As operating costs soar, some sellers decide to flee Shopify

Reuters cited data from YipitData as saying that Shopify added only 71,000 new merchants in the first half of this year. In 2020, when the epidemic was the most serious, Shopify had more than 680,000 sellers throughout the year, but in 2021 this number dropped to 314,000.

These sellers use Shopify to create online stores and payment systems, and the latter charges corresponding service fees - the basic package is $29 per month, and the advanced package can be as high as $2,000 per month. Most small and medium-sized sellers will choose the basic package to test the waters when they first enter the market. If the subsequent development trend is good, they will consider upgrading to the advanced package.

However, the company has also been hit hard by the weak e-commerce market, and Shopify's CEO admitted that it was a wrong decision to bet that the online shopping trend would continue to grow rapidly after the epidemic.

YipitData analysts said: "Unless Shopify's second-half entry volume can double that of the first half, we expect the company to experience its lowest level of merchant entry since 2018."

"The slowdown is mainly concentrated among users of basic packages, as small and medium-sized sellers are more vulnerable to inflation and interest rate hikes."

However, this has also had a certain impact on the user growth of the premium package, because some merchants will upgrade from the basic package to the premium package after using it for a period of time, and the latter is Shopify's main revenue driver.

Shopify's latest financial report shows that user growth for its premium packages is "very strong", and total user growth in the second half of the year will far exceed that in the first half.

A few weeks ago, it was reported that Shopify would lay off 10% of its global workforce, or about 1,000 people.

Shopify founder and CEO Tobi Lütke told employees in an internal letter that the company's growth has slowed as shoppers return to physical stores.

Lütke said: "Before the epidemic, e-commerce growth was stable and orderly. Is the rapid expansion of the industry brought about by the epidemic just a flash in the pan or a new normal?"

Shopify continued to expand rapidly after the end of the epidemic, believing that the pace of consumers shifting from physical stores to online stores would further accelerate, but the reality turned out to be the opposite.

Lütke said in a letter to employees that he had expected the growth in e-commerce sales to continue long after the pandemic, but said: "I was mistaken."

The Ottawa-based company said every department will experience layoffs, though the bulk of the cuts will be in recruiting, support and sales.

In addition to the pressure from the recovery of physical stores, Shopify has recently faced new challenges from Amazon. The e-commerce giant recently announced that it will allow third-party sellers to provide free shipping or fast delivery services directly to member consumers, which could only be done through Amazon before.

In fact, in addition to Shopify, in the current context of rising interest rates and high inflation, many large technology companies have announced layoffs or tightened recruitment plans out of concern for a future economic recession.

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