Shopify, the Canadian e-commerce platform, is currently experiencing a setback in its efforts to recover from past mistakes. Weak consumer spending and rising costs are deterring businesses from joining the platform, resulting in a decline in merchant growth. Research from YipitData reveals that Shopify only added 71,000 net merchants in the first half of 2022, a significant drop compared to the 680,000 added during the peak of the pandemic in 2020 and the 314,000 added last year.

As a platform, Shopify provides merchants with the necessary tools to set up their online stores and payment systems, earning a fee in return. The fee structure varies, ranging from $29 per month for the basic offering to $2,000 for Plus subscriptions, which grant access to advanced tools. However, due to the decline in online shopping, Shopify’s earnings have been impacted, leading to job cuts. The company had initially expected the surge in demand witnessed during the pandemic to continue, but this has not been the case.

Analysts from YipitData warn that unless Shopify manages to significantly increase the number of merchants in the second half of 2022, it is on track to experience the lowest net merchant additions in a year since at least 2018. The slowdown in merchant growth is primarily affecting non-Plus merchants, which are smaller businesses that are more vulnerable to inflation and rising interest rates. This, in turn, could also have an impact on the growth of Plus merchants, who are pivotal in driving Shopify’s gross merchandise volume. If the number of new merchants entering the platform decreases, there could be fewer conversions to the Plus subscription.

Experts emphasize the importance of attracting new merchants to the Shopify platform in order to sustain its growth. Without a steady influx of new merchants, Shopify risks stagnation and potential declines in revenue. Despite the challenges, Shopify remains optimistic, pointing to the success of its Plus offering in its latest results. The company highlights that prominent brands like ASICS and Hewlett Packard have migrated to Shopify Plus, and there have been numerous “homegrown success stories” as well.

In conclusion, Shopify faces challenges due to weak consumer spending and rising costs, which are impacting merchant growth on its platform. The success of the company hinges on its ability to attract new merchants, particularly to its Plus subscription, which offers advanced tools and drives gross merchandise volume. However, with a decline in online shopping and businesses exercising caution amid economic factors, Shopify must devise strategies to overcome these obstacles and sustain its growth trajectory.

Useful links:
1. Shopify Official Website
2. Shopify Plus