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- While Shopify makes most of its revenue by taking a cut of the transactions processed on its platform, the real value is in the ecosystem it creates.
- Fulfillment, payment processing, point-of-sale systems, and marketing are just a few of the value-added options merchants have when it comes to using Shopify as a commerce platform, and each one is a vital part of its increasingly sticky pie.
- For small business customers who lack IT skills, they are unlikely to switch e-commerce platforms. For enterprise accounts, they are likely to be attracted by competitive pricing (despite price increases), quick implementation, and ease of use.
- In its first quarter, sales grew 23% to $1.9 billion, or 29% on an underlying basis when adjusted for the sale of its logistics business. Sales growth was driven by merchant base growth, same-store sales from existing merchants, price increases, and higher revenue from merchant solutions (such as Shopify Payments).
- Operating expenses in the period decreased by 4% following the sale of the logistics business and staff reductions. Cost-cutting efforts were partially offset by higher marketing spending, which the company justifies due to the continued growth of its merchant base globally (which helped sales volume across all merchant stores increase by 23% to $60.9 billion).
- In our view, the company remains well positioned for further growth, including continued merchant growth, increased Shopify Payments penetration, impressive international sales, and the addition of larger retailers to the platform.
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