Digital-first commerce boosts Shopify’s earnings
Meanwhile, physical giant Walmart reports disappointing earnings.
The Ottawa-based global ecommerce platform yesterday announced striking financial results, with Q4 revenue up 94% YoY. Merchant Solutions revenues grew 117% (these are solutions Shopify offers in addition to its subscription platform, like payments and shipping).
Sales on the Shopify platform surpassed $5 billion during the holiday period. Full year revenue for 2020 showed an 86% YoY increase.
Major changes in consumer behavior. These results for a high-profile ecommerce enabler, while striking, are unsurprising given major changes in consumer behavior caused by the pandemic. Research from Publicis Sapient shows almost three-quarters of consumers purchasing online more than usual last summer (a trend likely to have persisted: 48% interviewed said they would continue to shop online in the future).
The research also indicates an opportunity for brands to acquire new customers through ecommerce experiences, with 74% purchasing products from retailers new to them.
Shopify responds. Shopify launched a number of initiatives in 2020 to promote digital transformation for merchants. In Q2 2020, it extended its free trial period from 14 to 90 days. It incorporated gift card capabilities in all its plans, as well as introducing buy-online-pickup-curbside and local delivery.
It also launched Shop, a free all-in-one mobile shopping assistant.
Meanwhile, Walmart falters. In contrast to Shopify’s success, Walmart saw a fall in shares in today’s pre-market trading as it reported Q4 earnings which fell short of Wall Street expectations.
Walmart has traditionally been a big-box retailer with almost 5,000 physical locations in the U.S. alone. It does, of course, have an ecommerce presence too, but it showed disappointing growth in Q4 (69%, the smallest increase since the pandemic hit).
This came against the backdrop of extra expenses involved in running physical locations during the pandemic, including sanitization, cleaning, and bonuses to staff.
Why we care. For the present, and for much of the foreseeable future, there’s a strong case for digital-first commerce. As consumers become accustomed to online shopping and delivery for products they would have previously purchased in-store, it’s in doubt whether they will revert to pre-pandemic habits once it’s safe to do so.