Expect 'More Normalized' E-Commerce Growth in 2021, Says Shopify CFO
Q4 revenue at Shopify spiked 94% to $977.7 million, reported the company Wednesday. At the end of 2020, 1.7 million merchants were selling on the e-commerce platform, generating $120 billion in gross merchandise value (GMV), said President Harley Finkelstein on a quarterly call. Total 2020 revenue was $2.9 billion, up 86%.
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Responding to a question on whether the growth in business creation spawned by COVID-19 is sustainable, Finkelstein noted the U.S. had more business registrations in Q3 than at any time since 2004, and said Shopify is seeing similar trends. The pandemic created a "catalyst," whether people needed to supplement their income or lost a job and needed to find something else, but “I do not think this trend is going away.”
As countries roll out vaccines in 2021 and consumers are able to move about more freely, “the overall economic environment will likely improve,” said Chief Financial Officer Amy Shapero. Some consumer spending “will likely rotate back to offline retail and services," and the shift to e-commerce, which accelerated in 2020, "will likely resume a more normalized pace of growth,” said Shapero. The company doesn’t expect the surge in GMV that drove merchant solutions to repeat in 2021. It's eyeing growth from new merchants joining the platform, its “growing menu” of merchant solutions, and international expansion, Shapero said. Q1 will likely contribute the smallest share of full-year revenue, and Q4 the largest, but the “revenue spread may be more evenly distributed” across quarters if COVID-19 vaccine rollouts shift more spending to services and prompt more offline shopping to the back half of the year, she said.
Shopify expects “rapid growth in gross profit dollars” this year and plans to invest back in business “as aggressively as we can,” said Shapero, citing an “ambitious hiring campaign” for engineers in R&D, plus hires in sales and marketing. The company is replacing quarterly and annual numeric guidance ranges with “information on directional indicators, the primary levers driving our financials and the assumptions that guide our planning,” she said, referencing the “many moving parts of Shopify.”
Responding to a question on the company’s recent announcement it had expanded the Shop Pay payment service to Facebook and Instagram, Finkelstein said Shopify looks to “future-proof” its product as much as possible for merchants. “If we know that extending Shop Pay to services like Facebook and Instagram is going to help them not only find new customers on those incredibly huge services, but also transact better -- where’s there’s fewer cart abandonments, where the transaction happens faster, more effectively -- we’re going to do that.”
Shopify has 10,000 new merchants on its enterprise-grade Plus platform, coming mostly from customer upgrades, said Finkelstein. The company had an acceleration in migrations from legacy e-commerce platforms, which the executive expects to continue. Many brands already had a direct-to-consumer business and were “looking at some of the more modern retail brands -- the D2C brands -- and wondering why they had better technology than they did.”
From Black Friday to Cyber Monday, sales on Shopify’s platform reached more than $5.1 billion worldwide vs. $2.9 billion in the year-ago period, the company reported. Merchants in the U.S., Canada and the U.K. received $227 million in merchant cash advances and loans from Shopify Capital in Q4 vs. $116 million received by U.S. merchants Q4 2019.