Morning Brew Daily
Klarna Losing Millions on "Burrito Loans" & People Love Trader Joe's
Wed, 21 May 2025
Episode 587: Neal and Toby talk about Klarna’s mounting losses from customers failing to pay off their ‘buy now, pay later’ loans. Then, a Chinese EV battery maker emerges as a winner from the US-China trade war with one of the biggest IPOs of the year. Plus, Axios just released their Harris Poll 100 which shows which brands customers trust the most, and Trader Joe’s tops the list, while Tesla continues to fall. Next, a match to find out who is the best of the worst as Manchester United faces off against Tottenham for a spot in the Champions League. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Visit endthecampaign.com for more Listen to Morning Brew Daily Here: https://www.swap.fm/l/mbd-note Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Palindrome Dates 02:40 - Klarna Woes 07:40 - Chinese EV IPO 11:20 - Beloved Brands 15:45 - Europa League Final $$$ 19:40 Headlines Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the latest troubles faced by Klarna?
Here is some potentially useless information. Starting yesterday, every date written out in the American format for the next 10 days will be the same backwards. It's palindromes all the way down. Tuesday was 5-20-25. Today is 5-21-25. Tomorrow is 5-22-25, etc., etc., until we hit May 30th when the streak will sadly end.
It's not useless, Neil. I'm about to drop this fun fact in every single meeting I have from today until next Thursday when the streak ends. Feels like the universe is telling us to slow down and reflect, or at least double-check the date before signing anything. But I'm already looking ahead to the next palindromic date on the calendar. I've got March 3rd, 3033 circled. Let's have a party.
And now a word from our sponsor, Iterable. Neil, you know those conversations with your mom, but there's a delay on the phone. You say something, they talk over you, you both stop, then awkward silence.
It's a mess. Unfortunately, I've had many a conversation like that. And those stop-start convos are what campaign-based marketing feels like. Delayed, out of sync, and totally disconnected from what your customer actually needs right now.
Iterable fixes that. It replaces outdated marketing calendars with AI-powered, moment-based engagement. So when your customer takes an action, browses, buys, or bounces, Iterable responds instantly with personalized messaging across every channel.
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Chapter 2: How is the Chinese EV battery maker performing amid trade tensions?
It's real-time marketing that actually feels real. No delays, no lag, just seamless, relevant communication that moves at the speed of your customer.
The best conversations don't happen on a delay. They happen in the moment. Now remember to go call your moms and visit endthecampaign.com. The collateralized debt obligations that helped crash the economy in 2008 are back, but this time it's not subprime mortgages going under. It's burritos.
Klarna, the buy-now-pay-later giant, said this week that its customers are struggling with that pesky second part as consumer credit losses shot up to $136 million, 17% higher than the first quarter last year. Those losses came on the back of a lousy consumer confidence reading, a sign that BNPL is increasingly becoming a burden that debt-saddled Americans can ill afford to bear.
An uncertain macro environment has also put a damper on Klarna's IPO dreams, as a Swedish company pressed pause on its long-awaited public debut, citing the destabilizing impact of tariffs. Through it all, the company has been trying to channel its inner Chamath, Friedberg Sachs, and Calacanis, and going all in on AI.
Chapter 3: Why do consumers trust Trader Joe's more than other brands?
its CEO presented its earnings call on Monday using an AI-generated avatar of himself, though there have also been some rumblings that its AI aspirations have gone too far. Earlier this month, Klarna CEO Sebastian Chemekovsky said that the company began hiring human gig workers since AI by itself wasn't enough to provide quality customer service.
Chapter 4: What factors influence brand reputation in the Axios Harris Poll?
Chapter 5: How did Tesla's reputation change recently?
Neil, Klarna has so many different balls in the air right now, from replacing workers with AI to navigating an uncertain economic environment. And it's got to figure it out now or there won't be a later.
Yeah. A lot of people were watching these earnings after Klarna signed this eyebrow-raising deal with DoorDash, which means you could essentially put your
ten dollar takeout delivery order uh on credit uh which has led to a lot of jokes about collateralized burrito loans but if you're looking at the consumer confidence measures that are plummeting second lowest uh in american history and you're like well people are broke and you can certainly look at clarna's earnings as evidence of that they reported a net loss of 99 million dollars
Chapter 6: What is the significance of the Europa League Final?
for the three months to March, which is up from 47 million a year earlier. So losses have more than doubled. Those consumer credit losses are also skyrocketing. So if you're looking for a gauge of the health of the American consumer, you can certainly look to Klarna's credit approach to maybe find some answers.
Yeah, and Klarna is trying to say that this is not actually alarm bells going off because the rise in unpaid balances is pretty low. In their words, it's still very low. The share of its total lending of these, I wanted to say subprime mortgages that have gone bad, but these loans that have gone bad rose from 0.51%. to 0.54%.
So they're saying in the grand scheme of things, a lot of people still are paying off their burritos. But let's also talk about this big shift that they've gone through when it comes to AI. Klarna was on the forefront of this AI push. They said that one AI system could replace 700 human customer service workers. But they've also said we might have gone too far.
They said that maybe cost became too predominant of an evaluation factor and that quality suffered as a result of that. And so now they are trying to invest in the human aspect of customer support again. Shamikovsky said that we want to have a human in the chain at all times, basically to, because they provide superior customer service to an AI bot.
So it has been this interesting pivot from all into AI to introducing some more human touch back to Klarna.
Still, this company's workforce has shrunk dramatically as it's pivoted to AI, showing that they're still all in on this technology, which they said they wanted to be open AI's favorite guinea pig back in 2023. They used to have 5,000 employees. Now they're down to about 33,000, which is a 40% decrease. And the CEO wants to get that number down to about 2,500.
They've also, at the same time, grown their revenue per employee, which is not a surprise. That used to be $575,000 in revenue per employee. Now they're over $1 million.
And actually, I didn't even mention the coolest part of this introduction of consumer support workers back into their chain.
They are doing it in an Uber-type setup where some agents who just are fans of the company, who maybe live in rural locations or even abroad, can just step in and pick up a shift on their consumer customer support hotline because he's like, a lot of our customers love Klarna. They're very knowledgeable about the product. So rather than hiring or outsourcing to a call center like that,
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