AFR RETAIL SUMMITAFR RETAIL SUMMITAFR RETAIL SUMMIT

PARALLELS

GFC TO NOW

MILLENNIALS AND GEN Z

BROADER BEHAVIOURAL SHIFTS

LONG TERM STEP CHANGE FOR RETAIL SPEND

RETAIL AND RETAIL ANDCUSTOMER INSIGHTS

SUPPORTING MERCHANTS

Afterpay Day sale: biggest on record with 12,000 retailers participating and over $40 million worth of purchases made.

Support Small and Afterpay Connect campaigns showcased hundreds of small businesses.

Over 14 million referrals to retailers globally per month.

PRE-COVID POST-COVID REFERRAL SHIFT

AUSTRALIAN REFERRALS

PERCENTAGE

SOURCE: COMPANY DATA NOTES: PRE-COVID 1/18/2020-3/19/2020 VS. POST-COVID 3/20/2020-5/20/2020, 61 DAYS VS. 61 DAYS

WOMENS FASHIONHOME AND ENTERTAINMENTMENS FASHION

ENTERTAIN THE KIDSSTYLE YOUR SPACEWORK ‘IN’SUPPORT SMALL

PRE-COVID19 POST-COVID19

TRENDS IN RECENT MONTHS

8 MARCH 22 MARCH 5 APRIL 19 APRIL 3 MAY

BABY BOOMER

GEN X

GEN Z

GEN Y MILLENNIAL

GETTING HOME AND FAMILY READYPeaked: Home, Gaming + Hobbies, Fitness, Pet Spend, Groceries

Bottomed out: Jewellery, Footwear

KEEPING EVERYONE COMFORTABLE AND ENTERTAINEDPeaked: Beauty/Cosmetics, Home, Furniture, Office, Toys

Bottomed out: Hair + Beauty Salons, Health, Travel, Groceries, Experiences

NEW CLOTHES, OUTDOOR GOODSPeaked: Apparel, Footwear, Outdoor, Jewellery, Automotive

Bottomed out: Games + Hobbies, Beauty, Fitness, Office, Toys

SOURCE: COMPANY DATA

TRENDS BY GENERATION

GEN Z

Made their homes look good

Spent on beauty + cosmetics

Slowed spending on apparel

MILLENNIALSFocused on home

Kept kids entertained

Spent on beauty + cosmetics

GEN XSpent on home

Spent on entertainment (toys, games, electronics)

BABY BOOMERHome was a focus

Spent on entertainment

Slowed spend on apparel

HOME

FURNITURE

BEAUTY+COSMETICS

PHARMACEUTICALS

AUTOMOTIVE

FURNITURE

HOME

TOYS

BEAUTY+COSMETICS

TOYS

ELECTRONICS

GAMESPET

APPAREL

entertainment (toys, games, VITAMINS+SUP

HEALTH

HAIR+BEAUTY

OUTDOOR

FURNITURE

HOME

ELECTRONICS

GAMES AND HOBBIES

OUTDOOR

FURNITURE

HOME

PET

BOOKS

VITAMINS

HAIR+BEAUTY

HEALTH

PET

BOOKS

VITAMINS

HAIR+BEAUTY

HEALTH

JEWELLERY

AUTOMOTIVE

APPAREL

HAIR+BEAUTY

HEALTH

STRONG GROWTH DECLINE/SLOW GROWTH STRONG GROWTH DECLINE/SLOW GROWTH

SOURCE: COMPANY DATA

THE RISE OF OMNI-CHANNEL

SALES GROWTH

BY CHANNEL

ONLINEONLINEIN-STORE

Online has driven into offline

In-store and online not independent - omni-channel retail has been embraced

In-store as important as ever but people expect integrated offerings

SOURCE: COMPANY DATA

BRAND AND VALUES IMPORTANTConscious consumption or purposeful retail is on the rise

Customers are inclined to shop smaller, and shop localReferrals for SMBs grew 77%

SMB lead volume up 25% in March and April

Recent in-store SMB sales are up over 95%

SMB SALES GROWTH

SOURCE: COMPANY DATA

HOW PEOPLE HOW PEOPLEARE SPENDINGHOW PEOPLE

SYSTEMIC SHIFTS

Across all generations we are seeing the compounding effect of:

offline online

cash debit

credit BNPL

offline onlineoffline online

debit debit

BNPL

ONLINE ADOPTION

IS ACCELERATING

6.6%

FEB

RU

AR

Y

7.1%

11.1%

MA

RC

H

AP

RIL

AUSTRALIAN ONLINE RETAIL GROWTH

APP DOWNLOADS

SOURCE: ABS

of our customers are actively using

our mobile app

80%80%Close to

SOURCE: COMPANY DATA

GLOBAL SHIFT TO ONLINE

US ECONOMIC PENETRATION

PERCENTAGE OF RETAIL SALES

2009 APR 2020

10 YEARS

2019

US ECONOMIC PENETRATION

PERCENTAGE OF RETAIL SALES30%

0%

SOURCE: BANK OF AMERICA, US DEPARTMENT OF COMMERCE, SHAWSPRING RESEARCH

5.6%

16.0% 8 W

EEKS

27%

SHIFT AWAY FROM TRADITIONAL FORMS OF PAYMENT

CRISIS IS CHANGING THE WAY WE PAY

BUY NOW PAY LATER IS IN, CASH IS OUT

9 FEB-80%

19 APR

CASH

BNPL

CHANGE IN TOTAL SPENDING

-32

-7

22%

CASH CARD

BNPL0%

BY PAYMENT TYPE

SOURCE: ALPHABETA AND ILLION, BASED ON A SAMPLE OF TRANSACTIONS ~250k AUSTRALIAN CONSUMERS, RBA

CRISIS

CARD

Cash withdrawals in April fell 30%

New consumer segments adopting BNPL: older and higher income brackets; men

SHIFT AWAY FROM CREDIT CARDS

DEBIT CARD SPENDING TRENDING ABOVE CREDIT CARD

U.S.PERCENT, YEAR ON YEAR

1 FEB 16 MAY

DEBIT CARD

CREDIT CARD

-60%

0%

SOURCE: BANK OF AMERICA GLOBAL RESEARCH

NUMBER OF PURCHASESAUSTRALIA

200620060

PURCHASESPURCHASESAUSTRALIA

1000M

2019 2006 2019

$80B

VALUE OF PURCHASES

SOURCE: RBA. TREND IS SEASONALLY ADJUSTED AND CHANGES IN REPORTING METHODOLOGY MARCH 2008 AND MAY 2018

TOTAL

TOTAL

DEBITCREDIT

CREDIT

DEBIT

WHY THESE SHIFTS WHY THESE SHIFTSWILL CONTINUEWHY THESE SHIFTS

POST-GFC DECLINE IN TRADITIONAL PAYMENT METHODS

20070%

SOURCE: RBA/MWE CONSULTING

60%

2019

SHARE OF VALUEDEBIT

TOTAL CARD

CREDIT/CHARGE

CASH

DECLINE IN CREDIT BALANCES

2007

60k

TODAY

CREDIT AND CHARGE CARDS

SEASONALLY ADJUSTED

20k

SOURCE: RBA DATA

TOTAL CREDIT CARD BALANCES

CREDIT CARD BALANCES ACCRUING INTEREST

YOUNG PEOPLE ARE TURNING AWAY FROM CREDIT CARDS AND CASH

2002

CREDIT CARD OWNERSHIP AMONG YOUNG AUSTRALIANS

2019

YOU

NG

PE

OP

LE W

ITH

CR

ED

IT C

AR

DS

In 2019, 36% of people aged 20-35 owned credit cards

59%

In 2019, people aged 20-35 owned credit cards

36%

14%

64%

In 2019, only ~14% of payments made by 18-29 year-olds were in cash

SOURCE: HILDA + RBA DATA

CASH

CREDIT

TOMORROW’S TOMORROW’SCUSTOMERTOMORROW’S

GEN Z: While Millennials turned away from credit cards, Gen Z aren't even signing up: 94% of Gen Z use debit on our platform.

Want low-commitment, straight-forward solutions for what they need.

Want to stay in control financially, especially post COVID.

Expect digital integration - shopping via social media is second nature.

Expect retailers to embrace a circular economy and care about sustainability and supporting small.

SOURCE: THE FUTURE LAB

ONE IN EVERY THREE DOLLARS SPENT ARE MILLENNIALS AND GEN Z REPRESENTING ALMOST HALF THE WORKFORCE 1

GENERATION SHARE OF

LABOUR FORCE

GENERATION SHARE OF TOTAL

SPENDING

MILLENNIALSGEN ZGEN XOLDER GENERATION

MILLENNIALS AND GEN Z ACCOUNT FOR 37% TOTAL RETAIL SPEND THEY CONTRIBUTE A GREATER PERCENTAGE OF THEIR INCOME TO RETAIL SPENDING 2

37%

GENERATION SHARE OF RETAIL

SPENDING

38%

12%15%

35%

MILLENNIALS + GEN ZGEN XOLDER GENERATION

31%

38%

35%

SOURCE: 1. ABS LABOUR FORCE SURVEY, MAY 2020; ABS CENSUS 2016 2. HILDA WAVE 18 NOTE: DEFINITION OF GENERATIONS IN THIS REPORT: GEN Z INCLUDES INDIVIDUALS BORN AFTER 1996. MILLENNIALS INCLUDES INDIVIDUALS BORN BETWEEN 1981 - 1996, GEN X ARE INDIVIDUALS BORN BETWEEN 1965 - 1980, OLDER GENERATION ARE INDIVIDUALS BORN BEFORE 1965. RETAIL SPEND INCLUDES CLOTHING AND FOOTWEAR; HOME REPAIRS, RENOVATION AND MAINTENANCE; MEDICINES, PRESCRIPTIONS AND PHARMACEUTICALS

35%

28%

MILLENNIALS + GEN ZGEN XOLDER GENERATION

INCREASED AT A MUCH FASTER RATE THAN OLDER HOUSEHOLDSAVERAGE ANNUAL HOUSEHOLD EXPENDITURE ON RETAIL

1,294

3,891

5,337

6,377+19%

2006 2018 2006 2018

BY GENERATION GROUP$, 2006-2018

MILLENNIAL AND GEN Z TOTAL RETAIL SPEND BY 2030

IF THESE TRENDS CONTINUE,

2006 2030

GEN Z

RETAIL MARKET SIZE FOR MILLENNIALS AND GEN Z

MILLENNIAL

2020

MILLENNIAL

SOURCE: HILDA WAVES 6-18 NOTE: RETAIL SPEND INCLUDES CLOTHING AND FOOTWEAR; HOME REPAIRS, RENOVATION AND MAINTENANCE; MEDICINES, PRESCRIPTIONS AND PHARMACEUTICALS

AS GEN X AND MILLENNIALS HAVE AGED, RETAIL EXPENDITURE FOR YOUNGER HOUSEHOLDS HAS

+201%GEN Z / YOUNGER MILLENNIALS

GEN X / OLDER MILLENNIALS

THANK YOU