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

AFR RETAIL SUMMIT AFR RETAIL SUMMIT

PARALLELS

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

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.

PRE-COVID POST-COVID REFERRAL SHIFT

AUSTRALIAN REFERRALS PERCENTAGE

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

WOMENS FASHION HOME AND ENTERTAINMENT MENS FASHION ENTERTAIN THE KIDS STYLE YOUR SPACE WORK ‘IN’ SUPPORT SMALL PRE-COVID19 POST-COVID19

TRENDS IN RECENT MONTHS

8 MARCH 22 MARCH 5 APRIL 19 APRIL 3 MAY BABY BOOMER GEN X GEN Z GEN Y MILLENNIAL

GETTING HOME AND FAMILY READY

Peaked: Home, Gaming + Hobbies, Fitness, Pet Spend, Groceries Bottomed out: Jewellery, Footwear

KEEPING EVERYONE COMFORTABLE AND ENTERTAINED

Peaked: Beauty/Cosmetics, Home, Furniture, Office, Toys Bottomed out: Hair + Beauty Salons, Health, Travel, Groceries, Experiences

NEW CLOTHES, OUTDOOR GOODS

Peaked: Apparel, Footwear, Outdoor, Jewellery, Automotive Bottomed out: Games + Hobbies, Beauty, Fitness, Office, Toys

SOURCE: COMPANY DATA

TRENDS BY GENERATION

GEN Z

Made their homes look good Spent on beauty + cosmetics Slowed spending on apparel

MILLENNIALS

Focused on home Kept kids entertained Spent on beauty + cosmetics

GEN X

Spent on home Spent on entertainment (toys, games, electronics)

BABY BOOMER

Home was a focus Spent on entertainment Slowed spend on apparel

HOME FURNITURE BEAUTY+COSMETICS PHARMACEUTICALS AUTOMOTIVE FURNITURE HOME TOYS BEAUTY+COSMETICS TOYS ELECTRONICS GAMES PET APPAREL

entertainment (toys, games,

VITAMINS+SUP HEALTH HAIR+BEAUTY OUTDOOR FURNITURE HOME ELECTRONICS GAMES AND HOBBIES OUTDOOR FURNITURE HOME PET BOOKS VITAMINS HAIR+BEAUTY HEALTH PET BOOKS VITAMINS HAIR+BEAUTY HEALTH JEWELLERY AUTOMOTIVE APPAREL HAIR+BEAUTY HEALTH

STRONG GROWTH DECLINE/SLOW GROWTH STRONG GROWTH DECLINE/SLOW GROWTH

SOURCE: COMPANY DATA

THE RISE OF OMNI-CHANNEL

SALES GROWTH BY CHANNEL ONLINE ONLINE IN-STORE

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 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%

SMB SALES GROWTH

SOURCE: COMPANY DATA

HOW PEOPLE HOW PEOPLE ARE SPENDING HOW PEOPLE

SYSTEMIC SHIFTS

Across all generations we are seeing the compounding effect of:

• ffline online

cash debit credit BNPL

• ffline online
• ffline online

debit debit BNPL

ONLINE ADOPTION IS ACCELERATING

6.6%

FEBRUARY

7.1% 11.1%

MARCH APRIL

AUSTRALIAN ONLINE RETAIL GROWTH APP DOWNLOADS

SOURCE: ABS

• f our

customers are actively using

• ur mobile app

80%

Close to

SOURCE: COMPANY DATA

GLOBAL SHIFT TO ONLINE

US ECONOMIC PENETRATION PERCENTAGE OF RETAIL SALES 2009 APR 2020 1 Y E A R S 2019 US ECONOMIC PENETRATION PERCENTAGE OF RETAIL SALES 30% 0%

SOURCE: BANK OF AMERICA, US DEPARTMENT OF COMMERCE, SHAWSPRING RESEARCH

5.6% 16.0% 8 WEEKS

27%

SHIFT AWAY FROM TRADITIONAL FORMS OF PAYMENT

CRISIS IS CHANGING THE WAY WE PAY BUY NOW PAY LATER IS IN, CASH IS OUT 9 FEB

• 80%

19 APR CASH BNPL CHANGE IN TOTAL SPENDING

• 32
• 7

22% CASH CARD BNPL 0% BY PAYMENT TYPE

SOURCE: ALPHABETA AND ILLION, BASED ON A SAMPLE OF TRANSACTIONS ~250k AUSTRALIAN CONSUMERS, RBA

CRISIS CARD

Cash withdrawals in April fell 30% New consumer segments adopting BNPL:

• lder and higher

income brackets; men

SHIFT AWAY FROM CREDIT CARDS

DEBIT CARD SPENDING TRENDING ABOVE CREDIT CARD U.S. PERCENT, YEAR ON YEAR 1 FEB 16 MAY DEBIT CARD CREDIT CARD

• 60%

0%

SOURCE: BANK OF AMERICA GLOBAL RESEARCH

NUMBER OF PURCHASES AUSTRALIA 2006 2006 PURCHASES PURCHASES AUSTRALIA 1000M 2019 2006 2019 $80B VALUE OF PURCHASES

SOURCE: RBA. TREND IS SEASONALLY ADJUSTED AND CHANGES IN REPORTING METHODOLOGY MARCH 2008 AND MAY 2018

TOTAL TOTAL DEBIT CREDIT CREDIT DEBIT

WHY THESE SHIFTS WHY THESE SHIFTS WILL CONTINUE WHY THESE SHIFTS

POST-GFC DECLINE IN TRADITIONAL PAYMENT METHODS

2007 0%

SOURCE: RBA/MWE CONSULTING

60% 2019 SHARE OF VALUE DEBIT TOTAL CARD CREDIT/CHARGE CASH

DECLINE IN CREDIT BALANCES

2007 60k TODAY CREDIT AND CHARGE CARDS SEASONALLY ADJUSTED 20k

SOURCE: RBA DATA

TOTAL CREDIT CARD BALANCES CREDIT CARD BALANCES ACCRUING INTEREST

YOUNG PEOPLE ARE TURNING AWAY FROM CREDIT CARDS AND CASH

2002 CREDIT CARD OWNERSHIP AMONG YOUNG AUSTRALIANS 2019 YOUNG PEOPLE WITH CREDIT CARDS

In 2019, 36% of people aged 20-35

• wned credit cards

59%

36% 14%

64%

In 2019, only ~14%

• f payments

made by 18-29 year-olds were in cash

SOURCE: HILDA + RBA DATA

CASH CREDIT

TOMORROW’S TOMORROW’S CUSTOMER TOMORROW’S

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

ONE IN EVERY THREE DOLLARS SPENT ARE MILLENNIALS AND GEN Z

REPRESENTING ALMOST HALF THE WORKFORCE 1 GENERATION SHARE OF LABOUR FORCE GENERATION SHARE OF TOTAL SPENDING MILLENNIALS GEN Z GEN X OLDER GENERATION

MILLENNIALS AND GEN Z ACCOUNT FOR 37% TOTAL RETAIL SPEND

THEY CONTRIBUTE A GREATER PERCENTAGE OF THEIR INCOME TO RETAIL SPENDING 2

37%

GENERATION SHARE OF RETAIL SPENDING

38%

12%

15% 35% MILLENNIALS + GEN Z GEN X OLDER GENERATION

31%

38% 35%

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

35% 28% MILLENNIALS + GEN Z GEN X OLDER GENERATION

INCREASED AT A MUCH FASTER RATE THAN OLDER HOUSEHOLDS

AVERAGE ANNUAL HOUSEHOLD EXPENDITURE ON RETAIL 1,294 3,891 5,337 6,377

+19%

2006 2018 2006 2018

BY GENERATION GROUP $, 2006-2018

MILLENNIAL AND GEN Z TOTAL RETAIL SPEND BY 2030

IF THESE TRENDS CONTINUE,

2006 2030

GEN Z

RETAIL MARKET SIZE FOR MILLENNIALS AND GEN Z

MILLENNIAL

2020

MILLENNIAL

SOURCE: HILDA WAVES 6-18 NOTE: 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

+201%

GEN Z / YOUNGER MILLENNIALS GEN X / OLDER MILLENNIALS

THANK YOU