The use of Shopify’s Shop Pay Installments feature is seeing explosive growth just one month after it opened up to all U.S. merchants, with purchases made using the buy now, pay later (BNPL) product tripling in the second quarter versus just three months prior.
Last month, Shopify expanded its partnership with Affirm to allow all eligible merchants selling on the Shopify platform to use Shop Pay Installments. According to Affirm CEO Max Levchin, 25 percent of merchants using Shop Pay Installments during its early access period saw 50 percent more orders compared to other payment types.
Shop Pay Installments is now automatically enabled for new merchants signing up for Shopify payments, and Shopify has self-serve onboarding available for existing merchants.
“We are pretty excited about the potential here over the long term,” Shopify President Harley Finkelstein told analysts and investors on a conference call.
Officially, total revenue for the Canadian eCommerce platform was $1.1 billion in the second quarter, up 57 percent year over year, marking the first time Shopify quarterly revenue has surpassed $1 billion. At the end of June, Shopify said its Shop platform had 118 million registered users, including buyers that have opted into Shop Pay and 23 million monthly active users of the app.
Omnichannel Integration
Even as Shopify continues to expand Shop Pay to all Facebook and Google merchants, CEO Tobi Lütke told analysts and investors that the company has no plans to make Shop Pay a full-stack processing solution to compete with PayPal. What makes Shop Pay successful, Lütke said, is that it is highly bespoke to the Shopify platform — “we can build based on assumptions that you can make about the merchants and their capabilities because of the vertical integration,” he said. “If we go beyond the realm of our platform, then we would have to lose a lot of differentiation there.”
Chief Financial Officer Amy Shapero told analysts that social channels and marketplaces represent a small but rapidly growing part of Shopify’s revenue mix, and that “it will take some time before it becomes a significant part.”
Finkelstein said, though, that it’s the company’s responsibility to make sure its platform is integrated in all the places where consumers are naturally congregating, such as social media platforms and other modern-day town squares. “And, of course, as more of those services come to life, that increases the complexity of commerce or running a modern-day business,” he noted. “And that also increases the value that I think Shopify provides to our customers.”
Areas of Investment
Shapero said Shopify is currently focused on investing in three areas it sees as growth opportunities: building the Shopify fulfillment network, adding new features to the Shop app and expanding internationally.
Merchants from outside North America grew as a percentage of Shopify’s total merchant mix in the second quarter, and Finkelstein noted that year-over-year GMV growth for the rest of the world outpaced North America. “Merchants around the world are looking for a retail operating system, and Shopify certainly is a favorite of theirs,” he said.
Finkelstein added that all of Shopify’s investments — including the expansion of its POS hardware to new parts of the world — are key as the global economy reopens, because the next 100 years of commerce are going to be focused on omnichannel.
“Talking about omnichannel going forward will be like talking about a color television,” he said. “Every business by default will be omnichannel, and Shopify is the platform that enables that.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More