Shopify’s turnaround strategy: When Shopify announced it was laying off 10% of its workforce last July, it was one of the first big-name tech companies to cut staff as pandemic growth slowed down.
- At the time, CEO Tobi Lütke took the blame, saying that he had wagered on continuing strong growth and admitting “it’s now clear that bet didn’t pay off.”
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The company has since made a number of moves aimed at shoring up its revenues to compensate for slowing ecommerce growth. It recently raised prices for its monthly plans by one-third, its first significant price hike in 12 years. It also rolled out a new enterprise solution to make it easier for large retailers to integrate its products into their tech stacks, and it has been investing heavily to build its own fulfillment network to offer next- and two-day delivery for the merchants on its platform.
- However, the company faces a clear challenge from Amazon, which recently expanded the reach of its Buy with Prime service, which allows retailers to leverage Amazon’s fulfillment and payments services.
Analyst take: While many headlines focus on Shopify’s lower-than-expected outlook for Q1, they neglect to recognize the better-than-expected gains the company made in Q4, including the critical final two months of the year.
- Roughly 52 million consumers made a purchase from brands powered by Shopify between Black Friday and Cyber Monday, a 12% increase year-over-year. That helped Shopify merchants generate $7.5 billion in sales between Black Friday and Cyber Monday, a 21% jump year-over-year on a constant currency basis.
- While Shopify’s growth has slowed, and is expected to slow in Q1, it is easy to lose sight of the fact that we expect its US retail ecommerce GMV this year to be roughly double what it was in 2020. That’s thanks in large part to its broad-based growth strategy in which it looks to appeal both to small and enterprise-level companies by offering an array of tools that spans everything from social commerce to advertising to payments.
Go further: For more on Shopify's growth prospects, read our Spotlight report.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.