“An overarching shift in how consumers shop” perhaps best describes the retail revolution of 2020 — and looking ahead, companies such as Klarna, a global bank and shopping and payments service, believe that the future lies in flexibility, digital innovation and “customer obsession.”
The company adopts a data-driven approach to determining customers’ evolving needs and wants. Sebastian Siemiatkowski, chief executive officer and cofounder of Klarna, told WWD, “The pandemic effect is multifold. Over the last year, we’ve seen a rise in ‘smarter’ shoppers, who are more mindful of budgets and are increasingly looking for innovative spending and shopping options.”
And unsurprisingly, that includes customers seizing the opportunity to address debts. “Many people are now paying down debt — Experian reported that credit card balances in the U.S. saw a record drop in Q3 2020 after almost a decade of growth from a record high of $829 billion in 2019 to $756 billion, the lowest point since 2017.”
WWD: How has Klarna evolved in the past year?
Sebastian Siemiatkowski: The pandemic has led to an overarching shift in how consumers shop, which is propelling the adoption of alternative payment options like Klarna. We’ve seen accelerated demand for our solutions amongst brands and retailers across all categories — Macy’s, Lululemon, Etsy and Rebecca Minkoff are just a few of the brands that have recently joined Klarna’s network, bringing the total number of retail partners to more than 6,000 brands in the U.S. and more than 250,000 worldwide. This growth speaks to the consumer appetite for more transparent, flexible and convenient ways to shop and pay beyond traditional credit cards.
Shoppers have also become even more engaged with Klarna as a consumer brand. We’re not just your average bank — our core focus is building a consumer brand that people love. We now have over 15 million shoppers using Klarna in the U.S., which is more than double where we were at this time in 2020, and more than 1 million new consumers joining each month. It’s been exciting to see how our platform is resonating with the new age of smart, informed and engaged shoppers, and we look forward to continuing this momentum in 2021.
WWD: Has this growth changed how you communicate with customers?
S.S.: One of Klarna’s core values is customer obsession, which is key to how we communicate with customers every day, and what sets us apart from other players in the industry. Even as we grow and evolve, it means always providing a Klarna experience that is simple, transparent and jargon-free.
Our partners and collaborations also enable us to communicate our values as a company and build a strong community. Over the last year, we’ve launched a “Knight Finger” ring to celebrate female empowerment with Lady Gaga, and a livestream gaming event called Playing for Keeps featuring streaming and gaming stars SypherPK, Kitty Plays, Snoop Dogg and Lil Yachty, with more exciting moments like these to come. By understanding what customers want and how they shop, we can offer the best deals with their favorite brands, as well as inspirational content to engage with.
WWD: Let’s discuss the shifting role of the physical retail store. What major changes or trends have you noted during the pandemic?
S.S.: The pandemic accelerated digital innovation within the physical retail space — in just three to six months, we saw a technological transformation of the in-store experience that would have otherwise taken years. Today’s shoppers expect flexibility, accessibility and safety while shopping in-store, and retailers have responded by integrating omnichannel and touchless services like buy online, pick up in-store, or BOPIS, and alternative payment options. And these innovations are paying off — a new Klarna survey of over 41,000 shoppers found that buy online, pick up in-store options have improved the shopping experience for over 81 percent of shoppers, with contactless payments also elevating the in-store shopping journey (61 percent).
WWD: Omnichannel has become increasingly important during the pandemic as businesses have been forced to become more competitive. Would you elaborate on how and why omnichannel has grown in importance this past year?
S.S.: Shoppers expect more choice and flexibility in how they pay and want a seamless shopping experience across all channels. Klarna data and survey results have proven this time and time again — 91 percent of shoppers expect brands to offer both online and in-store shopping experiences, and 87 percent also expect brands to have a mobile app. This preference toward integrated, omnichannel shopping experiences is not new but was accelerated during the last year. To stand out in today’s increasingly saturated and highly competitive retail market, giving customers the ability to shop seamlessly and conveniently anywhere, anytime is now table stakes.
WWD: What can we expect to see from brick-and-mortar stores in 2021 and beyond?
S.S.: Safety will continue to be a top priority for the majority of consumers shopping in-store — Klarna research has found that 77 percent of consumers would like stores to offer hand-sanitizing stations, even as the world begins to reopen. We’ll therefore likely see safety precautions like hand sanitizers, plastic barriers, and even temperature checks permanently adopted by physical retail stores.
That said, shoppers still value the in-store experience and are also craving the interactive, “human” aspects of physical retail that have been impacted by the pandemic — 77 percent of U.S. shoppers want to be able to try on clothes again in fitting rooms this year. So we expect many of those hands-on, try-on elements to return to physical retail, supported by safety-driven solutions to make shoppers feel more comfortable.
WWD: On a consumer level, what are some of the new customer segments that emerged during the coronavirus pandemic?
S.S.: The pandemic effect is multifold. Over the last year, we’ve seen a rise in “smarter” shoppers, who are more mindful of budgets and are increasingly looking for innovative spending and shopping options. Many people are now paying down debt — Experian reported that credit card balances in the U.S. saw a record drop in Q3 2020 after almost a decade of growth from a record high of $829 billion in 2019 to $756 billion, the lowest point since 2017.
We’ve also seen a rise in shoppers moving away from traditional forms of credit toward simpler, easier payment options that fit their lifestyles. This is especially pronounced among younger generations. In the U.S., Gen Z credit cardholders have an average of 1.5 credit cards, which is lower than the average American’s four credit cards. Many don’t even hold cards or use them. There is a huge consumer appetite for more transparent, flexible ways to shop and pay that we expect will continue to grow.
WWD: What has Klarna done differently during the pandemic? And what’s next for Klarna?
S.S.: We’ve structured ourselves to be more of a partner and growth engine to our rapidly growing merchant network in the U.S. In uncertain times amid the pandemic, it’s been especially important for Klarna to be more of a strategic partner than simply a payments provider.
In terms of what’s next, we’re focused on building out our shopping experience to make it even more innovative, immersive, and relevant to how today’s consumer wants to shop. This means everything from offering more shoppable moments to expanding Klarna’s in-store presence and launching new Klarna app features, products and partnerships. The first week of March, for instance, we launched Hauliday, a two-day live shopping event with our retail partners. We look forward to continuing to experiment with emerging platforms that engage customers in new ways this year.
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