Afterpay Touch Group Ltd (ASX: APT) is already looking at further geographical expansion, what will the share price do?
The buy now, pay later business has been busy expanding in the US and UK recently, but if it's going to be a global giant then it needs to be in more than just the English speaking countries.
The boss of the European division of Afterpay has been talking to the Australian Financial Review about plans to go into continental Europe. Carl Scheible said:
"I'd love to go into Europe, but I think we have to get the UK off the ground and solid. We're six months in, post-launch, we have the busy Christmas season coming up. Then we're into the new year, and we'll see what it brings. We will listen to our retailers, all the largest names all have businesses in Europe as well, they've all expressed an interest for us to follow them. And so it's something we're looking at and evaluating."
I think that makes a lot of sense. It takes a lot of hiring, agreements and so on to go into new countries. The UK and US are two huge markets for Afterpay, much larger than Australia, so it makes sense to just get the foundations right first.
It's going to be a tough slog to win in some European markets. Afterpay was the first mover in Australia and has cemented itself as the main name people think about for buy now, pay later. However, in Germany and Europe in general there is Klarna which is also focused on millennials.
One of the things that excites investors and analysts about Afterpay is the increasing diversification of industries it operates in like healthcare. But in the UK Afterpay (in the form of 'Clearpay') is sticking to fashion, beauty, lifestyle and accessories for a few years. But diversification in the US will happen sooner in the US.
Mr Scheible also spoke about how Brexit could be a headwind. Retail growth in the UK has also been slowing to a halt – although that's where Afterpay/Clearpay could actually provide the biggest boost for retailers looking for growth.
Foolish takeaway
It's exciting to know that perhaps in 2020 we'll see Afterpay start to think about expanding into Europe. That unlocks another huge addressable market for the buy now, pay later business.
The Afterpay share price is down around 1% in early trading. I don't know which way the Afterpay share price will be going in the short-term, but I imagine European expansion would send sentiment higher.
