Shopify accelerates online shopping services to take advantage of crisis

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Shopify is rolling out new services for retailers and pushing into the grocery sector as the ecommerce upstart tries to cash in on the disruption caused by the coronavirus pandemic.

With the high street in hibernation, retailers have turned to Shopify to provide back-end services as they move online and the Canada-based company’s market valuation has more than doubled since early April to above $80bn.

While venerable US retailers J Crew and Neiman Marcus filed for bankruptcy earlier this month, Shopify beat forecasts with a 47 per cent jump in first-quarter revenues.

“The retail world that would have existed in the year 2030 has been pulled into 2020. Brick and mortar retailers that were thinking of moving online have done so at an incredible clip over the last 8-10 weeks,” said Harley Finkelstein, Shopify’s chief operating officer.

“It feels a little bit like a story of two retail worlds. You have the legacy retailers — the Neiman Marcuses, the Barneys, the J Crews — that are no longer around because they did not adapt fast enough.”

Shopify on Wednesday unveiled more services for retailers, including options for small shops to set local delivery areas and compute optimal delivery routes, and finance functions to help them manage cash flow.

Worldwide lockdowns have brought retailers online that “frankly we never really saw as part of our total addressable market”, said Mr Finkelstein. “Shopify now has an entire team focused on the vertical of grocery, which is something we never did before.”

Restaurants are also turning to Shopify to supplement their income from traditional takeaways, offering meal kits, wine lists and recipe books.

Shopify does not carry out the deliveries itself, but it is building a warehouse and logistics network to compete with Amazon.

Dozens of retailers have signed up to the Shopify Fulfilment Network’s pilot phase over the past year as it has expanded to seven nodes across the US and, recently, into Canada, and the company is now “actively accepting” applications from more stores.

Mr Finkelstein warned it would still take another four years for the rollout to complete but he said being able to use services such as automated warehouses would level “the playing field” between small shops and the likes of Amazon and Walmart.

“We can go and build a network as if we were the second-largest online retailer in America and then simply distribute the economies of scale directly to small businesses, as opposed to keeping it for ourselves,” he said.

While the company has been happy to serve more than 1m retailers behind the scenes, it is now also beginning to draw more public attention. It recently launched an app, Shop, that consumers can use to track their orders from Shopify’s retailers and find new stores in their local area.

“I wouldn’t say we are becoming a consumer brand, but we are peeking our head out a little bit more,” said Mr Finkelstein.

There is “no plan” in the “immediate future” to create a service similar to Amazon Prime, where customers pay an annual fee for unlimited deliveries from Shopify stores, he said. “Then it feels like we’re a retailer,” he said. “If we did that, we’d then become a marketplace — that’s just not who we are.”

In the longer term, he said Shopify’s diverse network will help it weather any weakening consumer demand as the economic impact from the pandemic takes its toll.

“There is no one particular industry, trend or [merchant] that dominates [volumes] or revenue,” he said, while acknowledging that apparel was among its largest segments. “It’s a very long-tail business model.”

He added that the pandemic may push consumers back from experiences to material goods. “As consumers, because experiences are out of the question now, we are shifting towards stuff again,” he said.

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