Shopify Inc, the leading Canadian e-commerce platform, has reported third-quarter results that were disappointing and below analysts’ expectations. This comes as the surge in online shopping, which was fueled by the pandemic, begins to slow down, just in time for the crucial holiday shopping season.
During the peak of the pandemic, there was a significant shift towards e-commerce, benefiting Shopify with a surge of new business. Shopify provides the necessary infrastructure for retailers to establish and manage their online stores, primarily earning revenue through subscriptions and merchant services. However, as more people start returning to physical stores and larger players like Amazon strengthen their offerings to retain customers, analysts predict that Shopify’s growth, which has been primarily driven by small businesses, will start to taper off.
While Shopify still expects rapid revenue growth for the remainder of the year, the company warns that this growth will be at a slower rate compared to the remarkable expansion seen in 2020. In the third quarter, revenue only increased by 46%, which was lower than expected. Additionally, the adjusted profit per share of 81 cents fell short of analysts’ estimates of $1.18.
These disappointing results have led to a decline of around 4.5% in Shopify’s US-listed shares during premarket trading on Thursday. However, it is important to note that Shopify’s gross merchandise volume (GMV), a crucial indicator of the e-commerce industry’s performance, grew by 35% to $41.8 billion in the quarter.
In order to maintain competitiveness and offer more opportunities to its merchants, Shopify has formed partnerships with companies like TikTok and payments providers such as Affirm, AmazonPay, and PayPal. These partnerships aim to enhance the platform’s capabilities and make it easier for merchants to process sales. The addition of more merchants to the platform also contributed to a 37% increase in subscription solutions revenue, reaching $336.2 million in the quarter.
Despite falling short of expectations in the third quarter, Shopify remains a dominant player in the e-commerce industry. As the holiday shopping season approaches, it will be interesting to see how Shopify adapts and continues to support its merchants in this ever-evolving landscape.
Useful links:
1. Shopify Official Website
2. Statista – Online Shopping Statistics
