- Shopify continues to add new features to its Shop app.
- Shop could be an important growth driver for Shopify’s payment products, analysts said.
- It also allows Shopify to compete with companies like Amazon, PayPal, and Square.
Shopify continues to update its consumer-facing Shop app, and analysts say it could spur growth in its payment processing systems and help the company compete more directly with PayPal and Square.
The Shop app started out as Arrive, a package tracking app launched by Shopify in 2017. Arrive was rebranded to Shop in April 2020, with new features such as the ability to buy from local businesses and to receive exclusive product updates from the brands users have purchased from. before. Shopify has since added new features to the app, including the ability to search merchants for products and send gifts with just text.
The company has indicated in earnings calls and on its careers page that many more features are on the way.
Shop’s growth is significant for several reasons, analysts say. It provides an opportunity to establish Shopify as a standalone consumer brand that can more directly compete with Amazon for customer dollars.
But a key part of the app’s evolution is that it entices merchants to sign up for more of Shopify’s services, especially payments, where it competes with players like PayPal, Apple and Square.
Shopify has set up its ecosystem in such a way that merchants must use certain services in order to be eligible for others. For example, they must be enrolled in Shopify Payments to use Shop Pay, and they must use Shop Pay to have their products listed for sale in the Shop app.
Merchants choose to sell their products on Shop, just as they would on other sales channels like Facebook and Google. By building Shop to be a more engaging experience for customers, Shopify can make its entire suite of services more appealing to merchants and ultimately drive more revenue.
Guggenheim Securities analyst Ken Wong described it as a “if you build it, they’ll come” dynamic.
“Now that they’ve introduced customer engagement and customer buying, it almost forces the hand of any large merchant who wasn’t using Shopify Payments to reconsider, because you don’t want to be left out of that particular market,” said Wong told Insider.
Shopify still needs to bring more consumers to the Shop app — and demonstrate that it’s a shopping destination that users should keep coming back to. According to Apptopia, Shop was the third most downloaded shopping app in the US in 2021, with 30 million downloads, an 11% increase from 2020. Amazon was first with 40 million downloads, and Shein , the fast fashion retailer, was second with 32 million.
Shopify “has long spoken of a desire to have more of an initial brand with consumers,” Wong said. “Having a Shop app would enhance their brand image.”
A “fairly solid base” on which to build
The Shop app is inextricably linked to Shopify’s payments efforts, as it allows shoppers to make purchases directly from merchants.
Payments are becoming a bigger part of Shopify’s revenue. In the third quarter of 2021, the most recent quarter for which Shopify reported results, the company said Shopify Payments accounted for $20.5 billion in gross merchandise volume, or 49% of Shopify’s total GMV for the quarter. .
Shopify generates revenue from every transaction made on its platform. Shopify Payments is a payment processor that merchants can install at checkout, charging fees between 2.4-2.9% to process purchases with major credit cards. Merchants can use third-party payment processors instead of Shopify Payments, but they are subject to additional transaction fees of up to 2% if they do.
“If you buy things from Shopify merchants and you use Shopify Payments as your payment option, they have your payment credentials, they have your payment history, at least what happened on their platform,” said Colin Sebastian, Baird analyst.
Shopify also offers a digital wallet product called Shop Pay, which streamlines shopping by storing and encrypting buyers’ payment information, similar to PayPal or
Pay Apple
.
In 2021, Shopify announced that it would make Shop Pay available to any business selling on Facebook or Google, whether or not they are a Shopify merchant.
“It’s a pretty solid foundation, where they could turn Shop Pay into a competitor to PayPal and bring digital payments to more merchants outside of the Shopify platform, which can include both in-store and online” , Sebastian said.
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