Through Eisen he meets John Wylie at Lazard, the corporate advisory. He has an interview for an investment banking job but doesn’t get it; instead he goes to work at Mark Carnegie’s private equity firm. Carnegie quickly tells him he needs to rack off. He says, “this jewellery business you’re working on at night, if I gave you a million dollars to grow it, what would you do?” He gives Molnar a week to come up with the answer.
When he does, Molnar sells in a month what he normally would in a year. Carnegie promises to keep his job for him for 12 months, knowing that he will never come back. He never does.
And here is another: Nick Molnar’s story is about saving Australian retail and, in his mind, that all starts with – and hinges on – Australian fashion. He understands consumers, the way they think, the way their behaviour is not always aligned with what they tell you. This kind of stuff lights him up. He knows how to get people to part with their money, and – crucially – how to make them feel good about it. He owes Australian fashion a serious debt, because back when Afterpay was just getting started, Australian fashion retailers were his very first customers. He’s ready to pay them back. Or at least make an initial instalment.
Nick Molnar is not just a darling of the ASX but also the sweetheart of Australian fashion. At a lunch to celebrate the Australian Fashion Laureate in December, he sits next to Vogue editor Edwina McCann, who chats to him animatedly. Carla Zampatti – an early Afterpay investor who takes every opportunity to tell Molnar, sotto voce, that he has made her rich – leans over and asks to see pictures of his newborn son.
When he presents the people’s choice award – sponsored by Afterpay – to fashion brand Macgraw, he makes note of the trophy, designed by Dinosaur Designs. “It’s Afterpay green,” he tells his communications director. “Yes,” she says. “We got you one for your office.”
Months later, at the warehouse opening of Thread Together, a sustainable clothing charity also sponsored by Afterpay, Camilla Freeman-Topper of Camilla and Marc squeezes Molnar’s shoulder affectionately as they chat. Erica Berchtold, CEO of The Iconic, smiles broadly when Molnar comes to say hello. And the feeling is mutual: Molnar loves fashion.
At The Australian Financial Review Magazine’s shoot, he chats affably with the models, vows to buy the Song for the Mute blazer he wears and is stoked when our stylist lets him know that a pair of RM Williams boots is his to take, a gift from the brand.
“Fashion is in Nick’s roots,” says Natalie Xenita, executive director of IMG, which runs Australian Fashion Week. Correction – make that Afterpay Australian Fashion Week. Starting this year, Afterpay will be the naming sponsor, a title previously held by Mercedes-Benz for virtually all of the event’s 25-year history. “I was surprised, when I first met him, at how much he knew about the industry. It’s a perfect fit.”
To say 2020 was an annus horribilis for the fashion industry is an understatement. With the closures of restaurants, bars and live events, the cancellations of weddings, the ban on travel and, well, everything else, discretionary retail plummeted.
In April, the Australian Fashion Council – yet another entity sponsored by Afterpay – canvassed members on their prospects of recovering: 43 per cent said they were not confident they could; 23 per cent said they were certain they never would. And Australian Fashion Week was cancelled. It was meant to be a celebration of 25 years of the event, and instead: nothing. “It was devastating,” says Xenita.
Traditionally, Australian Fashion Week has been a trade event, aimed at buyers from department stores and luxury boutiques as well as media. But when Australian Fashion Week returns on May 31, with headline sponsorship from its fintech in shining armour, it will be more focused on consumers; designers will show collections that are available in-store or, more to the point, on consumers’ phones, online right then and there.
It is a shift made by many fashion weeks around the world. Melbourne Fashion Festival – sponsored by guess who? – has been see-now-buy-now since its inception in 1996. Its organisers say that each attendee spends an average of $735 as a result of the festival.
“The majority of designers who show here are using Afterpay,” says Xenita. “So they just got it, immediately. It made so much sense.” Xenita has known Molnar for the better part of a decade, when both of them had different lives. Xenita was the group sales manager at teen magazine Girlfriend (where, full disclosure, I also worked with her) and Molnar had a business called Ice.com, selling fun, inexpensive watches.
“I didn’t ever meet Nick back then,” says Xenita. “I only ever heard about him. But I do remember him wanting to do things differently. They wanted to sponsor our fashion editorials, which back then wasn’t really done. Now, of course, sponsored content is everywhere. He was always about breaking the mould.”
It wasn’t ever meant to be just “buy now, pay later”. Actually, Molnar had two ideas. “Pay in four,” as he called it back then, but also “try before you buy”. As in, here is a dress. Take it home. Wear it. If you don’t like it, bring it back. No questions asked.
“And the retailers literally wouldn’t engage with us,” he says. “They were so nervous about returns.” (And yes, of course, customers do this all the time – try, return and have their money refunded. To make it standard procedure, though, was a bridge too far.)
“I went to Ant one day, and I was like, ‘We’ve got to remove this try-before-you-buy product’. And his response was, ‘But then we’re no longer an after-pay’.” It’s funny now, Molnar says, because the name, conjured by his aunt, still holds with the product. But back then it felt like “an incredibly important decision”.
At first, retailers did not understand Molnar’s pitch, which in his own words rolls like this: “Fashion occupies a far bigger slice of your mindshare than it does of your wallet share. If you look at a shopping centre, 70 per cent of the physical space is fashion, but it’s a fraction of addressable retail gross merchandise value. So how do you get people to spend more on the things that occupy their mind?”
Working at Ice.com, he was puzzled by low conversion rates – just one in 100 customers looking at the store would actually make a purchase. Growing up after the subprime mortgage crisis of 2008, the bailout of major US banks and subsequent Great Recession, Molnar knew that his generation – Millennials – were averse to using credit cards.
His was also a generation used to streaming content on demand, ordering an Uber which arrives within minutes, using Deliveroo to get their dinner: they wanted the instant gratification. So what if he could figure out a way to get them what they wanted, spending money they didn’t yet have – without a credit card?
Afterpay is barely five years old and is already a $30 billion behemoth. Its shares were up almost 300 per cent in 2020 alone. They hit a record high of $160 leading into its half-year results in February. Although they’ve since been dragged down along with other tech firms, even at the $100 mark they’re still trading at a very optimistic enterprise value of 22 times estimates of forward revenue.
Afterpay is priced for rocket-fuelled growth, and it’s delivering. In its latest full-year results presentation, the bar charts – the rise in underlying sales, customer numbers, merchants – all look like near vertical cliffs. And it all began with Princess Polly.
Princess Polly, in case you are not a girl in your late teens, is an Australian-founded fast-fashion business that turns out the kinds of clothes beloved by girls in their late teens. Wez Bryett, the founder, was the first person to approach Molnar about Afterpay, rather than the other way around.
It was 2014 and Molnar and Eisen had just started the business, having scraped together $8 million from a handful of investors. They had 10 retailers and a few thousand customers on the books. The company was barely more than an idea, and then ping! An email arrived from Bryett, sent via the “contact us” form on Afterpay’s website.
“They sent out a press release,” he says. “And I was intrigued by this new payment scheme. We’ve always been very experimental and it just sounded like a good concept.”
Bryett knew that his customers – 16 to 24-year-old women who, in the main, did not own credit cards – would warm to the idea. As it turned out, “warm” didn’t capture it. Afterpay was coming in hot. “It was a totally new concept when we launched with it. And it took off straight away. We didn’t have to explain it or push people into it. As soon as we had it as a payment option, the demand was there. It was like people had been waiting for it.” Although he will not disclose numbers, Bryett says Princess Polly’s Afterpay customers are also its most loyal.
Working with a fashion brand opened Molnar’s eyes to the potential of his business, which, he says, follows a simple formula: fashion unlocks retail; Millennials unlock mass; and digital unlocks physical. Princess Polly had every category Molnar wanted to dominate – young people buying clothing online. You can practically see the lightbulb above his head.
This, by the way, is the next part of the pitch that Molnar rolls out to retailers to join the 75,000 who’ve already signed up. Was that always the strategy, I ask, or is that a post-success rationalisation that makes it all sound simpler than it really was? “That was always the strategy,” Molnar replies, matter-of-factly.
“Fashion is competitive,” he continues. “And fashion retailers deeply understand their consumer at another level. They’re really brand-oriented. So they could see, really early on, that using Afterpay was a way of saying to their customers, like ‘We love you, we will pay for this on your behalf’.”
Berchtold of The Iconic, another pure-play online retailer, echoes this sentiment. “Look, it’s modern-day lay-by,” she says. “It’s a really clever idea. It’s important for us to offer our customers a lot of flexibility. If Afterpay helps them get what they want sooner, that’s great.”
Though she won’t confirm that The Iconic pays Afterpay a 5 per cent fee for each transaction (“I won’t disclose the terms of our arrangement”) she does say that, “We wouldn’t keep doing those things if they didn’t deliver what we are looking for. For the category we play in, fashion and sport, it’s such a natural fit.”
Alexandra Smart, of Ginger & Smart, also demurs when asked if Afterpay is value for money – but points out it’s better than layby because with Afterpay, retailers get their cash immediately.
If you’re a retailer selling a $100 pair of jeans, and your customer uses Afterpay, you’ll get about $95 and Afterpay will pocket the rest. If the customer pays with a credit card, you’ll get about $99 – and the credit card company along with the banks share the remaining $1.
Afterpay costs nothing for customers (provided they pay back the money on time) but it’s expensive for retailers. Sebastian Siemiatkowski, the CEO of competitor Klarna, has called Afterpay “an extortion scheme” (Klarna charges a fixed transaction fee of 30¢ as well as a variable percentage of each sale).
What’s more, the regulatory scales are tipped firmly in the favour of the buy now, pay later (BNPL) sector. Credit card companies used to forbid retailers from passing on their fees to the customer, but in 2003 the Reserve Bank of Australia said retailers should be free to pass the costs along (and hence those jeans might actually cost the customer $101).
No such restriction is placed on BNPLs, and Afterpay prohibits its retailers from passing on its fees. Without such a regulatory advantage it would no longer be able to tell its customers that they won’t be charged an extra cent.
Last December RBA governor Philip Lowe, the umpire of the payments system, said he wouldn’t even the playing field; the benefits of innovation from BNPLs, he said, outweighed the costs. That, along with Australian and Securities Investments Commission declining to treat BNPLs as credit providers (even though one in five customers pay late fees), has for now removed key regulatory risks over the sector.
In September, a Senate committee recommended that BNPLs should be allowed to keep regulating themselves. It might have helped that for government relations, Afterpay retains David Gazard, a close confidante of Scott Morrison. (In February, Britain’s regulator took a different tack, saying BNPL firms had to apply affordability checks on their customers.)
Is Molnar running an extortion scheme? “I have no reaction to that,” comes his implausible reply. What he will say is, “People will try to perceive products that are fundamentally different to be the same as ours.” Afterpay isn’t a payments platform but a way for retailers to find new customers and get them to spend more, he says. That’s been the proposition right from the start.
“At the end of the day, whoever has the most love from customers, whoever scales the customer proposition the fastest, will have the best outcome.”
Which brings us back to why, when it comes to fashion and Afterpay, the deep affection is mutual. Clothing and accessories typically run at a higher profit margin – about 50 per cent – than, say, fast-moving consumer goods, which can have a margin as low as single digits. That gives fashion brands enough room to slice off some of the fat and share it.
“Princess Polly opened our eyes to the power of the fashion and beauty sphere,” says Molnar. “And we then realised the opportunity in the industry. And then we went for it.”
Nick Molnar was put on this earth to be an entrepreneur. That’s the view of Mark Carnegie, one of Molnar’s first employers. “I said to him, you’ve come to me after having four or five interviews in investment banking, and you’re already making more money than you would in your first year of investment banking.”
Working in an investment bank, Carnegie told Molnar, is “a shitty job. Being an entrepreneur is a great job. Anyone who’s an investment banker wants to be an entrepreneur. So why do you, a born entrepreneur, want to be an investment banker?”
“Mark challenged me,” says Molnar. “He said, ‘You’re not maximising this opportunity’, and he was right. And then he gave me the freedom to try and make something of it.”
I was 26 when we listed. I didn’t even know how public companies worked.
— Nick Molnar
What Carnegie saw was not simply a head for business, but an innate understanding of behaviour. “Steve Jobs told my friend Bobby Shriver that if you’re really trying to make it big, you have to change the culture. And that’s what Nick did. He wasn’t trying to sell a product or push a business, he changed the culture for young people. He understood something nobody else did.”
In 2018, Molnar relocated to San Francisco to focus on growing the US business. American retailers, he says, have been quicker to grasp that Millennials want debit, not credit. American venture capital firms have been friendlier too. Afterpay reached out to every Australian venture capital fund in 2015, says Molnar, and they all said no. Whereas US-based Matrix Partners said yes.
Living in San Francisco has allowed Molnar to absorb the Silicon Valley culture. It’s also allowed him to absorb American mores. COVID-19 meant he was back in Sydney when his American office began to reckon with the death of George Floyd and the subsequent Black Lives Matter protests. Even from across the Pacific, he could feel the moment’s significance for his American employees.
Over Zoom, the company invited everyone to a listening session, led by the American team’s HR head. The session resulted in the creation of a new position: head of diversity and inclusion at Afterpay. “I think that conversation was one of the best we’ve ever had as an organisation,” he says now.
“We’re in a fortunate position to be able to do this. And we have conversations about it with the board all the time, you know, how do we do better? Because everyone has the right to feel safe at work, to feel respected. And it will result in great business outcomes.”
It’s an unusually “woke” response for the CEO of an ASX-listed business, and Molnar agrees that his style of leadership is informed by his age. “I think I’ve built a culture of giving people a go,” he says. “When we went public, I was 26. I didn’t even know how public companies worked. I was lucky that I had Anthony by my side, who navigated us through the whole thing. I’ve had moments in my life where I’ve been given opportunities I probably didn’t deserve or wasn’t ready for. But I proved myself. And I ask that of my team, too.”
Going from fast fashion to sponsoring Fashion Week is a small step for Afterpay, which is built on the idea that a product is a product, no matter how much it costs, and if you want it, you should have it. But it is a giant leap for fashion weeks, which have been underpinned by a top-down approach that tended to lock out the very people it existed for: consumers.
At the October announcement of Afterpay’s Fashion Week sponsorship, Molnar called out fashion brands Spell and The Gypsy Collective, Aje and Cue as early adopters of Afterpay, and pledged to pay designer and delegate fees for the program. The room, at Sydney’s Carriageworks, was packed with designers and media. After the washout of 2020, there was a palpable sense of hope, relief and renewal as Molnar spoke of his commitment to the Australian fashion industry.
“We work with the vast majority of brands that are showing in Fashion Week,” Molnar says now. “We have an immense customer base that loves these brands. So we have the key ingredients of the equation to make this as successful as possible.” Fashion Week together with Afterpay, he says, in something akin to a call to arms, can be reinvigorated into a platform that allows brands to speak to trade, to Australian and overseas retailers, to consumers, to everyone.
“Nick is interested in more than just slapping his name on a sponsorship,” says Caroline Rush, chief executive of the British Fashion Council which runs London Fashion Week. Since February both have been sponsored by Afterpay’s UK business, Clearpay. “When we were talking about the challenges our industry has faced, he wanted to know what he could do to support businesses, especially young ones, who want advice around consumer behaviour, price points, product development. For us, it’s not about the week itself, it’s about kick-starting the economy.”
Molnar characteristically downplays his involvement. “Opportunities like this just don’t come up all the time. So when they do …” He shrugs, smiling, as if to say, “Why wouldn’t I?” or perhaps, “You snooze, you lose.”
And perhaps that is how the runaway success of Afterpay has shaped Molnar. Having started in 2014, by 2016 he was on his first investor roadshow, talking up the IPO. Competitors, like Sweden’s Klarna (part-owned by Commonwealth Bank), Zip Co, Beforepay and now PayPal are biting at his heels.
In March last year, the abrupt closure of restaurants and shops that employ young people led investors to wonder if Afterpay had finally met its Waterloo. Its share price plummeted from $41 to $8.90. In the middle of all this, Molnar and his pregnant wife, Gab, and their toddler daughter flew to Sydney from the US to sit out the global pandemic.
Molnar insists the share price is not something that the team discusses. “We don’t ever talk about it, internally. I mean, maybe the team speaks about it but it’s not … The share price has gone up 10 per cent in a week, and it’s gone down 10 per cent in a week. And we were neither a better nor a worse company than we were a week ago.
“The clarity of thought that I had when the share price was at $9 was the clearest that I ever had.”
He tells his team they need to be comfortable with the ups and downs. It’s a mark of his measured side, which evens out the bombastic. But is he truly comfortable with the wild swings in fortune? Just this year it’s risen to $160 and since fallen by one-third. If it collapsed back to $9, how relaxed would he really be? It’s on this point, when pressed, that his inner voice suddenly speaks up. His biggest worry, he admits, is that all of it – the money, the success, the freedom – could go away.
“This has happened really fast. So you feel like you’re on a knife’s edge. And you still feel it can go away as fast as it all came. And I feel like that every day. I wake up in the morning with the same level of anxiety that I woke up with on day one.”
He’s uncomfortable when people attach a dollar sign to his name. He uses sporting metaphors, mixing them somewhat to explain the importance of teamwork (“It’s like sprinting a marathon, you need the best people in the world around you. And then I’m there for you when you’re down, and you’re there for me when I’m down”).
He is close with his family, who are – obviously – incredibly proud of him, in an endearingly relatable way. When his father retired, he quickly got bored with stay-at-home life, so he started an Uber side hustle. At one point he picked up the then CEO of The Iconic. Molnar’s dad struck up a conversation (“You work in fashion? My son works in fashion!”), putting in a good word for his son and his business. As it happened, his son was pitching to The Iconic at the same time. When he won them over, his dad said, “I think I got the deal through for you.” As Molnar recounts the story, he shakes his head. “It’s like, Dad …”
When asked what she thinks of Molnar, Erica Berchtold says, “He’s just a nice, normal guy. He comes into meetings with his laptop, and he looks like any other city worker.”
She adds that, “So many people say to me, ‘We should have lunch’ and I never hear from them again. When Nick says it, you get an email a few days later asking you to have a sandwich.”
So he is low-key, sure, but also resolutely assured of his own ambition. At one of Afterpay’s Christmas parties – he can’t remember which one – he got up and told the team, “This is the year of millions and billions,” by which he meant millions of customers and billions in revenue. “And everyone thought I was crazy. But we delivered that well before the end of that financial year.”
The next year he stood up and said, “This is the year of the verb.” It became a pet project for him. “Everything we did from that point on referenced Afterpay as a verb. It was about getting it into context, how do you get it into the vernacular.”
As Molnar travelled the country in 2016, talking up the IPO, he launched a consumer campaign, asking Afterpay customers to request the platform from their favourite retailers. The social media campaign, he says, kept him “stimulated” during the investor roadshow.
“While I was having these investor conversations and telling them why debit, not a credit card, is the future, my phone is just going off with people asking for Afterpay. And all the investors are saying, ‘But I use a credit card’, and I’m like, ‘No, debit is a Millennial thing’. And at the same time we’re running this campaign and all these people are doing the work for us, asking for Afterpay at their favourite stores.”
“I would get out of the meetings and go, ‘Ant, we got a thousand likes on this post’, ‘Ant, we got 10,000 likes, we just reached a million people’. I remember walking through Melbourne and it’s like, ‘Oh my god, this is scaling so well’. And that was the conversation we were having. Not the IPO. The customers.”
Even now, he likes to walk through his local shopping centre, checking the visual merchandising of Afterpay. When he finds it wanting, he calls his head of sales. “Are you in Westfield again?” his weary colleague will ask. He still gets a kick from seeing his logo in shop windows.
There are Facebook groups dedicated to Afterpay, including Afterpay Obsession, with 132,000 members who ask where they can find various items which have Afterpay available as a payment option. Molnar loves this stuff, and it feeds into the company’s strategy.
He didn’t think his company needed its own Instagram account, but his Millennial and Gen Z staffers convinced him otherwise. As soon as the Instagram account went up, people started posting questions as to whether a given retailer had Afterpay. So Afterpay added a shop directory to its app – and brands get the data on how many new customers are being sent their way.
And yes, there has been the occasional moment of doubt. One came in 2019, when he wondered: “Are there enough people who want this for it to go global? And then a month later Visa announced an instalment plan. And then it wasn’t, ‘Are there enough people?’ Then it was, ‘Can Afterpay compete with Visa?’ How awesome is that?”
So that is the story of Nick Molnar. But it’s not the end; he is, after all, only 31. How can the rest of his life be possibly as thrilling as this past decade? He laughs gently, revealing nothing. Right now, he and the team are working on a five-year strategy. By the second half of 2021 Afterpay will have launched its own transaction accounts.
If all goes to plan, on the day this magazine is published, it will begin offering in-store payments via Apple Wallet, meaning customers can simply tap-and-go via the app. It has bought Matrix out of its US business and is considering a secondary listing on Wall Street. The business is growing quickly in the UK and Canada and is preparing to launch in Spain, France and Italy.
But before that, there’s the inaugural Afterpay Australian Fashion Week, where Molnar will sit front row and, no doubt, show off his love of Australian fashion (something Carnegie says is relatively new. “Mate,” he says. “Nick dressed better than I did back then, but … that’s not saying much.”
As an aside, Carnegie reveals he never invested, even though he was on the ground floor. Does he regret that? “What do you f—ing think?”).
Molnar will take his daughter to daycare, and on the weekends walk with his kids to the park, wearing the Apple Watch he bought for just this occasion because he can take calls and pay for that one-shot long black – but he can’t access his emails.
He will cycle the Peloton bike he had shipped from the States, but not often enough for his wife’s liking. He estimates that, with Afterpay, he’s up to chapter three of a story with 10 chapters. And, being a serial entrepreneur, there’s every chance he will do something completely different when chapter 10 is over.
“My best ideas just come in pure intense moments, you know: strategy during execution. I think I can divorce, or elevate out of execution into thought.” Partly it comes from football training, he says. “You get thrown problems all the time, every second, and you solve them and keep going.”
That’s what he has learnt from the past five years: keep going. “I rang my mum 18 months ago. I had just landed in San Francisco and I said, ‘Mum, I think I’m at my pinnacle of life’. And she just responded, ‘You don’t know what’s coming your way’.”
Stylist Virginia van Heythuysen
Hair Kimberley Forbes
Make-up Kristyan Low
Models Beti Xhuol, Kult Models; Maisie Dunlop, Priscillas Model Management.
Photographed at Jardan Furniture, Paddington NSW.
The April issue of AFR Magazine is out on Friday, March 26 inside The Australian Financial Review. Follow AFR Mag on Twitter and Instagram.