Shopify Inc. (NYSE:SHOP) Q2 2020 Earnings Call Highlights
Harley Finkelstein, COO:
“…Over the past few months, we’ve seen the COVID-19 pandemic fundamentally shift the way businesses and consumers interact. It has catalyzed e-commerce, introducing major changes in buyer behavior and pulling forward what retail would look like in 2030 into 2020. Many merchants were caught off guard, and we knew that Shopify needed to act fast to help them survive. So from late March through the second quarter, we dialed up our urgency to enable independent businesses to adapt and compete in this new reality. This urgency helped more merchants not just survive, but thrive in a period of major upheaval.
I cannot recall a time in our history when we have shipped so many features in such a short period of time, helping so many merchants recover and many others reach new levels of success. As a result, Q2 GMV growth accelerated to its highest level since before our 2015 IPO, driving Shopify’s cumulative GMV to over $200 billion. Stores selling on Shopify sold 1.5 times what they did in Q4 of last year, the seasonally strongest quarter of the year, and that number of stores is growing all the time. This tells me that we’re on the right track and made the right decisions early in the pandemic. The success our merchants are seeing motivates us to push even harder.
In Q2, Shopify hosted its first virtual company event, Shopify Reunited, which attracted more than 50,000 viewers, far more than we would have been able to reach with our annual in-person event. Our new product and feature announcements span the online store, multi-channel capabilities, retail, shipping and finance, all geared towards helping merchants navigate and quickly adapt to a rapidly changing commerce landscape. I want to highlight a few of these features, and then I’ll provide an update on how our merchants are responding in the current environment. Our progress with Shopify Plus and our partner eco-system, we shipped the express theme, a free theme designed to get any business online quickly, such as restaurants and cafes. We also introduced online tipping to support the food and services industries and businesses offering local delivery. We introduced natively integrated channels from Facebook shops, Walmart.com and Pinterest, enabling our merchants to sell in more places where their buyers are and driving new traffic to their stores.
As code research and deals, our retail merchants are focused on protecting their customers and employees by leveraging safe distance technologies such as contract less payments. After introducing the new Tap & Chip hardware in the U.S. last year, we rolled it out in Canada following the global launch of our all-new point-of-sale software in early May. Together, our point-of-sale offering is a powerful product that provides a seamless omni-channel experience for both the merchant and the buyer. The shift to online commerce is redefining the role of the physical store, and many retailers are reimagining their stores to serve as order fulfillment centers to meet digital demand, so we enhanced our curbside pickup and our local delivery capabilities to give merchants more control of their retail operations by driving last-mile execution. We also announced two financial services products since launch in the U.S. later this year, Shopify Balance and Shopify Installments.
We’re introducing Shopify Balance to further level the playing field, giving our merchants access to their cash faster and providing critical money management tools to effectively manage their business. To our no fee business accounts, merchants will be able to understand cash flows, track expenses and pay bills. Merchants will also receive a physical or virtual card, which will help them access their own sales revenue faster than before, and get rewards like cash back and discounts that will help more of our merchants reinvest in our future.
Our upcoming buy now pay later product, Shop Pay Installments will let merchants give buyers more options by paying in installments with no interest and no fees. Working through our partner, a firm, we will offer a product that can help merchants to sell more by increasing cart size, and sales conversion rates. Shop Pay Installments will be integrated into our accelerated checkout Shop Pay, which offers four times faster checkout and close to two times higher conversion than regular checkout options, providing a frictionless experience for merchants and their buyers. Since its launch, Shop Pay has facilitated cumulative GMV of more than $11 billion. Entrepreneurs have proven time and again that they’re resilient and resourceful, and here’s how merchants are tackling their challenges head on in the midst of the COVID-19 pandemic.
First, our merchants are creating new buyer opportunities. 39% of brick-and-mortar merchants in our English-speaking geographies adopted some form of local in-store curbside pickup delivery sources in Q2. That is up from 26% in early May to meet increasing local demand. Merchants also saw more local customers shopping at their stores, with the percentage of local customers per shop again increasing quarter-over-quarter. Merchants also grew their multi-channel presence over the second quarter with a greater proportion of merchants installing two or more channels in an effort to reach broader audiences.
Second, more merchants are leveraging merchant solutions as they seek to reduce friction while growing their businesses. More merchants access capital quickly in Q2 as a number of U.S. merchants accepting capital rose, and we offer financing for the first time to merchants in the U.K. and Canada, where we launched Shopify Capital in March and April, respectively. Cumulative funding across all the countries reached $1.2 billion at the end of June. More merchants also use Shopify Shipping as new users fulfilled their very first orders on the platform, and we expanded our offering to Australia. Adoption increased to 49% of eligible merchants in the U.S. and Canada in Q2, up from 42% in the same quarter last year.
And third, our merchants access new opportunities to strengthen customer relationships and loyalty. Merchants leverage tools, like Shopify Email and the Shop App to deepen merchant relationships with buyers and increase customer lifetime value. Over 150 million e-mails have now been sent through e-mail campaigns since Shopify Email launch in Q1. Shopify Plus merchants experienced an exceptionally strong second quarter. More brands joined Shopify Plus this quarter than ever before as merchants from lower-level plans grow their sales and upgrade and more large brands seek to scale their businesses in an Agile cost-effective manner. This is especially critical right now as digital commerce accelerates and an uncertain macroeconomic environment persists.
The optionality that Shopify Plus offers from speed to market to cost and the ability to experiment and act like an entrepreneur is resonating heavily with enterprise all merchants, encouraging them to rethink their channel strategies and accelerate their time lines towards digital transformation. In our second quarter, brands from different verticals launched stores on Shopify Plus, including the legendary by company found in 1895, Schwinn; beachwear company, Hurley; and Wester apparel brand, Stefan; Canadian grocery store, Farm Boy; U.K. food and drink CPG, Princes; chocolate bar company, Snickers; and the major beer company, Molson Coors, and many more brands across a range of products and industries.