Shopify's headquarters in Ottawa on October 22, 2018.CHRIS WATTIE/Reuters
Just a year after Shopify Inc. began a multilingual push into international markets, the Ottawa-based e-commerce platform says more than 100,000 merchants now use its services in languages other than English.
On an analyst call for its first-quarter financial results, Shopify executives shed some light on the company’s efforts to move beyond its increasingly saturated English-language markets in North America, Britain and Australia. Last May, Shopify let users try versions of its platform in French, Japanese, Italian, Brazilian Portuguese, Spanish and chief executive Tobi Lutke’s native German – which is “cool that I can finally do," Mr. Lutke said on the call.
And while it will take time for Shopify’s new markets to mature – in core markets, the company has been mastering product-market fit for 15 years, Mr. Lutke said – the company is approaching them on multiple fronts. It continues to add new languages, such as simplified Chinese and Dutch, while exploring how cultural differences in existing markets might affect product design and payment options.
Chief financial officer Amy Shapero said international growth was one of the reasons Shopify boosted its fiscal 2019 forecasts slightly, projecting revenue of as much as US$1.5-billion, up from US$1.48-billion in February. The company crossed the US$1-billion sales mark just last year.
Ross MacMillan, an analyst with Royal Bank of Canada Capital Markets, raised his price target for Shopify’s U.S.-listed shares to US$265, from US$230, highlighting the company’s global expansion. “While the year’s raise to [revenue] was small relative to history/expectations, we think this embeds a level of conservatism, especially as the company is prudent on international growth extrapolation,” he wrote in a research note. Richard Tse of National Bank Financial noted that international merchant additions boosted what is usually a slow first quarter for Shopify merchant growth.
In the first quarter, which ended in March, Shopify’s revenue rose 50 per cent year over year to US$320.5-million, beating analysts’ consensus expectation of US$310-million, thanks to its swelling ranks of merchants who pay monthly fees to sell their wares through the platform. Its number of users, which include social-media personality and cosmetics business founder Kylie Jenner as well as storied companies such as Levi Strauss & Co., rose to 820,000 at the end of last year, though the company did not reveal how many were added during the first quarter of 2019.
Investors sent the Toronto-listed shares up 7.5 per cent, closing at $325.75 Tuesday. Year-to-date, the stock is up 75 per cent. But Shopify, which has expanded beyond its e-commerce platform in recent years as it services a wider range of entrepreneurs’ needs, including loans and marketing, still posted a net loss of US$24.2-million, or 22 US cents a share, compared with a loss a year earlier of US$15.9-million, or 16 US cents. The larger loss was in part due to the rising costs of doing business in its “merchant solutions” division, which includes services such as shipping and payment processing.
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That business line also includes Shopify’s “gross merchandise volume,” or GMV – the total value of orders processed through its platform, which rose 50 per cent over the first quarter of 2018 to US$11.9-billion. Ms. Shapero said the share of GMV from international markets was “nearly twice” what it was a year earlier, before Shopify began its multilingual push.
Through its merchant cash-advance program, Shopify Capital, the company issued US$87.8-million in loans and advances, up 45 per cent over the prior year. It said more than 40 per cent of eligible North American merchants were using its shipping service last quarter as well. It also launched a new suite of hardware for in-store retailers this month, including a tap-and-chip card reader.
Mr. Lutke said stores would likely see more offerings in the future: “Internet marketing is starting to get pretty pricey – and funnily enough, expanding offline, expanding to bricks-and-mortar, is starting to look really good.”
Shopify’s share price dipped last month on the news that Facebook-owned Instagram, which some merchants connect with their Shopify accounts, was introducing its own in-app checkout. Analysts noted that some of its largest customers were already trying out the feature, potentially driving some payments outside Shopify’s ecosystem. On the call, chief operating officer Harley Finkelstein said the company did not want to get in the way of its merchants.
“What Shopify does as a retail operating system is allow our merchants to run across as many channels as they want,” he said. “We also make sure that we capture economics through [revenue] shares with our partners [such as Instagram] that we allow our merchants to sell through.”
Josh O’Kane