AFR RETAIL SUMMIT AFR RETAIL SUMMIT PARALLELS GFC TO NOW BROADER - PowerPoint PPT Presentation

AFR RETAIL SUMMIT AFR RETAIL SUMMIT

PARALLELS GFC TO NOW BROADER BEHAVIOURAL SHIFTS LONG TERM STEP CHANGE FOR RETAIL SPEND MILLENNIALS AND GEN Z

RETAIL AND RETAIL AND CUSTOMER INSIGHTS

SUPPORTING MERCHANTS Afterpay Day sale: biggest on record with 12,000 retailers participating and over $40 million worth of purchases made. Support Small and Afterpay Connect campaigns showcased hundreds of small businesses. Over 14 million referrals to retailers globally per month.

AUSTRALIAN REFERRALS PERCENTAGE PRE-COVID POST-COVID REFERRAL PRE-COVID19 POST-COVID19 SHIFT WOMENS FASHION ENTERTAIN THE KIDS HOME AND ENTERTAINMENT STYLE YOUR SPACE MENS FASHION WORK ‘IN’ SUPPORT SMALL SOURCE: COMPANY DATA NOTES: PRE-COVID 1/18/2020-3/19/2020 VS. POST-COVID 3/20/2020-5/20/2020, 61 DAYS VS. 61 DAYS

TRENDS IN RECENT MONTHS NEW CLOTHES, OUTDOOR GOODS KEEPING EVERYONE COMFORTABLE AND GETTING HOME AND Peaked : Apparel, Footwear, ENTERTAINED FAMILY READY Outdoor, Jewellery, Automotive Peaked: Beauty/Cosmetics, Peaked: Home, Gaming + Bottomed out : Games + Home, Furniture, Office, Toys Hobbies, Fitness, Pet Spend, Hobbies, Beauty, Fitness, Groceries Office, Toys Bottomed out: Hair + Beauty Salons, Health, Travel, Bottomed out: Jewellery, Groceries, Experiences Footwear BABY BOOMER GEN X GEN Z GEN Y MILLENNIAL 8 MARCH 22 MARCH 5 APRIL 19 APRIL 3 MAY SOURCE: COMPANY DATA

TRENDS BY GENERATION STRONG GROWTH DECLINE/SLOW GROWTH STRONG GROWTH DECLINE/SLOW GROWTH GEN Z GEN X HOME HEALTH FURNITURE HAIR+BEAUTY Spent on home Made their homes look HOME FURNITURE HAIR+BEAUTY HEALTH Spent on good entertainment entertainment BEAUTY+COSMETICS (toys, games, (toys, games, VITAMINS+SUP TOYS BOOKS Spent on beauty electronics) + cosmetics PHARMACEUTICALS APPAREL ELECTRONICS VITAMINS Slowed spending on AUTOMOTIVE PET GAMES PET apparel MILLENNIALS BABY BOOMER HAIR+BEAUTY FURNITURE HAIR+BEAUTY FURNITURE Focused on Home was a home focus HOME HEALTH HEALTH HOME Kept kids Spent on entertained entertainment VITAMINS TOYS ELECTRONICS APPAREL Spent on beauty Slowed spend on + cosmetics apparel BEAUTY+COSMETICS BOOKS GAMES AND HOBBIES AUTOMOTIVE OUTDOOR PET OUTDOOR JEWELLERY SOURCE: COMPANY DATA

SALES GROWTH BY CHANNEL ONLINE ONLINE THE RISE OF IN-STORE OMNI-CHANNEL Online has driven into offline In-store and online not independent - omni-channel retail has been embraced In-store as important as ever but people expect integrated offerings SOURCE: COMPANY DATA

BRAND AND VALUES IMPORTANT Conscious consumption or purposeful retail is on the rise Customers are inclined to SMB SALES GROWTH shop smaller, and shop local Referrals for SMBs grew 77% SMB lead volume up 25% in March and April Recent in-store SMB sales are up over 95% SOURCE: COMPANY DATA

HOW PEOPLE HOW PEOPLE HOW PEOPLE ARE SPENDING

SYSTEMIC SHIFTS Across all generations we are seeing the compounding effect of: offline online offline online offline online cash debit debit debit credit BNPL BNPL

11.1% 7.1% 6.6% AUSTRALIAN ONLINE RETAIL GROWTH SOURCE: ABS ONLINE FEBRUARY MARCH APRIL ADOPTION IS ACCELERATING APP DOWNLOADS Close to 80% of our customers are actively using our mobile app SOURCE: COMPANY DATA

GLOBAL SHIFT TO ONLINE US ECONOMIC PENETRATION US ECONOMIC PENETRATION 30% PERCENTAGE OF RETAIL SALES PERCENTAGE OF RETAIL SALES 27% 8 WEEKS 16.0% S R 5.6% A E Y 0 1 0% 2009 2019 APR 2020 SOURCE: BANK OF AMERICA, US DEPARTMENT OF COMMERCE, SHAWSPRING RESEARCH

SHIFT AWAY FROM TRADITIONAL FORMS OF PAYMENT CRISIS IS CHANGING THE WAY WE PAY CHANGE IN TOTAL SPENDING BUY NOW PAY LATER IS IN, BY PAYMENT TYPE CASH IS OUT 22% BNPL CASH CARD 0% CARD BNPL -7 CASH New consumer segments -80% -32 CRISIS 9 FEB 19 APR adopting BNPL: older and higher income brackets; Cash withdrawals in April fell 30% men SOURCE: ALPHABETA AND ILLION, BASED ON A SAMPLE OF TRANSACTIONS ~250k AUSTRALIAN CONSUMERS, RBA

SHIFT AWAY FROM CREDIT CARDS DEBIT CARD SPENDING TRENDING NUMBER OF VALUE OF ABOVE CREDIT CARD PURCHASES PURCHASES PURCHASES PURCHASES 1000M $80B AUSTRALIA AUSTRALIA U.S. PERCENT, YEAR ON YEAR TOTAL TOTAL DEBIT DEBIT CARD 0% CREDIT DEBIT CREDIT CREDIT CARD 0 -60% 2006 2006 2019 2006 2019 1 FEB 16 MAY SOURCE: RBA. TREND IS SEASONALLY ADJUSTED AND CHANGES IN REPORTING METHODOLOGY MARCH 2008 AND MAY 2018 SOURCE: BANK OF AMERICA GLOBAL RESEARCH

WHY THESE SHIFTS WHY THESE SHIFTS WHY THESE SHIFTS WILL CONTINUE

POST-GFC DECLINE IN TRADITIONAL PAYMENT METHODS SHARE OF VALUE 60% DEBIT TOTAL CARD CREDIT/CHARGE CASH 0% 2007 2019 SOURCE: RBA/MWE CONSULTING

DECLINE IN CREDIT BALANCES CREDIT AND CHARGE CARDS 60k SEASONALLY ADJUSTED TOTAL CREDIT CARD BALANCES CREDIT CARD BALANCES ACCRUING INTEREST 20k 2007 TODAY SOURCE: RBA DATA

CREDIT CARD OWNERSHIP AMONG YOUNG AUSTRALIANS YOUNG PEOPLE ARE TURNING AWAY FROM CREDIT CARDS AND CASH YOUNG PEOPLE WITH CREDIT CARDS 64% 59% CREDIT 36% In 2019, 36% of people aged 20-35 owned credit cards CASH 14% In 2019, only ~14% of payments made by 18-29 year-olds were in cash 2002 2019 SOURCE: HILDA + RBA DATA

TOMORROW’S TOMORROW’S TOMORROW’S CUSTOMER

GEN Z: While Millennials turned away from credit cards, Gen Z aren't even signing up: 94% of Gen Z use debit on our platform. Want low-commitment, straight-forward solutions for what they need. Want to stay in control financially, especially post COVID. Expect digital integration - shopping via social media is second nature. Expect retailers to embrace a circular economy and care about sustainability and supporting small. SOURCE: THE FUTURE LAB

MILLENNIALS AND GEN Z ONE IN EVERY THREE ACCOUNT FOR 37% TOTAL DOLLARS SPENT ARE RETAIL SPEND MILLENNIALS AND GEN Z REPRESENTING ALMOST HALF THE WORKFORCE 1 THEY CONTRIBUTE A GREATER PERCENTAGE OF THEIR INCOME TO RETAIL SPENDING 2 37% 38% 31% 35% 28% 35% GENERATION GENERATION GENERATION SHARE OF SHARE OF TOTAL SHARE OF RETAIL LABOUR FORCE SPENDING SPENDING 15% 12% 38% 35% MILLENNIALS MILLENNIALS + GEN Z MILLENNIALS + GEN Z GEN Z GEN X GEN X GEN X OLDER GENERATION OLDER GENERATION OLDER GENERATION SOURCE: 1. ABS LABOUR FORCE SURVEY, MAY 2020; ABS CENSUS 2016 2. HILDA WAVE 18 NOTE: DEFINITION OF GENERATIONS IN THIS REPORT: GEN Z INCLUDES INDIVIDUALS BORN AFTER 1996. MILLENNIALS INCLUDES INDIVIDUALS BORN BETWEEN 1981 - 1996, GEN X ARE INDIVIDUALS BORN BETWEEN 1965 - 1980, OLDER GENERATION ARE INDIVIDUALS BORN BEFORE 1965. RETAIL SPEND INCLUDES CLOTHING AND FOOTWEAR; HOME REPAIRS, RENOVATION AND MAINTENANCE; MEDICINES, PRESCRIPTIONS AND PHARMACEUTICALS

AS GEN X AND MILLENNIALS HAVE AGED, RETAIL EXPENDITURE FOR YOUNGER HOUSEHOLDS HAS IF THESE TRENDS CONTINUE, INCREASED AT A MUCH MILLENNIAL AND GEN Z FASTER RATE THAN OLDER TOTAL RETAIL SPEND BY 2030 HOUSEHOLDS AVERAGE ANNUAL HOUSEHOLD EXPENDITURE ON RETAIL RETAIL MARKET SIZE FOR MILLENNIALS AND GEN Z BY GENERATION GROUP GEN X / OLDER MILLENNIALS $, 2006-2018 +19% 6,377 MILLENNIAL MILLENNIAL 5,337 GEN Z / YOUNGER MILLENNIALS +201% 3,891 1,294 GEN Z 2006 2018 2006 2018 2006 2020 2030 SOURCE: HILDA WAVES 6-18 NOTE: RETAIL SPEND INCLUDES CLOTHING AND FOOTWEAR; HOME REPAIRS, RENOVATION AND MAINTENANCE; MEDICINES, PRESCRIPTIONS AND PHARMACEUTICALS

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