US-based ecommerce play Zebit (ASX:ZBT) is one of a number of ASX-listed companies with BNPL-adjacent operations.

But chief financial officer Steve Lapin and the ZBT executive team view it as a “completely different” business model.

Along with his thoughts on BNPL, Lapin provided an update on the key focus areas for Zebit’s institutional investors as ZBT looks to scale up, with 2023 flagged as the target timeline for profitability.

Sector overview

As BNPL matures, a common narrative is that it will be subject to further competition with a race to the bottom on transaction margins.

Lapin isn’t an industry sceptic, and says the current players are competing for a share of what is a “huge addressable market”.

“It’s a business model that can be moved easily across geographies. But part of that ease of being able to move brings with it additional competition,” he said.

“If I was a retailer I don’t see why I wouldn’t just have all of them in the cart, and I’d use that as leverage to compress fees.”

With a large market, low barriers to entry and lots of competition, Lapin says the sector is primed for consolidation.

“If that’s the game that’s played and it’s a race to bottom on who’s willing to take smallest fee, then whoever has the biggest balance sheet is going to win,” he said.

“PayPal – it’s hard to compete with that balance sheet. And Afterpay (ASX:APT) – it’s hard to compete with that balance sheet as well. They have a ton of cash.”

“For now, other players are competing and taking some good market share. So time will tell,” he said.


Zebit is often tied in with the sector because it does offer BNPL payments, but within a vertically-integrated ecommerce platform.

The company’s website is an online merchant platform that sells over 90,000 products.

It runs an inventory-light model by acting as a distributor for around 80 different drop-ship partners who pack and ship products on-demand for sales made through the Zebit platform.

So its core income model is based on that of a retailer – revenue less cost of goods sold – which it uses to fund its BNPL payment model where customers can buy their goods via zero-interest instalments.

What are the instos saying?

A central feature of Zebit’s business model is that it’s built to serve consumers with lower credit scores who can’t access more traditional methods of payment financing.

In the US, those customers comprise a potential addressable market of more than 120m consumers.

But it’s also a segment that’s either “not well understood or heavily stigmatised”, Lapin said.

“So I think it scares people away without truly understanding the space and the benefits we’re providing.”

In its IPO last year, Zebit raised $35m from investors at $1.58 per share. But accompanying a broader ecommerce selloff in 2021, ZBT shares have lagged and are currently trading at a 37pc discount to their December listing price.

Lapin said the Zebit team is keen to visit Australia when pandemic restrictions allow, to further engage with investors about the business model.

At the same time, “we have a number of institutional investors on our cap table who’ve been tremendously supportive and really understand (the model),” he said.

And for those investors, the questions centre around traditional ecommerce and BNPL metrics – revenue, bad debts and the path to profitability.

“Bad debts are a big topic, and the thing we’re always trying to say to investors in our business is that we are benefitted when those numbers are actually rising a bit,” Lapin said.

“The way a risk model works is it looks for different indicators to approve or decline customers. You can loosen or tighten it and the goal is to find the sweet spot within that band.”

As the platform scales for growth, Lapin said the “sweet spot” for ZBT’s growth is a bad debt percentage in the mid-teens.

“We could easily operate with 10% bad debts right now easily, but that also means we’re limiting the number of customers on our platform at the expense of long-term growth,” he said.

“It limits the ultimate revenue opportunity, and that’s not the stage we’re in while the business is scaling up.

“The way we address that opportunity is by building an eligible cohort of customers who can generate long-term profit growth into the future.”

Looking ahead

In line with its 2023 profit target, Lapin said Zebit’s current strategy is built around scaling its customer base and driving profit margins over the next 24 months.

Those measures include a targeted TV advertising campaign to build consumer awareness for its platform.

“The trend we see is customers we acquire today will spend more money next year than they do in the current year,” he said.

“So the number of customers we bring in today isn’t as important today as it will be two years from now.”

In terms of the product mix from its third-party vendors, Lapin said a priority for the business right now is groceries and everyday items.

“That’s another differentiator from traditional BNPL because the sector really hasn’t got much traction for everyday grocery items,” he said.

And like all ecommerce plays, the goal is to generate enough scale where operating costs come down, which can then be passed onto consumers.

“We think we have a head start in this market, but our top priority is customer engagement and faster revenue growth.”

“To do that means running tighter margins and outlaying more capital in value-add areas such as TV advertising and skilled staff – you need to build that moat.”

“So that’s where our focus is today and we look forward to speaking with Australian investors soon to provide more details on that strategy.”