Shopify Takes a Stake in Faire: Shopify POS Rising
Shopify took another swing at the B2B Marketplace world by investing in Faire.
What's Faire? Faire connects brands looking to sell inventory in independent retailers at wholesale prices. In other words, a B2B marketplace. As a marketplace, it needs to benefit both sides. Retail buyers are looking for new brands to stock for their consumers in stores. Brands are looking for distribution channels to sell their products through.
What Are the Terms of the Arrangement Between Shopify and Faire?
Faire now becomes the recommended wholesale marketplace for Shopify.
Shopify Point Of Sale (POS) is now the recommended provider for the Faire community.
There are a lot of features coming for the Faire, Shopify integration — more than I expected.
What do I think about the deal? (Speculation)
What Implications Does This Deal Hold for Shopify's Point of Sale (POS)?
For the POS partnership alone, I think the deal is probably worth it for Shopify. Shopify is doing what no eCommerce platform I’ve known has done in the past, try to own the POS stack as well as the eCommerce stack. This likely makes it more and more difficult for payment providers and POS vendors to partner with Shopify going forward, similar to how you don’t see alternative checkout providers on Shopify anymore.
What Values Alignment Exists Between Faire and Shopify?
There is values alignment between Faire and Shopify, both supporting independent retailers. And in particular, this deal is about Shopify Point of Sales. Whether or not Faire does a fantastic job, Shopify now has access to a lot of retailers.
What Are the Opinions of Brands Regarding Faire?
I hear extremely mixed reviews about Faire from brands I speak with. The expense is a big part of that, but the service levels are also consistently mentioned. COVID and the end of COVID likely has not been kind to independent retail. Retailer cashflow is tighter, and web traffic to Faire from public sources seems off significantly in the past year.
What Is the Current Valuation of Faire and What Factors Could Impact It?
What is Faire valued at? The key question. In May 2022 they were valued at around $12 billion post money. I would expect their current valuation to be a tremendous amount less than that.
Under the radar news is that Faire is involved in a lawsuit, making it more difficult for them to raise capital — yet another reason the valuation is likely on the lower side.
What Could Be Shopify's Investment in Faire Based on Valuation?
Let’s say that the fair valuation for Faire is in the $1 billion range now that we are back in valuation reality ($100M revenue at Faire on mixed growth? My guess 🧐). I would expect that Shopify for its part would want about 8% of the company. That would put Shopify’s investment at around $80 million.
Could Shopify's Stake in Faire Be Larger Than Anticipated?
This is kind of the nail in the coffin from the previous B2B Marketplace Handshake acquisition, though they did get Glen Coates out of it 🙂
Given the length of the upcoming roadmap, it could be that Shopify’s stake is even larger than this, or the valuation is lower than even my discount.
Did Shopify secure favorable marketplace terms for Shopify merchants as part of the deal? Extremely likely, but time will tell.
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