Exactly one year ago buy now, pay later (BNPL) firm Zip entered a definitive agreement to acquire rival Sezzle. Fast-forward to Wednesday (March 1), and Zip is exiting most of the markets in which it operates, ending its vision of global expansion.
As reported by Bloomberg, Zip is now working with “boutique advisory firms” to sell off parts of the business, “a process set to be completed by the end of June.” These sales are said to have initially focused on operations “in India, the Philippines, Turkey, the Czech Republic, South Africa, Poland,” but have now expanded to Singapore, the U.K., Mexico and the Middle East.
Somewhat ironically, Australia-based Zip is “the biggest rival to Afterpay in Australia,” the report said, and Australia is one of the markets where the BNPL firm will continue operating, with other active markets including New Zealand, the U.S., and Canada.
The objective is for Zip to attain positive cash flow by the first half of 2024.
Bloomberg reported, “The Australian company is trying to win back investors after a 95% stock slump over the past two years by selling or ending operations in 10 of 14 markets around the world. The firm, like many peers, is struggling to reach profitability amid intense competition and a slowdown in online spending in the aftermath of the pandemic.”
Diamond told Bloomberg, “It’s been a tough six to 12 months to reach that conclusion, but we are pragmatic and realistic about our position; those markets would’ve taken three to four years to achieve profitability,” particularly in emerging markets where BNPL isn’t well established.
Market watchers have speculated on a contraction or consolidation among the BNPL providers that sprung up in the wake of Afterpay kickstarting the trend in 2014 and hitting its stride — along with several new competitors — as eCommerce activity spiked during the COVID years.
However, as Bloomberg reported, “valuations of other consumer credit providers have also declined amid a broader tech slump. U.S.-based Stripe Inc. has lowered its value by tens of billions of dollars, while Klarna Bank AB, once Europe’s most valuable startup, completed a down round that saw its valuation plummet to $6.7 billion from $45.6 billion.”