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• While Shopify derives most of its revenue from taking slices of transactions processed on its platform, the true value is in the ecosystem it creates.
• Fulfilment, payment processing, point-of-sale systems, and marketing are only a few of the value-added options that merchants have when it comes to using Shopify as a commerce platform, and each of these is a vital piece of its increasingly sticky pie.
• For small business customers that might lack IT expertise, it’s perhaps unlikely that they would switch e-commerce platforms. For enterprise accounts, they’re likely drawn to Shopify’s competitive pricing (despite price increases), quick implementation and ease of use.
• In its first quarter, sales grew by 23% to $1.9bn, or 29% underlying when adjusted for the sale of its logistics business. Sales growth was driven by growth in the merchant base, same-store sales of existing merchants, price increases, and higher merchant solutions revenues (such as Shopify Payments).
• Operating expenses in the period declined by 4% following the sale of the logistics business and lower headcount. Cost-cutting efforts were partially offset by increased marketing spend, which the company is justifying due to continued growth in the merchant base globally (helping sales volume across all merchant stores rise 23% to $60.9bn).
• In our view the company remains well positioned to continue growing, including continued merchant growth, greater Shopify Payments penetration, impressive international sales, and larger retailers joining the platform.