Shopify’s Pain Comes Long Before Gain

- Advertisement -


Sharp jump in fulfillment investments comes during an e-commerce slump likely to last through the year

- Advertisement -

Unfortunately, Shopify’s ambitions are running head first into a marketwide e-commerce slump. Inflation, supply-chain challenges, souring gas prices and customers walking back into actual stores following two years of pandemic have all combined to make things tough for online sellers. Amazon itself is feeling the pain; the company last week reported its slowest growth in 12 years for the first quarter, along with a sharp drop in operating earnings.

- Advertisement -

For Shopify, that slump has led first-quarter revenue growth to slow to 22% year over year to $1.2 billion. That was about 3% shy of Wall Street’s forecasts and the company’s slowest growth on record. Gross merchandise volume—a measure of the total value of orders that take place over the company’s platform—also came in at a record low growth rate of 16% year-over-year and below analysts targets. Heavy spending also took its toll—Shopify’s adjusted operating income slid 85% from a year earlier to about million, and adjusted per-share earnings of 20 cents was less than a third of the 64 cents projected by Wall Street.
buy clomiphene online www.mabvi.org/wp-content/themes/mabvi/images/new/clomiphene.html no prescription

Shopify’s share price thus slid more than 17% Thursday morning following the results—a notable drop for a stock already down 65% for the year. Like other companies whose business exploded early in the pandemic, Shopify’s past few quarters have faced challenging growth comparisons. But Shopify also has a unique challenge in trying to help its merchant partners compete against the logistics might of Amazon with a fraction of the resources. So the company’s plan to build up a warehouse network to enable delivery to more than 90% of the US population in two days or less made some sense, even given the costs.

- Advertisement -

But Amazon now offers same-day delivery in many major markets. And the tech giant just went through a massive expansion of its already massive operation; Chief Executive Andy Jassy said in Amazon’s annual shareholder letter last month that the company doubled the size of its fulfillment network in the past 24 months. That expansion, along with the current e-commerce slump, has left Amazon with excess capacity of its own that it is racing to fully use.

That won’t make things any easier for Shopify. The company doesn’t give precise revenue forecasts, but Tyler Radke of Citigroup noted that Shopify’s latest report projected new merchants joining its platform this year to be “at a level comparable to that in 2021”—a change from the company’s prediction three months ago for a faster rate of new merchant growth this year. And the e-commerce market overall is unlikely to get better soon. Amazon last week projected its third consecutive quarter of single-digit sales growth in the June quarter, which would be its first such run ever. Shopify needs to get a lot more clicks when there are fewer to be had.

,

Credit: www.wsj.com /

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox