shopify entrepreneur

Shopify’s Growth And Profitability 2022

Introduction

Without a doubt, Shopify is one of the most outstanding marketplaces in the industry today. While they’ve been through years of disappointing revenue, they’ve finally come into a season of positive profits.

In 2021, this powerhouse marketplace has achieved record-breaking revenue and GAAP profits. Indeed, the COVID-19 pandemic has played a critical part in the company’s progress, thanks to the closure of various retail stores.

Lockdowns have pushed the rise of online shopping further. In the last four quarters, Shopify has accelerated its revenue by more than 90%. In the first quarter of 2021, it has even reached the peak of a 110% increase in profit or at least an equivalent of $988 million. 

For any business, this is truly remarkable. Given these metrics, it is without question that Shopify is soaring high in the industry.

Shopify Profitability And Cash Flow

Shopify’s growth metrics in the recent quarters have been impressive. However for Shopify to thrive long-term in the ecommerce space, it must deliver promising cash flow. Currently, things are looking positive for Shopify. 

Here are some of the industry highlights and solid metrics you need to take note of:

  • $650 million cash flow
  • 26% Return on Equity
  • 53% Gross Margin
  • 45% Net Margin
  • $1.6 billion net income (GAAP)

According to industry statistics, Shopify has $490 million in free cash flow in the TTM period. Looking at these metrics in a bird’s eye view, it’s pretty clear that Shopify’s earnings are supported by the marketplace’s cash flow.

Shopify 2022 Q4 Forecast

It is seen that Shopify’s next biggest win is in the 4th quarter of 2022. We all know how the year’s last quarter is filled with the most awaited holidays, resulting in people shopping more than usual. 

While Shopify isn’t acknowledged as a retailer, it encourages people of the same bracket to take online selling as an opportunity. Just like Shopify, these online retailers also benefit from the holiday season. Shopify vendors have already accumulated a total of $6.3 billion during the Black Friday weekend last year.

COVID-19 Pandemic: Shopify’s Trampoline To Success?

Here’s one thing you should know about- the COVID-19 pandemic wasn’t the birth of Shopify’s winning spree.

Even before the worldwide pandemic, Shopify has already been on a roll with its revenue from the year 2012 to the year 2019. In just 7 years, their profit jumped from $24 million to $1.6 billion.

At present, Shopify has already claimed the top 2 spot in retail ecommerce sales in the United States, following the business giant Amazon.

Shopify Over Amazon

It is an interesting fact that some entrepreneurs prefer to go with Shopify over Amazon. Why you may ask?

Here are some of the reasons you should take note of:

  • Shopify contains more favorable terms 
  • Absence of conflict of interest
  • Amazon sells their products vs third-party sellers; this may be viewed as competition
  • Compared to Amazon, Shopify aids their merchants to establish an online presence without a massive capital

Without a doubt, Shopify will continue to rise into the space of revenue growth and international expansion.

Shopify And Its Other Competitors 

Let’s take a deep dive into Shopify’s competitive landscape. Here are some of its widely known competitors in the ecommerce space:

  • Magento
  • BigCommerce
  • WooCommerce

All of these marketplaces which are Shopify’s direct competitors, offer SaaS tools. Thus, it’s easy for interested entrepreneurs to host their online shops. Aside from SaaS tools, these marketplaces also offer data analytics, website design, and even payment processing. 

You may be wondering- isn’t Amazon a direct competitor of Shopify? The answer is, not quite. Since Amazon operates on a different business model, you can conclude that there’s nothing about these two identical companies.

Although, Amazon can be Shopify’s direct competitor if we talk about marketplace migration. If an entrepreneur decides to migrate their Amazon store to Shopify, Amazon loses revenue. Therefore, we could say that Shopify is a tacit competition to Amazon.

The Bottomline

It is without a doubt that Shopify is a fast-growing company. With its level of profitability, it’s set to bring in a massive amount of revenue. Overall, it’s exciting to see how this tech plays in the field of the ecommerce industry.