In the field of electronic commerce, Shopify (NYSE: SHOP) has become the first platform used by entrepreneurs to sell their goods and services online. The company has more than 1.7 million traders worldwide, compared to just 1 million at the end of 2019.
Still, investors may be surprised to find that the vast majority of Shopify merchants are located in North America. In fact, the data suggests that around 56% of traders using the platform reside only in the United States and Canada. Selling beyond their own geographic boundaries represents a huge opportunity for merchants, and Shopify has just taken a decisive step in helping sellers take this next big step.
An important stake
Earlier this month, the company announced the launch of Shopify Markets, a new hub that helps traders find and manage global trade opportunities. The platform “helps remove the complexity of international commerce and enables independent merchants to sell to consumers around the world,” Shopify said in a press release.
Shopify Markets is undoubtedly the result of a broader collaboration and partnership with Global-E online (NASDAQ: GLBE). The company strives to make cross-border sales a reality for online retailers, eliminating many of the challenges associated with international trade. Global-E handles a wide range of complications related to cross-border selling, including currency conversion rates, translation into foreign languages, and handling of local market regulations including customs and tariffs.
Global-E recently went public, with backing from Shopify, which has acquired a significant stake in the company. Shopify acquired a stake of 7.75 million shares, or roughly 6.5% of Global-E’s shares before its IPO in May, although its percentage of ownership fell to around 5.4% after it went public. the newly issued IPO shares were put on the market. The story does not end there, however. Shopify has also purchased warrants allowing it to acquire an additional 11.85 million Global-E shares over the next two years.
Finally, Shopify has named Global-E as the exclusive provider of cross-border services for merchants on its platform, the initial three-year agreement and the option of annual extensions. All of this represents a huge vote of confidence in the fledgling state-owned enterprise. That’s not to say that Global-E is a newbie to space, having first opened in 2013.
Take your game to the next level
Shopify already provides merchants with many of the tools they need to sell in various geographies, including multiple currencies and international domains, but this platform is taking its cross-border retail capabilities to the next level. By providing merchants with all the tools they need to sell internationally, Shopify is dramatically expanding its market opportunities.
According to Shopify, total global e-commerce hit a record high of $ 4.2 trillion in 2020, growing 25.7% year-over-year. In the future, cross-border sales could represent up to 20% of all e-commerce transactions by 2022, according to estimates provided by Forrester Research.
The very definition of a win-win
By helping its merchants facilitate cross-border sales, Shopify is helping itself, increasing not only its revenue, but also its gross merchandise volume – or the total value of products sold on its platform. Both metrics are closely watched by investors, allowing them to more accurately assess the growth of the business.
At the same time, Global-E is attracting a captive audience of over 1.7 million marketers looking to increase their sales. By managing the challenges and complexities associated with selling across borders, Global-E increases its own revenue, while simultaneously building its credentials with other online sellers.
Investors on both sides of the equation should rejoice.
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