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Snoop Dogg-backed 'try before you buy' payment firm sees sales jump

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Snoop Dogg is an investor in Klarna. Photo: Richard Shotwell/Invision/AP

Klarna, a Swedish payment “unicorn” backed by Snoop Dogg, saw sales jump by 36% to £21.6bn last year, the company said on Monday.

The sales jump helped Klarna’s revenues rise by 31% to £445m. The company provides shoppers with a “buy now, pay later” feature that lets them order items online and pay for them only once they’ve received them and are sure they are right. It works with the likes of Asos and TopShop in the UK.

“The feedback that we get from consumers is that they like having that flexibility to make sure that the product is correct,” Luke Griffiths, the UK MD of Klarna, told Yahoo Finance UK.

“They can add more items to their baskets, they can increase the range of products they’re purchasing, and then they can make sure when they receive that product that they want to complete that purchase.”

Founded in 2005, Klarna is one of Europe’s few “unicorns” — a private tech businesses valued at over $1bn. The Swedish company was valued at $2.5bn in 2017 and has raised over $750m from backers including H&M, renown Silicon Valley venture capital firm Sequoia Capital, and even Snoop Dogg.

The UK is Klarna’s third biggest market globally, behind Germany and the Nordics. Its biggest partners in the UK are Asos, JD Sports, and Arcadia Group, which owns TopShop, Topman, and Miss Selfridges.

Snoop Dogg in an ad for Klarna. Photo: Klarna

“Really over the last 18 months we’ve accelerated our growth on the back of our pay later payment method which has gained considerable adoption amongst consumers and merchants, in particular in the fashion vertical,” Griffiths said.

“It has particular resonance in fashion for sure because you’re solving to make sure that the fit is correct, that the product is correct, what you expect it to be.”

4.4m people in the UK have used some type of Klarna product (as well as the pay later product, it also does online check outs and pay in instalment products.) Klarna said 25,000 people per week tried its services in the UK for the first time at the end of 2018.

Klarna’s popularity with online fast-fashion retailers means it has a strong foothold among millennials.

“We see that the trend in terms of credit card usage within that customer group is declining so the convenience of being able to put a purchase onto either a deferred payment or an instalment plan with our pay in three product is solving for what may traditionally have been a credit card transaction in the past,” Griffiths said.

Griffiths added Klarna was equally popular with other age groups and demographics.

Globally, Klarna works with over 130,000 retailers including IKEA, H&M, Adidas, and Zara. The company has been pushing into electronics through partnerships with the likes of Samsung and Game, as well as areas like travel and home goods.

Despite surging sales and revenues, the company’s profit margins are thin. Operating profit for the year was just £13.5m and net income was £8.8m.

Griffiths declined to comment on any IPO or fundraising plans.