[Overseas Stocks Spotlight] "Shopify, Amazon's Only Competitor"

[Asia Economy Reporter Eunmo Koo] Shopify (SHOP.US) is expected to emerge as the sole competitor to Amazon in the future, based on a solid ecosystem of consumers and sellers.

Shopify is a global shopping mall support solution company, with its main revenue models being subscription revenue (monthly fees based on plans) and merchant revenue (commission revenue: capital, shipping, payment). In 2019, the revenue proportions were 41% and 59%, respectively. Shopify has over 1 million merchants, with major competitors including publicly traded Wix and privately held BigCommerce and Woocommerce.

Shopify is simultaneously listed on the Toronto Stock Exchange (SHOP.TO) and the New York Stock Exchange (NYSE), consisting of Class A shares with one voting right each (listed, approximately 106.77 million shares) and Class B shares with ten voting rights each (unlisted, 11.9 million shares). Class B shares are held by the founders and management, accounting for 53% of total voting rights.

On the 20th, Mirae Asset Daewoo forecasted that Shopify would stand out as Amazon’s only rival based on its firm ecosystem of consumers and sellers. On the same day, Yongje Chung, a researcher at Mirae Asset Daewoo, stated in a report, “Shopify’s user-friendly mobile-based user interface (UI) and additional services such as shipping, pay, capital, and app store, along with various sales channels, will deepen sellers’ dependence on Shopify.”

He added, “The fulfillment network (SFN), which started last year, signifies securing differentiated delivery competitiveness beyond Shopify’s existing ecosystem, and the evolution strategy into a shopping platform on mobile platforms (SNS and messengers) is expected to benefit Shopify by connecting merchants with the platform.”

Regarding this year’s performance, although there is a slight possibility of a downward revision in the sustainability of improved growth rates from April, the novel coronavirus disease (COVID-19) is evaluated positively for strengthening Shopify’s mid- to long-term growth potential. Mirae Asset Daewoo expects Shopify’s revenue this year to increase by 42% to $2.25 billion, and operating profit to grow by 9% to $46 million.

Researcher Chung said, “With COVID-19 as a turning point, the penetration of e-commerce into the retail market and the rapid expansion of new categories such as food and groceries are expected. Amid this, the expansion of the fulfillment network (starting in earnest in 2021), the establishment of additional services such as pay, shipping, capital, and app store, and the recent launch of the shopping app ‘Shop’ will deepen merchants’ dependence on Shopify.”