Shopify’s business thrives as retailers move online

7 May 2020454 Views

Shopify's main office in Ottawa, Canada. Image: BalkansCat/Depositphotos

Shopify has been helping bricks-and-mortar businesses move their stores online as Covid-19 restrictions continue.

On Wednesday (6 May), Canadian e-commerce business Shopify announced that revenue was up 47pc year-on-year in the first fiscal quarter of 2020, as both retailers and shoppers turned to e-commerce. It passed the Royal Bank of Canada to become the most valuable public company in Canada.

Shopify saw a 62pc increase in new stores created on its platform between 13 March and 24 April compared to the prior six weeks, driven by the shift e-commerce in light of Covid-19 restrictions.

The company said that this increase included first-time entrepreneurs and established sellers, but it is unclear how many of these users will sustainably generate sales, which is the platform’s primary determinant of merchant longevity.

Tobi Lütke, CEO of Shopify, said: “The vast majority of people are employed by small businesses, and they struggle most during a crisis. The spread of Covid-19 is going to be a tough time for all entrepreneurs.

“We are working as fast as we can to support our merchants by re-tooling our products to help them adapt to this new reality. Our goal is that, because Shopify exists, more entrepreneurs and small businesses will get through this.”

Revenue boost

Total revenue for the first quarter was $470m, with subscription solutions revenue growing by 34pc year-on-year to $187.6m, and monthly recurring revenue up by 25pc to $55.4m.

Net losses widened to $31.4m in the latest quarter, however the company said this was due to the acquisition of 6 River Systems, “significantly more brand spend” than in the first quarter of 2019, and an increase in the allowance of losses in relation to disruption caused by the coronavirus pandemic.

Shopify said that it has been “uniquely positioned” to deal with Covid-19 as it helps businesses of all sizes to move their stores online.

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The company has introduced new initiatives to support merchants and protect stakeholders. This includes an extended 90-day free trial for all new standard plan sign-ups, the availability of gift card capabilities to merchants on all plans, and the introduction of local in-store and curb-side pickup and delivery options.

Shopify has also increased its funding commitment to Shopify Capital, which provides small business loans, and introduced new online resources to support merchants, such as information about where to secure government funding. It has also offered an online community forum, live webinars, online meetups and tutorials to help merchants as they adjust to their new online presence.

Financial outlook

Shopify’s CFO, Amy Shapero, said: “Now, more than ever, Shopify needs to be there for our merchants, so our focus during these challenging times is to help solve their immediate pain points.

“We are well positioned to help our merchants, particularly given the accelerated shift to online commerce. Our strong balance sheet provides us with the flexibility to continue investing in the right merchant-first initiatives, supporting our merchants’ success now and well into the future.”

Shopify suspended the financial expectations it provided in February for the full-year 2020, as its financial results for the rest of the year are contingent on the duration and scope of the Covid-19 pandemic and its economic impact.

The company said that it will closely monitor external factors, given the increased uncertainty and the likelihood of an extended global recession. These factors include the impact of rising unemployment on consumer spending, the ability of bricks-and-mortar retailers to shift sales online, and the rate at which consumer spending habits transition online.

In the earnings report, the company wrote: “We believe Shopify has a unique opportunity to improve the economic lives of merchants and their buyers in this difficult environment and position our company for the future of commerce.”

Shopify’s main office in Ottawa, Canada. Image: BalkansCat/Depositphotos

Kelly Earley was a journalist with Siliconrepublic.com

editorial@siliconrepublic.com