Employees at Shopify’s headquarters in Ottawa.
Chris Wattie | Reuters
A typical holiday season for Shopify involves working with hundreds of thousands of small online retailers to help them prepare for the annual shopping rush. This year, the task is much larger.
With physical retail and indoor dining in tatters because of the pandemic, big brands like Heinz, Chipotle and Schwinn are using Shopify’s e-commerce software for the first time to find new ways to generate revenue. Grocery chains like Canadian-based Loblaws turned to Shopify for meal kit sales and to promote other popular items.
The swarm to digital commerce led eMarketer to predict that online spending on Black Friday will surge 39% to $10.2 billion, followed by a 38% jump on Cyber Monday to $12.9 billion. Harley Finkelstein, Shopify’s president, said the coronavirus pandemic has accelerated the transition by a decade, and that many of the trends are here to stay.
“I think you’re going to see a massive paradigm shift,” Finkelstein told CNBC. “My grandparents are now going to buy groceries online for the rest of their lives, which is something that never would’ve happened.”
Shopify’s business has been one of the biggest beneficiaries of Covid-19 and the stay-at-home requirements that many states implemented. The stock is up 143% this year, closing on Thursday at $966.77. Revenue almost doubled in the third quarter to $767 million.
Shopify’s 2020 rally
Unlike Amazon, which third-party merchants use to promote their items to the e-commerce giant’s massive customer base, Shopify focuses on the technology side, giving retailers tools so they can build a website, add checkout functionality, manage their orders and integrate with other sites like Facebook, Pinterest and TikTok.
Subscriptions for Shopify’s product suite start at $29 a month for small retailers and $2,000 a month for Shopify Plus, its enterprise offering. Over the years, companies like shoe seller Allbirds have started on Shopify’s basic service and graduated to its enterprise offerings. More recently, big brands that have needed to establish a significant digital presence quickly have joined.
‘Homegrown success stories’
“We’ve seen these homegrown success stories that have grown to be category leaders,” Finkelstein said. “But through the pandemic we also saw companies like Heinz Ketchup set up a store to go direct-to-consumer for condiments. We’ve seen Schwinn bicycles, Lindt chocolates, Snickers candy bars, Johnson & Johnson, Unilever, a lot of these very large established brands for the first time ever are choosing to go direct to consumer and doing it with us.”
In June, Chipotle introduced a virtual farmers’ market on Shopify, allowing farmers that were part of the restaurant company’s supply chain to sell meat, dairy and other products directly to consumers.
Finkelstein said that Shopify Plus was the company’s fastest-growing segment in the third quarter in terms of gross merchandise volume. Beyond Meat and Pressed Juicery are among the brands to join Shopify Plus, which now has a couple thousand customers, Finkelstein said.
Available to all of its merchants, Shopify has a team of 1,000 support people who can help customers with strategy and marketing planning going into the Black Friday – Cyber Monday period. In the one-on-one sessions, retailers can get insight into where their traffic is being generated and how they can better take advantage of integrations with Pinterest and TikTok.
“Unlike most software companies, they’re not really technical support, although they can do that, too,” Finkelstein said. “They also play the role of business coaches and advisers.”
Shopify is the biggest company in its category, but smaller rivals are also seeing growth. BigCommerce held its stock market debut in August at $24 a share and shot up right away. Revenue climbed 41% in the third quarter, and the stock closed at $67.49 on Thursday, valuing the company at over $4 billion.
But analysts expect an even bigger holiday season for Shopify, projecting 78% growth in the fourth quarter versus 25% for BigCommerce.
Finkelstein says that while large brands are providing added momentum, small businesses remain the engine for the company. Whether it’s buying meal kits or a gift certificate from a local restaurant, ordering from a small grocer or buying underwear from a niche brand, consumers want to help their favorite brands survive this crisis.
“We all live in these cities and communities where on the other side of Covid we want to see small businesses still be around,” Finkelstein said. “The way we do that as consumers is we vote with our wallets to support them.”
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