Third & GroveThird & Grove
May 4, 2021 - Justin Emond

The Hidden Insights in Shopify's Q1 Earnings


The numbers are in and the numbers are, well, damn good. Shopify recently announced their Q1 earnings. You can see the full report here. As usual with Shopify the release of these earnings resulted in some good press, but most of the coverage has completely missed a few details in the earnings that will have a profound impact on enterprise adoption of Shopify.

Bottoms up

The future of commerce, argues The Economist, is from the bottom up, growing from vibrant consumer-first communities. This is why the Facebook numbers from the Q1 earnings report are crucial to understand: Shops actively selling on Facebook have more than quadrupled from a year ago, including when measured by the Gross Merchandise Value. These brands are in the early stages of onboarding Shop Pay on Facebook and Instagram. New features that provide greater ease of use for customers usually prove profitable for businesses, which means we may see even higher returns next quarter.

Bottom line: Shopify’s mission to democratize e-commerce is working, which will profoundly impact how Americans buy and sell online for the next decade.

The post-purchase experience is leaving the website

Shopify’s native mobile application for tracking orders now has more than 100 million registered users. You read that right: An app focused on tracking orders you already made has more users than the total number of people who live in Germany. And these 100 million users really, really like checking their order status: The average buyer checks their order multiple times and there are more than 24 million monthly active users using the app. Mobile reorders are 11% more likely to occur when orders are tracked in Shop.

Brands that seize the opportunities to interact with customers during the order fulfillment phase will reap enormous benefits. 

The platform effect is taking off

Overall, revenue growth accelerated from the last quarter, up 110% year-over-year to $988.6 million in their first quarter. To put this in perspective, Shopify’s first-quarter revenue exceeded their fourth-quarter revenue, a remarkable achievement given they typically see a seasonal decline quarter-over-quarter coming off the holiday selling season. Subscription solutions revenue growth accelerated to 71% year-on-year in Q1 to $320.7 million, mainly due to strong monthly revenue growth.

Shopify Plus is a platform business: Like Airbnb, Uber, and many others, they benefit from the virtuous feedback loop of merchants drawn to the platform because of how many apps exist to extend functionality, and app developers are drawn to the platform because of the merchants. When you throw in additional network effects like Shop Pay (accelerated checkout on every single Shopify store in the world if you have made one purchase anywhere once) and the Shop App, the charts start to go exponential. 

Shopify Capital 

The global economy is made up of just two things: labor and capital. For those of us that live in the west, we control the output of our labor, and each of us has the same amount of time in our day: 24 hours. But not all of us have access to capital. But as Shopify knows, capital is the great leveler of wealth inequality in the 21st century. 

It was a gamble for an e-commerce platform to engage in assisting small business owners with financial support. Nevertheless, in 2016 they took the gamble. Fast forward to the first quarter of 2021 and they funded over $300 million to Shopify merchants (up 90% from the previous year). The funding has brought an incredible $2 billion in cumulative capital funding.

It took four years to fund the first billion and just a quarter of that time to fund the second. 
Let that sink in.

So what does the leading e-commerce platform of the future look like? 

This, it looks exactly like this.