Ecommerce platform and payments provider Shopify Inc. reported first-quarter revenue that topped analysts’ estimates as businesses moved swiftly online during the coronavirus pandemic.
Sales grew by 47% to $470 million from the same quarter a year ago, Ottawa-based Shopify said in a statement Wednesday. Analysts had expected about $443 million, according to data compiled by Bloomberg.
40 retailers in the 2020 Digital Commerce 360 Top 1000 use Shopify as their ecommerce platform provider.
“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,” CEO Tobi Lutke said in the quarterly release.
The key metric of gross merchandise volume, which represents the value of all goods sold on the platform, increased 46% or $5.50 billion to $17.42 billion from a year earlier. Analysts were expecting a 40% increase on a year-over-year basis to $16.68 billion.
Still, Shopify noted the drop in point-of-sale purchases from bricks-and-mortar stores and questioned the sustainability of some of the online switch. Shopify provides store-based point-of-sale systems for merchants that enable them to manage their online and store sales using a single Shopify platform.
Shopify added that it is closely monitoring the impact rising unemployment has on new shop creation on its platform and consumer spending, the rate at which consumer spending habits transition to online shopping and the ability of brick-and mortar retail merchants to shift sales online.
Shopify reported gross merchandise volume through its store point-of-sale channel fell 71% between March 31 and April 24 as stores shut down through the pandemic. Companies also downgraded from its Shopify Plus plan to cheaper-priced options.
Still, the switch online appeared fairly painless for many. Shopify retailers managed to replace 94% of their store volume with online sales, according to the company statement.
“Retail merchants are adapting quickly to social-distance selling, as 26% of our brick-and-mortar merchants in our English-speaking geographies are now using some form of local in-store/curbside pickup and delivery solution, compared to 2% at the end of February,” Shopify said.
Colin Sebastian, an analyst at Robert W. Baird, said the strong results reinforced his firm’s positive view of Shopify’s growth strategy. Its ability to adapt quickly was also a reflection of “strong product and engineering capabilities.” But sustainability of the recent sales growth and how that translated to revenue will be key, he added.
In April, Shopify chief technology officer Jean-Michel Lemieux said the ecommerce company had U.S. Black Friday-type of traffic as it adds “thousands” of businesses to its platform amid the coronavirus outbreak. Many brick-and-mortar businesses have used Shopify to keep their companies afloat as nationwide lockdowns force retail store closures across the world.
Shopify offers tools to allow businesses to open their own digital stores across multiple channels, including social media. The company launched a redesigned point-of-sale service earlier this month that brings online and offline sales together, offers curbside pickup and local delivery options and greater flexibility to move inventory between various locations. Its rivals include tech giant Amazon.com Inc. and Square Inc.
The company said new stores created on it platform grew 62% between March 13 and April 24 versus the prior six weeks, driven by both first time and established sellers. But it added, “it is unclear how many in this cohort will sustainably generate sales, which is the primary determinant of merchant longevity on our platform.”
Help for merchants during COVID-19
In late February, Shopify told employees to cancel nonessential travel and by mid-March, its entire workforce was working from home, chief operating officer Harley Finkelstein said on its earnings call Wednesday according to a transcript obtained from Seeking Alpha.
“We are fortunate to have already been well outfitted for collaboration at a distance,” he said. “So this shift was minimally disruptive to most employees day to day. Others, whose primary work supported our office spaces are contributing in other ways, many supporting initiatives that directly impact our merchants. No one has been furloughed due to COVID. Our merchants on the other hand have been far more impacted.”
In response to the pandemic, Shopify launched a resource center for merchants, with the links to apply for government funding, tutorials for Shopify store POS merchants on implementing in-store and curbside pickup, and information on how to set up local delivery options, Finkelstein said. Shopify also added digital gift card selling to all Shopify plans on March 20. “With more than $1 million in gift cards sold since making this change, merchants are accessing much needed cash quickly during this disruption,” he said.
Shopify is also lending $200 million additional dollars through its Shopify Capital arm to merchants and expanded those loans beyond the U.S. to merchants in the U.K. and Canada.
In late March, Shopify began offering free three-month trials of its standard Shopify ecommerce platform and is offering its email marketing feature to all merchants for free until Oct. 1. “Bricks-and-mortar-only retailers have lost their only channel, the street, if these businesses are going to survive, its mission critical to get online and we’re giving them more time to do exactly that. This change is also helpful to anyone finding themselves with more free time or wanting to generate supplemental income,” Finkelstein said.
Shopify also said its seeing a notable increase in online store creation since the pandemic, some of which are established brands that are likely losing sales via grocery stores. In April, CPG brand Hines signed onto Shopify Plus and launched ecommerce seven days later, while chocolate maker Lindt launched in five days. “This pandemic is forcing all kinds of merchants to rethink how they sell things and Shopify Plus offers larger merchants the ability to move fast while managing costs—especially important at a time when economics are pressured,” Finkelstein said. “Our partners are getting stores up and running, significantly faster, with the number of stores created in three days or less increasing by 85% between March 13 and April 24 compared with six weeks earlier,” he said.
The number of consumers making a purchase for the first time from any Shopify merchant grew 8% between March 13 and April 24 compared with the previous six weeks, Shopify said. Over that same period, the number of consumers purchasing from a Shopify merchant they’ve never shopped at before grew by 45% compared with the six weeks prior.
The company also noted growth in GMV in the food, beverage and tobacco category, which more than doubled between March 13 and April 24 over the prior six-week period. In Canada, large grocery chains such as Loblaws and Farm Boy setup have stores on Shopify Plus since the pandemic began.