Shopify sees slowing growth ahead after logging double-digit gains in gross merchandise value (GMV) and revenues.
Inflation is a headwind, management said, even as consumers continue to move back to brick-and-mortar commerce. Details in the earnings supplementals show that the company has seen 40% growth in offline GMV as measured in all of 2022 vs. a year ago.
President Harley Finkelstein said on the call that, with a nod to eCommerce demand and faster checkouts, Shopify Plus merchants accounted for 27% of all POS activity, which was up 12% from a year ago. And Shop Pay, the company’s accelerated checkout option that lets consumers save their data with merchants, has garnered an increasing share of GMV, at $11 billion in the most recent quarter, up 25% year on year. And, as Finkelstein noted, 100 million buyers have opted into the accelerated checkout function.
“Additionally, Shop Pay unlocks our buy now, pay later product — Shop Pay Installments — for consumers as the highest converting checkout,” he said.
Additionally, the company disclosed that 28% of traffic to Shopify stores came from buyers outside the merchant’s home country.
Demand for Shopify Capital was strong, Finkelstein said — acting as a “lifeline for merchants” — and during the quarter the company advanced about $400 million, up 21%.
Overall GMV grew 17% on a constant currency basis, to $61 billion, outpacing U.S. retail growth in the quarter of 6%. CFO Jeff Hoffmeister said that the penetration rate of Shopify Payments as a percentage of GMV was 56% for the quarter versus 51% in Q4 the prior year.
Total revenue increased 26% to $1.7 billion compared to the prior year, up 28% on a constant currency basis. Merchant Solutions revenue increased to $1.3 billion compared to 2021’s 4Q, up 32% on a constant currency basis. Subscription Solutions revenue increased 14% to $400.3 million compared to the prior year.
But looking ahead, as for the slowing growth, management noted on the call a guidance that sees “high teens” revenue growth anticipates that inflation remains elevated, pushing consumers to discounted and non-discretionary purchases. And investors, in trading action after the earnings report, pushed the shares down about 10%.
Asked on the call about checkout about the enterprise opportunity, and Shopify Plus, Finkelstein noted that the checkout offerings “currently powers something in the neighborhood of like 10% of all eCommerce in the US … and allows these very large merchants, these large brands, these established brands to combine the best parts of Shopify with things that they already have in-house,” adding that “it allows us to expand our market because we can go further up the stack of large enterprises.”
Analysts also asked about the relationship with Amazon and how that relationship might be evolving — and how Shopify might help manage relationships with merchants interested in using Buy With Prime. Management said that the company is “in talks with Amazon now to make that work.”