E-commerce isn’t what it used to be. Customers began shopping online at unprecedented rates during the pandemic, but digital sales have since slowed significantly and caused e-commerce stocks to plummet.
Shopify (NYSE: SHOP) has been one of the biggest losers. If you were to pull up a chart of Shopify’s stock performance since the beginning of 2020, you would be met with a worrying sight. Since reaching a pandemic high of over $1,600 a share toward the end of 2021, shares have returned to where they were pre-pandemic, forming the dreaded inverted parabola.
But Shopify may have found a catalyst that can recoup those losses. On Wednesday, the e-commerce giant announced more than 100 new product releases, including the addition of a business-to-business option.
The updates are part of a new semiannual initiative from Shopify called Editions, which the company will use to showcase new product launches and features. In the inaugural Editions, Shopify highlighted an array of e-commerce tools, including tap to pay for iPhone, NFT-based shopping and an integration with Twitter Shopping that moves it further into social commerce.
But perhaps the most significant addition is B2B on Shopify. Armed with a full suite of B2B commerce tools, the company could jump-start its rebound by entering a market it views as having “billions in untapped revenue.”
“It is an opportunity for us to expand our (total addressable market),” Harley Finkelstein, president of Shopify, told the Financial Times. “Not just go after direct-to-consumer businesses, big and small, but to now go after wholesale business, which is a huge untapped market.”
Experts generally agree. A 2021 Wunderman Thompson report found nearly half of all B2B purchases are made online, while a 2021 survey from PwC revealed around two-thirds of businesses consider implementing digital marketing and sales a business priority. Four out of 10 considered it a top business challenge.
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However, a survey from BigCommerce highlighted a few concerns with B2B e-commerce, with fulfillment chief among them. It found that more than three-quarters of B2B businesses use Amazon’s marketplace to sell or advertise, likely due to the integration with its highly touted Fulfillment by Amazon service.
But fulfillment may not be much of an issue for Shopify either and that could be the key to turning B2B e-commerce into a profit driver. In May, Shopify completed the largest acquisition in its history when it bought end-to-end logistics provider Deliverr for $2.1 billion. The deal followed months of flak from analysts, who criticized the e-commerce giant for terminating several contracts with fulfillment centers.
The Deliverr acquisition also came immediately after Amazon released Buy with Prime, which has the look of a game-changer for the marketplace. Buy with Prime allows merchants — including those not on the Prime platform — to offer their customers Prime benefits such as free and next-day delivery.
Adding Deliverr wasn’t quite the blockbuster move that Buy with Prime appears to be, but it did even the playing field a bit for Shopify. Using Deliverr’s nationwide fulfillment network, which has warehouses within 100 miles of half the U.S. population, the platform can offer perks like two-day shipping and easy returns.
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Notably, Deliverr handles B2B deliveries. That means that while Shopify’s B2B offering probably won’t be quite as fast as Amazon’s, it might be sufficiently fast to entice enough merchants to turn a profit.
That’s something Shopify needs right now. In its most recent earnings report, the e-commerce giant fell far short of analyst expectations for earnings per share and also missed slightly on revenue. Shares of the company dipped more than 15% over the news.
“While investors were braced for a shortfall, particularly after weakness at other e-commerce companies, SHOP’s Q1 still fell short of the lowered bar,” said Jefferies analyst Samad Samana in a note to clients.
Adding to the recent pressures, Mawer Investment Management, one of Shopify’s investors, bailed on the company this month citing concerns about slowing e-commerce growth. Mawer had held its stake in Shopify since 2017.
But it appears investors are regaining faith in Shopify after this week’s announcement — at least early on. The company’s stock opened at around $325 the day B2B on Shopify was introduced, but by noon Thursday it had reached $360. That’s still a far cry from Shopify’s position at the end of 2021, but shares have gained 20% in value since June 15.
In order to avoid becoming the new WeWork, Shopify will need to steal some market share from Amazon, which generates $470 billion in annual revenue compared with Shopify’s $4.6 billion. But with Buy with Prime in the opposite corner, B2B on Shopify has entered the ring — and it may just have a fighting chance.
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