Merchant growth slowed down, with Shopify adding only 71,000 merchants in the first half of this year

Many businesses are reportedly moving away from e-commerce platforms as they are hit by rising costs and falling consumer spending. Shopify.

Data shows that Shopify added only 71,000 net merchants in the first half of this year, a rapid decline compared to the 680,000 the company added at the peak of the epidemic in 2020 and 314,000 last year . YipitData analysts told Reuters: "Unless Shopify adds about twice as many merchants in the second half of 2022 as in the first half, we estimate that they may reach the lowest net merchant additions in a year since at least 2018."

Shopify helps merchants set up their online stores and payment systems in return for fees ranging from $29 a month to $2,000 for a Plus subscription, which gives access to advanced tools. But a slump in online retail sales has hit Shopify’s earnings this year. Small businesses, which have been the main source of Shopify’s growth, have been particularly hard hit.

Shopify said it made the wrong bet that e-commerce spending would outpace physical retail in the long term , leaving it facing huge losses. On July 26, Shopify announced that it would lay off 10% of its employees (about 1,000 people) due to slowing e-commerce growth. Most of the layoffs will occur in recruitment, support and sales departments.

With slowing merchant growth, stagnant online sales, a $1.2 billion net loss in the second quarter , and falling stock prices, Shopify appears to have fallen into an e-commerce sales dilemma.

But faced with the dilemma of slowing e-commerce demand, Shopify did not sit idly by. It is reported that Shopify announced that its latest strategy will focus on "vertical integration of logistics" to strengthen its logistics capabilities to cope with the slowdown in demand for goods flowing through its fulfillment network and reduce the logistics burden on merchants . Shopify acquired Deliverr for US$2.1 billion last month , which will provide the e-commerce platform with a network of warehouses, carriers, and last-mile partners to fulfill orders. According to insiders, through this transaction, Deliverr will be able to handle the "vast majority" of Shopify's total merchandise volume in North America .

Shopify has been doing well in the big picture , but it looks like it may have a long way to go before its merchant growth rate stabilizes. The decline in consumer spending continues to impact Shopify , and post-pandemic trends are not showing any signs of slowing down, and Shopify may suffer broader losses in the third quarter.

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