Klarna, the Swedish fintech, has boomed during the pandemic, while Inditex takes its budget brand online: both point to the new importance of the value segment.

With the COVID-19 pandemic a reality for the medium- if not long-term, the desire to avoid crowds has driven shoppers online. This has been strong for Klarna, which as WARC has previously reported has built its name by providing a payments back-end for brands, and by offering flexibility to consumers.

This flexibility, reflected in the company’s latest figures, hints at the other side of the pandemic: the economic.

Now gearing up for a stock market listing, Klarna – currently valued at $5.5 billion – has seen its volumes increase by 44% year-on-year in H1, according to an interim report. This has had much to do with the company’s particularly strong expansion in consumer usage in the US and UK, up 550% and 120% respectively compared to 2019.

Pre-pandemic, the service was already finding favour among brands as a clever way to offer options that lessened the short-term cost of an item, acting effectively like a promotion that doesn’t negatively affect the value of the brand.

“We are in this odd situation: coronavirus has rapidly accelerated our growth”, said Klarna CEO Sebastian Siemiatkowski in an interview with the FT.

“People are shopping a lot more online. It’s a little odd: the world is impacted in a very negative way but at the same time we are doing very well”.

Klarna’s rise comes at a time of recession, in which businesses and their marketers are having to answer the question of what drives spending in tough times. The important thing to know is that majorities in almost all countries responding to a Pew survey felt that conditions are bad, with an overall 68% saying conditions are bad.

These macro conditions are part of the reason behind a renewed interest in capturing the value segment of the market as people trade down. For instance, Lefties, an Inditex-owned budget clothing brand has begun selling online in Spain and Portugal, reflecting the twin consumer pressures of avoiding the virus and saving money.

It’s likely that a firm with the kind of infrastructure built up from its more profitable brands will allow the company to sustain this advance online, where margins are even thinner. Scale will matter.

Sourced from Klarna, WARC, Financial Times, Reuters