How One Fintech Unicorn Became A Fashion Destination
As the world moves rapidly online, the distinction between B2B and B2C is becoming increasingly hazy. Today, consumers have more visibility and connection to businesses further up the value chain. And smart businesses are taking advantage of this direct relationship to become more relevant to a new audience. One business that is leveraging its B2B strengths into an expanded B2C offering is Klarna, the $5.5 billion fintech platform that allows shoppers to buy now and pay later.
In the past couple of years, Klarna has begun to offer a direct-to-consumer digital shopping mall that services close to 8 million U.S. consumers. H&M, Sephora, Timberland, The North Face, Fender, Anine Bing, FORWARD, and ModCloth are among the leading retailers that have signed on as merchant partners, leading Klarna to a 163% growth in partnerships in the past year.
I sat down with Sebastian Siemiatkowski, the CEO and cofounder, to learn more about Klarna’s evolution from fintech B2B to consumer lifestyle brand and how being a B2B and B2C company can be mutually beneficial to both partners and consumers.
Soon Yu: You have been leading the evolution of Klarna from a B2B fintech to a B2C shopping platform. What was the impetus?
Sebastian Siemiatkowski: It wasn’t an obvious route. Payment solutions are usually designed to make life easier for the technology provider and processor rather than for the consumer. Klarna was founded in 2005 as a traditional B2B payments company focusing on supporting retailers and helping them grow. We made the decision to become a bank in order to go deeper into the payments value chain and broaden our product offering. But throughout our evolution, we continued to see consumers encounter too much unnecessary friction when shopping online. This became the real opportunity for us – using our B2B relationships to improve the end-to-end shopping experience for consumers.
We took the consumer’s point of view. We wanted to provide flexibility and value while still enabling people to buy the things they love. By creating our buy now, pay later options that came with no fees or interest, we were helping consumers by allowing them to see and try on goods before parting with any money while also taking on all the risk for both the consumer and the retailer. We are now able to build and directly serve a highly engaged and loyal consumer base that also shops at our partner retailers. It’s mutually beneficial for both our B2B partners, which represent about 4,000 U.S. brands and consumers, who now have a frictionless, end-to-end shopping experience.
Yu: How have you managed the transition from being strictly a B2B company to becoming both a B2B and B2C business?
Siemiatkowski: From an internal business point of view, we knew we needed to make some changes in order to meet the varying needs of running B2B and B2C functions effectively. After we undertook a massive review of how we were operating day to day, we implemented an entirely new organizational structure and way of working. Instead of traditional departments, we’re now made up of more than 300 small “startup” teams with a broad range of relevant backgrounds. These teams operate autonomously with their own budgets, investment rounds, and products. This makes us even more focused, flexible, and innovative, able to solve issues for both the consumer and retailer sides while ensuring that we continue to scale without losing pace.
For our B2B partners, it was so important to include them in this journey. Our retail partners understood our mission to create an elevated shopping service and strong consumer network, engage new audiences, and build loyalty with existing customers. For our consumers, we’ve focused on innovating to provide more inspiration, convenience, and value, as well as an engaging shopping experience. We launched the Klarna app, which streamlines the shopping experience from pre- to post-purchase, including enabling users to shop at any online store and to create and share wish lists, get price-drop notifications, and access exclusive deals. Our consumer network in the U.S. is now close to 8 million. We’ve also focused on building a strong consumer brand, fueling consumer, and retailer demand. We’ve been able to leverage our celebrity investors like Snoop Dogg, and our influencer partners, like Lady Gaga, who have massive consumer appeal and have helped drive consumer awareness and adoption of Klarna.
Yu: How has Klarna managed to stay distinct and relevant to two different audiences (retailers and consumers), including throughout the COVID-19 pandemic?
Siemiatkowski: It’s not binary. By supporting either audience in a specific way, we help both in the end. The pandemic has accelerated the pace of adoption of many of the changes that the industry has been discussing for years now. We have spent years speaking with the biggest global retailers that have huge legacy platforms with complex structures, so we were well-positioned to guide our retail partners through quick decision making and help them implement new strategies. Our app and other offerings have helped solve issues that physical retailers face. For example, due to the pandemic, consumers expect contactless payments, digital receipts, and simplified returns. Our consumer app and back-end technology provide options for consumers that allow them to manage their payments in a contactless, digital way, with the ability to try on items at home and return seamlessly. Klarna also empowers them to not take on unnecessary debt, providing them increased flexibility and control over their finances. Our new Vibe loyalty program allows Klarna users to earn rewards for purchases not only from Klarna but also through the loyalty program of the brand whose product the customer is purchasing. Our new in-app wish list feature lets consumers share items they want with friends and family while giving our partner retailers additional opportunities to reach out and engage those users.
Yu: What advice would you give others who are considering the transition from B2B to B2C?
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