Although Amazon remains the singular titan of online shopping, Canadian company Shopify has carved out space as an e-Commerce force to be reckoned with. The company had a banner year in 2021, with holiday sales in particular breaking records; according to CNBC, Shopify’s Cyber Monday transactions alone brought in over $5 billion. Just a few days earlier, meanwhile, its Black Friday deals booked nearly $3 billion (which represented a 22% increase from the previous year). Despite all this revenue though, Shopify has started the new year in less-than-stellar fashion. Just this January, company shares plunged by a whopping 30%.
The Rise and Fall of Shopify
What makes Shopify’s drop particularly significant is that it was almost totally unexpected. One of the few major companies that actually gained from the pandemic, Shopify had –– as mentioned –– seen massive growth since 2020. Most notably, this was thanks to the rapid swelling of the brand’s seller population. As explained in an introductory article on AskMoney.com, Shopify’s popularity among merchants is due to its low startup costs, accessible interface, and easily customizable online store templates. Essentially, this means that for a reasonable fee, Shopify merchants can do their promotions, posting, selling, and transaction fulfillment all through a single platform. This stands in sharp contrast to Amazon, which notoriously has complicated and unfair processes for sellers. With over 1.75 million merchants, including celebrities like Martha Stewart, Shopify was poised to become an e-Commerce winner in 2022.
Unfortunately, the January share drop has stalled Shopify’s success. A combination of waning e-Commerce sales and fulfillment network concerns is the main cause for this. Regarding the former, analysts are expecting more sales to funnel back into brick-and-mortar retailers as physical restrictions ease up. As for the latter, following reports that Shopify was reducing contracts with warehouses and fulfillment centers, stakeholders were understandably worried that performance would be impacted. All in all, this resulted in a near-50% drop from Shopify’s all-time-high value last November.
Presently, a report on Financial Post states that Shopify is no longer Canada’s biggest publicly-traded company. It now sits in third place behind Royal Bank and Toronto-Dominion Bank.
What’s Next for the e-Commerce Giant
By the first week of February, Shopify had already seen a small yet meaningful improvement in share price. This increase came following clarification that the company’s fulfillment centers were merely adjusting — not downsizing. At the same time, evidence suggests that Shopify is embracing more tech innovations to future-proof its business model.
Previously, we reported here on F450C that blockchain would be a huge game-changer in e-Commerce. By providing more secure, convenient, and seamless data security, supply chain management, and payment processing, blockchain is expected to relieve numerous e-Commerce pain points. In line with this, Shopify has embraced blockchain technology by offering NFTs and accepting crypto payments. Additionally, the company was recently granted a patent for an AR body-measuring technology. As shared on Retail Wit, this tech aims to alleviate sizing issues among customers. Industry experts also believe that this may signal Shopify’s future plans to dip into physical stores, as Amazon has already done.
So, does the early stumble mean a year in the red for Shopify and its investors? Finance and e-Commerce analysts say no. Though the drop has been worrisome, it appears that Shopify may yet experience a valuable year. How soon it can regain its previous glory, though, remains to be seen.