shopify-merchants-business

Shopify Merchants Business

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While Merchant services drive most of the revenue for Shopify, in reality, subscriptions have a much larger contribution margin. Indeed, in 2023, on $7 billion in revenue, Shopify generated $3.15 billion in gross profits or about 50% gross margins.

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Who Owns Shopify

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The founder and CEO of Shopify, Tobias Lütke, owned or controlled 7,891,852 Class B multiple voting shares and 5,250 Class A subordinate voting shares, representing approximately 33.8% of the aggregate voting power attached to all of the Company’s outstanding voting shares. Another key stakeholder is John H. Phillips, an angel investor who placed an early bet on Shopify.

Shopify Business Model

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Shopify is an e-commerce platform that enabled over 2 million merchants by 2021 to commercialize their products. While Shopify works with a subscription-based business model, it makes most of its money via merchant services, which are additional services provided to merchants. In 2023, the company generated over $7 billion in revenue, of which over $1.8 billion (26% of total revenue) was from subscriptions and $5.2 billion (74% of total revenue) from merchant solutions.

Shopify Cost Structure

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While Merchant services drive most of the revenue for Shopify, in reality, subscriptions have a much larger contribution margin. Indeed, in 2023, on $7 billion in revenue, Shopify generated $3.15 billion in gross profits or about 50% gross margins. However, if we drill down its cost structure, we can see how gross margins from merchant services stood at nearly 39%. Meanwhile, gross margins from subscription services (Shopify’s MRR was $149 million in 2023) reported over 80% gross margins, thus making its subscription business critical to sustaining the overall Shopify business model.

Shopify Profitability

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Shopify was finally profitable in 2023, with $132 million in net profits, while it was not profitable in 2022, generating over $3.4 billion in net losses. In 2021, driven by the massive wave of e-commerce throughout the COVID-19 pandemic, Shopify had turned to profitability in 2021, generating over $2.9 billion in net income, while it became unprofitable again in 2022 and back to profitability in 2023.

Shopify Revenue

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Shopify generated $7.06 billion in revenue in 2023; it generated $5.6 billion in revenue in 2022, and over $4.6 billion in revenue in 2021.

Shopify Revenue Breakdown

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The company generated $7.06 billion in revenue in 2023, of which $1.84 billion was from subscription revenue and $5.22B in merchant revenue. In 2022, Shopify generated $5.6 billion in revenue, of which $1.5 billion (almost 27% of total revenue) was from subscriptions and $4.1 billion (more than 73%) from merchant solutions.

Shopify MRR

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Shopify Employees

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Shopify had 8,300 employees in 2023, compared to 11,600 employees in 2022 and 10,000 in 2021.

Shopify Revenue per Employee

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Shopify generated $850,602 in revenue per employee in 2023, compared to $482,759 in 2022, and $461,186 in 2021,

Shopify Merchants

shopify-merchants

Shopify Competitors

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In just fifteen short years, Shopify has grown from humble beginnings to become one of the fastest-growing eCommerce platforms online. The Shopify eCommerce solution is perhaps best suited to users who desire an easy, flexible and affordable starter solution for their online store. The provider now has upwards of 820,000 stores accounting for 20% of the total market share. However, the continued success of any company in the dynamic digital market is never guaranteed.

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