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Shopify sees 'paradigm shift' as Black Friday nears

US e-commerce sales are expected to soar almost 36 per cent this holiday season, according to eMarketer, almost perfectly offsetting losses in brick-and-mortar stores.

Shopify sees paradigm shift as Black Friday nears
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‘conscious consumerism’ is getting a boost from the pandemic says its president Harley Finkelstein 

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US e-commerce sales are expected to soar almost 36 per cent this holiday season, according to eMarketer, almost perfectly offsetting losses in brick-and-mortar stores. But the smaller firms Shopify serves face unique hurdles because of the pandemic

Shopify Inc. expects a banner holiday season as the worsening pandemic encourages more consumers to shop online and buy from the small businesses that sell through its platform. While the pace of growth will likely slow once the pandemic ends, this year's gains will likely hold up, President Harley Finkelstein said in an interview. The company reported a 109 per cent increase in gross merchandise volume, a key metric for online retailer companies, in the third quarter. "This is not going to go back to the way it was pre-Covid. This has been a paradigm shift," he said. "I don't think it's fleeting." With Black Friday still a week away, it's already clear the next two months will be "really good," Finkelstein said. The number of orders merchants received rose 17 per cent in the second week of November compared with the first week. The average consumer cart of merchandise sold in the second week of November was $81, an 18 per cent increase over last year, he said.

Large retailers have been among the biggest beneficiaries of the online shopping boom and will see the most growth in market share this season, according to a report by Adobe Analytics, though small retailers will experience the greater percentage revenue boost. While more large chains are turning to Shopify, the vast majority of Shopify's customers are businesses with 500 or fewer employees. Shopify is counting on consumers to choose independent brands for items that aren't staples. That "conscious consumerism" is getting a boost from the pandemic, Finkelstein said: "Direct to consumer is not a fad."

Almost 40 per cent of shoppers will make a deliberate effort to shop at smaller retailers over the holiday season, according to the Adobe report. Shopify began in 2004 as a service provider to small companies, helping them build websites to sell to customers directly. As the e-commerce market has expanded, so has its line of tools and services. Today most of its merchants peddle their wares on multiple platforms. Since 2017, merchants have been able to connect to Amazon.com Inc.'s marketplace through Shopify. The Ottawa-based company has also struck partnerships with major platforms including Facebook Inc., Instagram, EBay Inc. and TikTok Inc. In June, it announced a deal to get some Shopify merchants on Walmart Inc.'s third-party marketplace.

Shopify now views itself less as an e-commerce company than a "retail operating system" for merchants where they can manage multiple sales channels as well as marketing, data analytics, shipping, payments and capital needs, Finkelstein said.

Merchant Hurdles

U.S. e-commerce sales are expected to soar almost 36 per cent this holiday season, according to eMarketer, almost perfectly offsetting losses in brick-and-mortar stores. But the smaller firms Shopify serves face unique hurdles because of the pandemic. "The biggest challenge is navigating the uncertainty," said Marcus Wilson, co-founder of Nobull, a footwear and training apparel company that uses Shopify. While Nobull's sales are up 78 per cent so far this year, matching inventory to that growth is difficult because products for this holiday season had to be ordered six months ahead of time, during a period of huge economic uncertainty. Shipping delays have also been a problem, said Charis Jones, founder of Sassy Jones, a Shopify merchant that produces jewelry in India and China and imports it to the U.S. to sell. "We got bought out by other large companies on our cargo space hundreds of times, too many to count, and it was expensive like four times more expensive to import," she said. "We just got bumped for our Black Friday stuff." Still, the company expects sales will grow three-fold this year to at least $15 million. (Bloomberg)

By Danielle Bochove

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