Death to diverse local shops by Klarna

I have a lot of respect for Sebastian and the people at Klarna for their contribution to transforming online shopping.

Still, we need to face the facts. Klarna lost 6.2 billion SEK first half of 2022, and their latest innovation is a massive step backwards for diversity in business, quality and sustainability, and I’ll tell you why.?

Set the record straight

First I need to set the record straight. During the inaugural product release format named Klarna Spotlight, CEO and co-founder Sebastian Siemiatkowski presented a skewed history lesson. In his video, after 30 seconds he is looking back at the early klarna days.

He proclaimed that online shopping was plagued by situations where products seldom arrived when ordered if at all. That is shit copywriting by who ever put the text up on the teleprompter. Rather than bluntly lying about the start of the eCommerce age, he could have simply explained what Klarna actually did, and be proud of that. Klarna provided a payment option, based on a username and password, no card forms or one-time-passwords, and behind that simple login was an invoice accompanying your shipment. It was that simple. And the conversation rate for a username and password pathway to shopping with an invoice vs card forms was simply easier, and the merchants accepted Klarna because the conversion numbers at checkout did not lie. This was the brilliance and simplicity that made Klarna a remarkably important part of eCommerce history. The other story is at best a clumsy way of trying to say that Klarna converted more baskets than cards. Klarna is easier than cards, but Cards is still king when looking at payment volume. So, sad that the real story, that is a great one, got forgotten while telling a bullshit story about products not being shipped.?

The bad news

Now onwards to the bad news. Klarna presented their next product and service addition, the Klarna search. Or put bluntly; a price comparison service. Do a dumb (or advanced) search and Klarna will scout through all the products they have indexed from all the merchants they have managed to sign. All these businesses have shared their product details with Klarna by leaning on a tighter and tighter integration, finally leaving the major parts of the payment and after sales experience to Klarna. It’s a genius move by Klarna to get their hands on as much pre- and post payment details they can. What you purchased, were, the price, the size, color and variation. Now they can in fact offer you, the consumer, a product comparison engine that is likely on par with the best data indexing players on earth.

But. It comes at a cost.

For consumers, this service will have you focus on products that are accessible inside the Klarna ecosystem. At the end of the day, Klarna only makes money if you pay at their partnering shops, and they need to make some money… So the selection and comparison you get will be inside their available catalog. Mind you that Klarna has many shops, so you are likely going to find something you like, and be able to get the absolute lowest price. But during the presentation mr Siemiatkowski pissed on other marketplaces, focusing on such players’ desire to sell you what they have and not what you are looking for. I would argue he will do the same, as he can’t show you stuff they can’t sell you. So while Klarnas’ search may not juggle the results like Amazon does, it will still only show you what you can buy from their merchants. Same thing, different spin. But this is not the worst.?

So; you will search for a product. If it exists in the Klarna merchant catalog, you will find the lowest price. Here is the bad news; Merchants flocked to Klarna because it was a fantastic payment option that converted better than cards. Now that Klarna becomes a search engine, targeting consumers and being a gateway, a guardian of purchasing power and carefully diverting a sneakers-purchaser to the right merchant, Klarna has crossed a boundary. They are no longer a smart payment option for consumers and merchants, it’s a marketplace where businesses have to underbid to get a sale. Promising to give you the lowest price, klarna has pointed out a path, putting consumers first, focusing on in-demand searches with low price to get you to buy.?

That is terrible for business.

Diversity, quality and local shopping is what the world needs. Not 'the lowest possible price'.

What we really need is fair pricing while local businesses should be empowered to counter the extreme price pressure on hyped goods. Klarna had the power to be a force for good. A force that would connect local merchants with buyers. A way to drive diversity, and visitors into local stores. A way for anyone to open up shop, both physically and digitally to reach an audience, where simple payments was the focus accompanying quality and diverse products and service. Klarna could do for local shops, what they did for online payments; simplify and enable. Instead they flipped on their merchants, focusing on using the data to make product comparison easy and price pressure higher.?

We can already find the cheapest version of anything by searching. And I’m sure businesses that hoped Klarna would help them sell more was not hoping for their product price information be used to list them at the bottom of a price list. I’m sure the businesses would have hoped for a way to reach out locally, to build valuable connections between people and shops, driving engagement, loyalty and value for both sides. Diversity in products and services, focus on niche and quality rather than who can flip this hyped up, environmentally unfriendly, mass produced and unsustainable sneaker for the absolute lowest margin.

I love to pay with Klarna, but I wish I could do it at that strange local hippie shop that sells short traveled hand made eco wool mittens vs searching for the lowest price for a pair of sea-turtle eradicating sneakers made in Bangladesh.?

Buy something weird, preferably at a local shop, and if you can I encourage you to pay with Klarna.