A Few Disturbing Takeaways From Shopify's Recent Investor Call
Last week, Shopify’s president Harley Finkelstein and CFO Jeff Hoffmeister were at the Morgan Stanley TMT Conference where they provided updates on their new Enterprise solution, Commerce Components by Shopify, and its Fulfillment Business.
Here are the top statements I took from the event:
1 - Shopify Fulfillment Network is really about Shop Promise. Harley said the company wanted to be able to display a badge to merchants and this badge has been proven to improve conversion rates by up to 25%.
Well, if this is true, I feel a little bad for Shopify. I personally know at least three different companies that can predict shipment dates which would not have cost $2 billion dollars. Then you can buy a 3PL if you want for 1 times revenue to put in the background.
What Harley should have instead said is that sure, we can provide a badge, but that badge is worthless without fulfillment excellence. Unfortunately, they gave analysts no idea how they will make that happen except to push more work to partners.
2 - Shopify expects between tens of thousands and millions of merchants to use Shopify Fulfillment Network.
While he didn’t use numbers, CFO Jeff Hoffmeister provided a kind of range that might predict logistics adoption at Shopify. He said that Shopify’s adoption of its tax software signed up tens of thousands of merchants on the one hand, and on the other hand, Shop Pay adoption as a percentage of its total gross merchandise volume is now at 56%.
Can we be real for a minute? Jeff is misinformed at best here and delusional at worst. Logistics adoption is not in between the range of these two terrible examples provided by the CFO.
Logistics adoption is about ten times harder than changing a payment processor because it requires inventory movement and a lot more trust.
3 - Shopify refused to pick a single target market.
When Shopify was asked what its target market was, it essentially was “everyone”. Of course this is the answer the company would give, but it’s going to be problematic in the long term. Investors want to see a focus, and I think in the long-term it’s not going to be intellectually honest.
The reason is that Shopify is no longer a company that makes most of its money on subscription software. It makes most of its money from payments. Just say, over time our business model demands that we are focused more on up-market than entrepreneurs.
You can say the words!
4 - Shopify says it will sign a deal with Amazon over Buy With Prime.
This one was surprising, but the company must keep answering this way because financial analysts are asking. Shopify could have just said the company is not inclined to sign.
What did they later say? A deal will likely get done with Amazon, but it will be on Shopify’s terms, leaving merchants in control over the customer, the data, and the back-office experience. This part of the answer I liked.
