How Shopify is Gaining Business Out of Covid

How Shopify is Gaining Business Out of Covid

August 20, 2020

When global retail sales are expected to dip by 5.7% in COVID-19 pandemic, online purchases of clothes go up by 76.7%, groceries spiked to 146%, and increased by 9%

Shopify earnings, revenue, and gross merchandise volume is crushing the estimates amidst the coronavirus pandemic. According to the June-quarter analysis, Shopify stocks popped up while the brick-and-mortar businesses pivoted online during the pandemic. However, Shopify declines to provide any guidance to e-commerce software providers and other platforms. 

Growth In Gross Merchandise Volume 

According to Shopify, their revenue soared up 97% to $714.3 million. Just a year before, Shopify has earned 10 cents a share of $362 million. It was earlier expected to earn 1 cent a share during the higher investment in sales amount of $510.8 million. 

Shopify is gaining business out of COVID crisis while retail shops cease to thrive. The gross merchandise volume comes from their merchant customers spiked 119% to $30.1 billion. 

This online surge in small businesses going digital in hurry during pandemic benefited the second quarter results of Shopify. 

RBC Capital Analyst Mahaney shared how Shopify’s GMV growth decelerated in the months of June and July. But just during the quarter while pandemic, 39% of brick and mortar merchants mostly from the English-speaking geographies adopted the online business model of their stores.  

Although, some of these demands boost GMV growth to be just one-time. They believe the significant portion of this increase in pandemic dramatically soared due to this online shift. 

Also, this online shift is predominant in certain numbers of categories amongst the low e-commerce segments such as furniture, groceries, clothes, and consumer packaged goods. 

Impact of COVID 19 on Shopify

The current scenario pushed e-commerce behaviorism from customers to a different mindset altogether. The ongoing effect of pandemic accelerated the alteration in the purchase habits of customers. 

Shopify monitors the patterns, and based on their data, here are some key changes they have noticed in their business. With the observations, they also seek the potential implication to further lift their business performance in the e-commerce market. 

  • There is a surge in the formation of new stores on the Shopify platform. It grew 71% specifically in the second quarter as compared to the first one. This shift ideally pushed due to the changes in e-commerce. However, a significant portion of it was also achieved by the free trial period extension on their standard plans from 14 days to 90 days. 
  • Shopify further took some major decisions to relieve the merchants in order to help them establish their online business. The users with ending free trials on May 31, 2020, are expected to continue converting as paid merchants by the end of August 2020. Also, Shopify is not asking for any subscription fee while on a free trial to let store owners start selling.
  • Shopify’s data indicates how the rate of conversions on new stores created during the extended 90-days free trial is a bit lower than merchants joined Shopify prior to the COVID-19 pandemic. However, Shopify expects stronger retention rates of those merchants after their completion of a 90-days free trial as they get used to long-tenured relation to the online business.
  • With online, business daily getting adapted to online portals, GMV point-of-sales (POS) channels still declined by 29% in the second quarter as compared to the first one. This happened due to the suspension of in-store operations of many Shopify retail merchants in April and May. But POS GMV already started recovering in June even with the COVID-19 restriction. Since businesses have adapted new online models co-existing with a pandemic situation, this is only going to improve. Another good news for Shopify! 
  • Going back to how brick-and-mortar businesses in English speaking geographies are coming up with online solutions, Shopify is more likely to adapt the changes to an even greater level to leverage the situation for more profits, and for good reason too. 

The COVID-19 pandemic accelerated the growth of the e-commerce sector shifting a huge section of retail spending to online. Experts believe this trend to persist even longer than the pandemic. Pandemic positively influenced the Shopify business gaining on higher GMV, sales conversion, and expected boost in customer retention rates. However, this behavior in growth for Shopify is still uncertain for the future. This is also the reason why Shopify decided not to provide any financial outlook for their third-quarter or a whole year of 2020.

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