Momentum in Shopify’s premium user base drove growth at the local firm this past quarter, which also saw the Ottawa e-commerce company record the billionth order placed on its platform.
Analysts had estimated $234.6 million of revenue, at the high end of the company’s guidance range, according to Thomson Reuters Eikon.
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Monthly recurring revenue was $35.3 million for the quarter, up 49 per cent from the year before. Driving the growth in this segment was Shopify Plus, the firm’s enterprise-level offering, which drew $8.1 million.
Chief operating officer Harley Finkelstein said during Tuesday morning’s conference call that the firm added “more merchants than ever” to Shopify Plus this past quarter, with large brands such as K-Swiss and De Beers joining the firm’s premium platform. He added that features geared towards the enterprise market, such as tools to automate workflows, have been paying off in recent months.
Shopify had a deeper net loss of $24 million or 23 cents per share during the quarter. That compares with a year-earlier loss of $14 million or 15 cents per share.
Shopify executives again declined to disclose metrics such as customer churn or the average subscription dollars per merchant across its platform tiers, suggesting that analysts’ focus on these figures was misplaced. The firm has seen its year-over-year revenue growth drop consistently over the last six quarters, even as it unveiled a slew of new features and services for merchants, including a tap and chip payment reader, tipping, in-store pickup and multi-channel return and exchange options.
Shopify’s stock price was down roughly 6.3 per cent to $179.81 per share in late afternoon trading on the Toronto Stock Exchange.
Shifting marketing landscape
With Facebook shares facing an historic drop last week, some analyst questions on Shopify’s Tuesday morning call revolved around the social media giant’s data scandal and the European Union’s new privacy regulations, prompting some speculation from CEO Tobi Lütke on how the shifting online landscape will affect Shopify and its merchants.
While any direct impact from new privacy laws were downplayed, Lütke did address concerns that the rising cost of advertising on platforms such as Facebook would spill over to the Shopify’s bottom line, should its users feel the pinch.
“If some advertising source dries up, another will be found,” Lütke said, arguing that the internet has always found a way to develop a suitable ad platform to support itself. He also pointed to Shopify’s merchants as makers – crafters of unique products – which would help them stand out in crowded and expensive marketing spaces.
Another analyst question followed up his response: Would Shopify ever consider creating its own marketplace for merchants to peddle their wares?
Lütke revealed that back in 2007, which he recalled as “100 internet years ago,” Shopify was in fact a marketplace. That model never worked out, and while he said the firm still considers one day going down that route, “it is unlikely that it’s the right move for (the) company.”
Instead, he said Shopify’s position allows it to plug into existing marketplaces such as Pinterest or Instagram. That modular characteristic helps it to better support its merchants rather than attempting to become the go-to destination for commerce itself, he suggested.
“I think our position, being neutral … makes it so we can integrate into them and help our customers that way.”
Shopify gets physical
The past few months were full of announcements and new product rollouts at Shopify following the firm’s annual Unite partner conference in May.
One of the big reveals was the plan for Shopify’s first brick-and-mortar location, expected to open later this year in Los Angeles. The physical space will allow customers to buy the latest tech from Shopify’s hardware division – Google Nest cameras and Wi-Fi routers for in-store surveillance are some of the new additions to this lineup – as well as providing a possible space for merchant pop-up shops.
Brick-and-mortar retail has been an area of focus for the traditionally-online commerce company. Finkelstein noted on the call that 70,000 merchants are currently using Shopify’s point-of-sale hardware in-store.
In the coming months the Canadian company will continue its international push with additional localized languages and currency-matching features.
– With reporting by The Canadian Press