Klarna’s entry into the e-commerce sector

Klarna’s expansion into e-commerce is part of the company’s diversification strategy to help the company expand and attract new customers.

Klarna – the European market leader in buy now pay later (BNPL) services – is expanding into e-commerce. In early 2021, the company updated its app and transformed it into a marketplace for online shopping by allowing its customers to shop directly from over 250,000 retailers (both partners and non-partners) through the app. In July 2021, the company announced the acquisition of virtual social shopping platform Hero.

This move underscores Klarna’s desire to change the way consumers shop online. Hero’s technology enables online shoppers to have a personalized experience by interacting live with a salesperson via video or chat. This social e-commerce solution narrows the gap between online shopping and physical stores by providing personalized customer service through an online experience. This will have a greater positive impact on consumers than simply reading online reviews or browsing a website. Hero says its solution reduces cart abandonment at checkout by 40% compared to traditional online shopping.

Given the rapid growth of e-commerce (especially mobile commerce), it is increasingly important for e-commerce platforms to develop solutions that enhance the consumer online experience.

By making its app a hub for online shopping, Klarna can track consumers’ purchases throughout the entire journey – from discovery to checkout. This is a huge advantage for Klarna, as it allows the company to collect large amounts of data on consumer behavior. This data can, in turn, be used to improve its behavior model and develop a customized experience for each of its users, which should lead to greater customer loyalty and retention – and therefore higher sales. And the Hero deal wasn’t Klarna’s only July 2021 acquisition in the e-commerce space. The company also acquired Stocard, which allows consumers to store their loyalty cards in a digital app.

Klarna’s desire to expand into e-commerce is motivated by growing regulators’ interest in the BNPL sector. While no announcements have been made yet, we expect regulators around the world to issue regulations that will reduce the revenues of Klarna and other BNPL providers. Expanding into e-commerce will help Klarna diversify its revenue model and should offset losses due to regulatory changes. Another factor motivating this diversification is the growing number of competitors in the industry. In addition to direct competitors such as Affirm and Afterpay, technology companies are also entering the market. PayPal and Amazon already offer their own version of BNPL loans, and Apple is the latest entrant into the space. Apple is renewing its partnership with Goldman Sachs to launch BNPL services integrated with Apple Pay.

The story continues

If Klarna successfully expands into e-commerce, the company can generate more revenue and make its BNPL service available to a larger audience. If Klarna can integrate these innovative solutions, it could become a “super app” for e-commerce, giving the company the potential to impact the e-commerce industry as much as Amazon did when it grew from a simple online bookstore to the world’s leading online platform.

This was written by Chris Dinga, Banking/Payments Analyst at GlobalData.

“Klarna rapidly expands into e-commerce to fuel growth of its BNPL service” was originally created and published by Electronic Payments International, a GlobalData brand.

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