United States-based Zebit is the the latest buy now, pay later (BNPL) entrant to seek a place on the ASX, with a listing planned for September. According to the Australian Financial Review (AFR), Zebit will be looking to raise $42 million which would value the company at $200 million. But Zebit is not just looking to muscle in on the BNPL space, it is also an eCommerce retailer a la Kogan.com Ltd (ASX: KGN), selling some 90,000 products.
Strong growth in eCommerce and BNPL
BNPL providers have seen an upswing in already strong transaction volumes as a result of the shift to eCommerce and a renewed focus on budgeting in the wake of COVID-19. The likes of Afterpay Ltd (ASX:APT), Sezzle Inc (ASX: SZL), and Openpay Group Ltd (ASX: OPY) have reported increasing customer numbers and revenue in recent market updates. Kogan, too, has benefitted from the move to online shopping, with sales increasing 103% year on year in April and May.
New listing combines eCommerce and BNPL
Zebit is like a combination of Afterpay and Kogan operating in the US market. It offers products from some 75 suppliers through its website with an in-house BNPL solution available to customers. The company does not actually have any inventory or warehouses of its own, but instead puts customer orders through to suppliers which then despatch products on Zebit’s behalf.
Zebit’s BNPL offering specifically targets customers who can’t get credit elsewhere, according to the AFR, with almost all customers using it because their credit ratings aren’t high enough to qualify for mainstream credit products. According to Zebit, this market is underserved by BNPL operators such as Afterpay and Sezzle.
Zebit could be on to something – it estimates this market consists of 154 million underserved US customers creating a US$85 billion market. But bad debts are a fact of life in this market and Zebit saw bad debts of 17.4% as a proportion of revenue in FY19. According to the AFR, the company is in the process of rolling out a new registration system to reduce the proportion of bad debts.
Will Zebit work?
Zebit is seeking to combine BNPL services with something like an online department store selling everything from fridges and beauty products to jewellery and electronics. By targeting a traditionally underserved market, it may be able to expand market share rapidly. In order to grow profitably, however, Zebit will need to carefully manage bad debts.
5 stocks under $5
We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
More reading
- Is CommBank the BNPL killer?
- 3 Warren Buffett quotes to start the week off right
- Why these brokers are telling you to buy the crashing IAG share price today
- Is it time to dollar-cost average into ASX shares?
- All Technology Index celebrates 6 months with stunning outperformance
Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Latest ASX entrant mixes BNPL with eCommerce appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/2P3Et9K
Leave a Reply