Comparing BigCommerce to Shopify GMV
What is BigCommerce GMV (Gross Merchandise Value) and how does it compare to Shopify, based on its valuation? A thought experiment. Oh! BigCommerce didn't release its GMV? Let's try to back into it. They did release their number of accounts and ACV/ARR (Annual Contract Value/Annual Recurring Revenue). Let's try and guess at it.
9,000 accounts out of 60,000 are over $2k ACV. Let's say you model pricing at 0.1% of sales for rough math. That is $2M GMV for those 9,000 accounts, that would be $18B GMV but...that seems high. Almost a third of Shopify? Hmm. My guess is half that.
So instead, $1M GMV for those 9,000 accounts. 9B GMV seems more reasonable. The long tail accounts I expect are diminished GMV.
Shopify Market Cap: GMV Ratio = $130B / $61B = 2:1
BigCommerce Market Cap: GMV Ratio = $4.4B / 9B = 0.5:1
What can you learn from this?
BigCommerce has a ton of room to run both in this ratio point of view as well as GMV, which is small compared to Shopify?
BigCommerce is riding on Shopify D2C investor coattails?
Shopify is great at marketing?
This tells me three things:
BigCommerce needs a better business model and more ways to extract revenue.
BigCommerce needs to prove it can grow the GMV of its clients.
BigCommerce needs to get better at marketing to get in more deals.
If it can do those things, I predict a higher ratio.
Alex Levashov posited a different model, which I found super interesting. His thoughts below:
I think you underestimate BigCommerce GMV:
1. $1M is close to min GMV when it makes sense to take their Enterprise plan, so average should be more, hence it is more than $9B and should be more than $18B
2. The remaining 52,000 account have more than zero GMV, even if we take modest $100K per merchant it will be another $5.2B If we take GMV to $25-30B, the ratio will be closer to 5:1
Now this is what I wanted, alternative models! Fair enough, but a few points.
First, if BigCommerce was one-third to one-half of Shopify GMV (what Alex posits - let's say $20B - $30B GMV), this would be shouted from the mountaintops. As a result, it's not. Not even close.
Second, $100k for the long-tail is enormous. The numbers just don't add up. Any agency will tell you, BigCommerce is not even in most eCommerce deals. And most agencies have a 2:1 or even 5:1 ratio of their customer base in favor or Shopify, not the other way around. Doesn't pass the smell test to me.
BigCommerce is making their living on minimums. Most people DO NOT have enough GMV to cross those minimums, even on the Enterprise plan. That is just a fact of SaaS. In fact, the dirty secret of SaaS is often 10-20% of your customers have absolutely zero GMV, and yet still pay your minimums on time every month! Also, it would not be 5:1. Instead if would be 0.14 instead of 0.5. That means BigCommerce is almost comically undervalued for that GMV level. If that is truly the case, Wall Street thinks that BigCommerce business model is 100% completely broken., which I don't believe they think.
