted in these benefits to merchants. It's not that they have integrated to Afterpay or to zip or to Sezzle. You've based a big part of your analysis on this that is totally flawed in logic and thought process.

Any look at sezzle, Afterpay, zip, Klarna, affirm to name a few bnpl offerings all state they increase the size of dollar value sale and also increase basket size. Ie for them to say this they are able to confirm a consumer is spending more money and buying more items being able to spread the payments over a period of time in comparison to what? To their everyday customer. And several merchants have also confirmed this. But one idea thinking out aloud is a credit card with 45 day interest free terms also offers a delayed period before needing to pay.
So you need to then look at the generations. Older generations, people 45 and older are still predominantly using credit cards for ecommerce purchase. Younger generations those under 40 are adopting bnpl more so than the older. Lots of things going on there to consider;

What proportion of bnpl growth is related to age? Ie younger people adopting
What proportion of bnpl is being driven by those not wanting a credit card but wanting access to credit?
what proportion of bnpl is being driven by those who love apps and the ease of paying through an app (ie transparent and user friendly payments)?

Afterpay and zip with their bnpl offering starts off with 1000 balance and then increases over time if you don't default and buy stuff. The traditional bnpl cannot and does not target everyday spending. It targets discretionary spending. Ie new clothing, presents, etc but up to 1000. This means traditional bnpl like zip and Afterpay offer is only hitting a very small percentage of wallet, I'd say less than 10 percent of total consumer spending. This of course comes down to the demographic though. Those with higher earnings on average have higher disposable incomes in which they can buy discretionary or say luxury items. Luxury being an item you don't need but want.

Cannibalisation can only occur if one is eating the other. Since we know traditional bnpl doesn't target everyday spend the vs versa is also true. Everyday spend does not compete with discretionry spending. So we then know tap and zip which targets everyday spend, ie it needs to be done in store.

The only argument that does hold up is some form of margin erosion, but this only holds up if you look at total TTV sales achieved of all revenue streams then worked out the averageargin across all TTV.
You cannot use the same margin erosion idea to profitability. Just because an item is low margin does not mean it's a low profitability transaction. And this is where yourself and Stefan and others have got yourselves into a hole of poor logic and one could accuse you of being Short sighted.
A company can be making 20 points margin on a product but be making a loss if the operating costs of producing those goods outweigh the revenues coming in. And conversely. A company making one point margin on a product could be making a lot of profits if the operating cost of making that product are lower than the revenues coming in and add to that there is scale of transactions.

Just look at the banks as an example. Interest rates have been at historic lows for years now, so how does the CBA as an example generate billions in profit a quarter and how does the CBA maintain a higher profit per dollar over wbc, ANZ, etc.

my belief is tap and zip at scale is a highly highly profitable revenue stream. Low margin but highpy profitable. Let's think about this. How is Zip able to offer 10 percent case back on Saturdays? I mean how can it do it right? Let's look at goodfella.and Stefan's view. They say zip is making 0.25 of 1 percent in margins but they are giving back 10 percent, so for every 100 dollars spent zip is loosing $9.75 ! That sounds scary doesn't it!!

but let's look at this in another light. Let's say the traditional bnpl which is 5 percent say, is generating 15 percent a year in profitability. And let's say that 1 percent of the tap and zip is generating 50 percent profitability.
Then if 1 million dollars in tap and zip revenue is generated it means it's customers have to have spent 100 million. And half of that 1 million is profit, or 500k.

Let's say zip has an internal rate of return profitability target of 15 percent just like it's traditional bnpl revenue. That means zip can give back 350 K to customers while hitting its target. So Zip management will be able to tweak the dials on this seemingly giving very amazing cash backs to customers, but what one has to accept is many customers won't actually make that 30 dollars threshold and a small majority will make the limit of X amount in cashback they have in their terms.

One thing I'm pretty certain of is zip hasn't got unlimited money. I'm pretty certain their tap and zip is highly profitable which is why they can offer these cash backs. And I'm confident some smart accounts in their company are constantly watching the dials and adjusting to assure they reach their internal rate of return targets they are looking to achieve.

Where Afterpay and zip are competing head to head with merchants and consumers for the traditional bnpl discretionary spend, zip is actually not competing with Afterpay at all for its everyday tap and zip spend and it's it's instead competing with the traditional credit card and banks on this front.
You can see why Westpac decided to partner with Afterpay due to its non compete. And you can see whyastercard and visa are partnering with the likes of Zip since banks credit card revenue has been on the decline for years. The big issue again here for Afterpay is lack of choice. Partnering with WBC consumers who want a savings account have to use WBC and WBC have such a small percentage of total market. What consumer wants to be forced to open up an account with a bank that's just paid a billion dollars in anti money laundering fins and guilty of royal bank commission findings?

Zips clean break from.westpac for me has removed any sort of negativity I associated with Westpac with it. Zips the new trendy and ethical company I want to be with for my everyday spend.

That's my two cents. I'm off to the supermkt to get some groceries and use my tap and zip. More and more now I leave my wallet in my card and ensure my phone has charge on it. My dependency on my phone is becoming stronger because of the utility it provides me. The debit card sits in its wallet sheath, rarely taken out now. Just like my licensed and other cards. We have already seen the likes of NSW roll out their digital.license as other states will soon follow. Once I've got my Medicare card and few other cards all on my phone I will have no need for a wallet at all.

Expand

dont worry, your not shooting me down,, you lack of reading and comprehension and complete fabrication of numbers is what shoots yourself in the foot...

you say ive "stated that its the intergrated merchant thats experienced higher basket sizes orders and more sales"

and then

you said "its buy now pay later thats resulted in these benefits to merchants. it not that they have intergrated to afterpay or to zip or to sezzle"

please read right at the start of my idea where is started with "PRIOR to tap and zip"

so yes i was talking about a space in time where merchants being intergrated was the result for basket size and increase $ sales.

before you got on about klarna and szl and other who have similar products i was talking about comparison BEFORE tap and zip to AFTER tap and zip to show how some cannibalism of one product feature can cannibalize another. (which is based for anz region, which klarna and szl had 0 to little impact in that time so are irrelevant to the examples given)

you then continue to dribble on and without taken the simple "PRIOR to tap and zip" it just becomes a waste of reading.

you belief that tap and zip is highly profitable is you opinion and im ok with it,, i do want to ask this

i may need a little more info here as i havent read all the guesses at margins and how much is split from visa to tap and zip. this may just be wording but you can clear it up.

you said "they say zip is making .25 of 1 percent in margins..... (result being 1% of 100 = $1,, zip makes $0.25) is that 0.25 revenue, or profit?

next one you said customer spend 100 million and zip gets one million with half being profit,, isnt zip ment to get 0.25 of 1 percent as per the previous example? so that would be 250,000, and 50% of that is $125,000 profit?

then giving away 350k to customers in promos,, well we know what that means..

anyhow your examples are either not clear or inconsistent. if im misreading, let me know

hey btw where do i have a bet that apt will be $273

and also i dont own only apt as you claims,, got some zip as well.

heres a deal,,

show me where i have a bet for 273 and ill never post on zip fourm again,,

and if i screenschoot that i have zip share unlike you claim i only have apt,, then you leave the zip fourm!!

if your not making up these statements and numbers youll have nothing to worry about. right??

Z1P Price at posting: $5.25 Sentiment: Sell Disclosure: Held
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