commercetools Open Letter provides Vast Contrast to Shopify

When a private company releases public numbers, we must dig in. And there must be comparisons. CT released a few new interesting numbers, which lets us to compare them to Shopify, even if they are aimed at very different targets.

Why this matters is commercetools - based on public press reports - seems likely IPO sometime in the next 6 - 24 months, depending on market conditions. Hiring new big executives (especially CFO) on its own is enough confirmation, but releasing yearly financial updates seals the deal.

You might say that the MACH Alliance, which commeretools pioneered, is pretty much the only other industry narrative that has firmly taken hold in Europe and North America outside of Shopify's momentum - which has captured all oxygen.

What new information did we learn from CT?

* 2023 they achieved 65% growth in ARR.

* 45% y/y growth in GMV - now over $30B (including 45% B2B)

* 200 releases + new integrations (meant to counter a Shopify Editions narrative)

* Release and growth of Connect (meant to counter a Shopify App Store narrative)

* Served 500M users in 2023

* Processed 10 million orders in BFCM period.

Last year, the company reported:

* Reaching $100M in ARR. (Let's assume by now they have almost made it to $150M ARR)

In short, the signals are here to compare to Shopify from CT itself. So let's do it.

* How many customers?

I have seen Shopify estimates as high as 5 million stores.

CT we have to guess, but let's assume around 500 customers total with 1000 total stores, it seems like a good round number.

* Shopify ('23) $235B GMV, growing 23%, which would put Shopify 8X CT $30B GMV, with CT GMV growing about twice as fast.

* Shopify BFCM $9.8 billion at est $100 AOV = 98M orders, about 10x CT BFCM 10M orders - not surprising due to Shopify consumer focus.

* Shopify $1.8B ARR ($150M ARR Dec '23) is 13X CT ARR

First drop: CT average store GMV is 638x Shopify.

* Shopify average GMV per store = $47k/year.

* CT average GMV per store = $30M/year (higher if there are fewer stores, lower if there are less)

Quite a different market focus.

Second drop: CT average ARR per store is 83X Shopify.

* Shopify average ARR per store is $360/store.

* CT average ARR per store is $30k/store.

This means Shopify must work much harder to raise ARR - which is not to say revenue per store - since that is much larger due to not considered merchant services revenue. All investors, including Shopify management, recognizes the importance of ARR/MRR in SaaS, so it's an important metric. Combined with Net Revenue Retention you might say these two metrics are the most important SaaS metrics, period.

Also this says nothing about whether Shopify CAN manage big stores, but if you look at the company averages, it tells you so much about dedicated focus of a company on one mission, versus the Shopify approach of "win everywhere."

It really is a tale of two very different companies.