Shopify makes a $1 billion bet on warehouses and delivery
With frank – if not obvious – acknowledgment that the torrid COVID-era two-year growth rates, fueled by stimulus checks, lockdowns and an unprecedented digital shift, were set to slow in 2022, Shopify on Wednesday, February 16 is become the latest large-cap e-commerce player to take a brutal beating in the market.
Although the Canadian-based digital commerce platform’s fourth quarter and full-year results beat expectations, its lucid but cautious outlook for the coming months has not gone down well with investors, who pushed the stock to a 20-month low that has now halved Shopify’s value in just three months.
“Compared to these secular and broader economic assumptions, our financial outlook calls for revenue growth for the full year of 2022 that is lower than the 57% revenue growth achieved in 2021, but still rapid and higher than the growth of e-commerce,” CEO Harley Finkelstein told analysts. and investors.
Far from being a dying company, Shopify said it plans to use many growth levers to bring a website builder business and e-commerce platform to “more merchants in more of geographical areas”.
The $1 Billion Bet
Even after its market’s recent decline, Shopify is still worth nearly $90 billion and has the wherewithal to reinvest in the business, including more than $1 billion that was earmarked for building a network of wider execution which will reduce delivery times for a large majority. of its merchants’ customers.
“We’re excited to update you today on what we’ve learned, how far we’ve come, and most importantly, where we’re headed as we move out of the prototype phase and into the build phase,” Finkelstein said during of a conference. call, as he detailed plans to consolidate the company’s network into larger facilities and unify management of the warehouses it has built and tested over the past 18 months.
Finkelstein said these changes will allow Shopify to deliver packages in two days or less to more than 90% of the US population, adding that fulfillment is only something merchants think about when it’s not working. .
In short, although Wall Street is pricing slowing growth rates at sell-off levels, true e-commerce businesses like Shopify are still fully expecting and planning for further growth.
“If the volumes are what we expect them to be, we need to have enough capacity,” Finkelstein said. “It’s really important, but the ability also has to be of very high quality and that’s what we’re preparing for. We run bigger hubs as a backbone, but we also take advantage of partners.
Finkelstein said the center network will not be fully owned by Shopify, but the goal is to match Shopify warehouses with partner warehouses. In this way, the quality will increase and the capacity will increase due to these changes.
It’s part of a strategy, the company said, to keep pace with digital e-commerce developments, ranging from new ways for merchants to improve shopper discovery and loyalty, to new business opportunities on social channels. , to a data-driven revolution in shipping and logistics. .
This includes the hiring of more engineers than in 2021 as well as an expansion of sales staff, the launch of a new offline performance marketing program and increased marketing efforts internationally.
The new era, but slightly slower
Chief Financial Officer Amy Shapiro said the company is moving forward with its investments as the wave of e-commerce during the pandemic has pushed the need for better technology.
“Now that we have turned the page on this new era of e-commerce, the road ahead of us is full of opportunities that we need to act on to build more momentum into our flywheel,” Shapiro said, pledging commitment. “full steam”. to build on its business infrastructure and foundations.
“This will allow our merchant base to grow, grow stronger, and succeed now and on the other side of this digital commerce transformation,” Shapiro added.
One of those touted investments is the Shopify point-of-sale system for brick-and-mortar retailers, which she says are seeing an increase in walk-in customers as the pandemic wanes.
“In-person selling is one of the best opportunities for merchants to deepen their relationships with buyers through experiences, services and often a shared community,” Shapiro said. “As we still have a huge opportunity to bring our core omnichannel capabilities to more retail businesses, we will increase our investments to put Shopify POS in the hands of more brick-and-mortar merchants in more areas. geographical.”