Retail Channels
16 February 2023
Shopify adds Mars, touts 21% revenue growth in 2022
The ecommerce software company is focusing on enterprise and offline commerce.
(Photo via Shopify)
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Shopify isn’t growing as fast as it was during the pandemic ecommerce boom, but it is still growing.
After skyrocketing in 2020 and 2021, the Canadian software company in 2022 became synonymous with an ecommerce pullback amid economic tightening and a return to stores. Yet the end result was still a year of expansion.
On Wednesday, Shopify shared the following results for 2022:
- Revenue grew 21% from 2021, reaching $5.6 billion
- Gross merchandise volume increased 12% to $197.2 billion
- Share of overall U.S. ecommerce: 10%
To be sure, the revenue gains are not as large as the 85% growth in 2020 and the 57% growth of 2021. Given the slowing growth and the $1.2 billion acquisition of Deliverr, Shopify also swung to a loss of $822.3 million in the process, compared with income of $268.6 million in 2021.
But the results nevertheless show that Shopify still has room to expand.
Businesses operate differently as the economy changes. That means a company’s priorities may look different during times of economic tightening than they did during the boom times.
In many cases, this is painted as a priority on growth vs. profitability. When capital is easy to obtain and investment is flowing, as it was over the pandemic years, companies prioritize differently. But the environment also changes where a company focuses.
Shopify was long known for providing the software to help emerging businesses start and run ecommerce. Now, the company is touting growth among enterprise businesses and in-store retail as it focuses on efficiency in 2023.
Only last year, Shopify was known primarily for "arming the rebels." Now, a major piece of news from Wednesday’s earnings call was an announcement Shopify is now providing ecommerce for Mars.
“This global agreement will pave the way for more Mars brands to build and scale their businesses on Shopify and is a positive signal for others in the industry as Mars joins the ranks of other large CPG brands that are already using Shopify, including Heinz and Nestle,” Shopify President Harley Finkelstein told analysts Wednesday. “Our commitment to making commerce better for businesses of all sizes is only growing.”
Black and Decker, luxury brands like Sergio Rossi and department store retailer Giant Tiger were also among the new additions to Shopify Plus in the fourth quarter.
This comes as Shopify started the year by launching Commerce Components, which allows enterprise brands to choose features of Shopify and add them to the stack. Mattel is an early adopter of this product.
Meanwhile, GMV for offline commerce, which takes place in stores, was up 40% in 2022. It comes after the company rolled out a revamped in-store hardware system that enables mobile checkout and connects with ecommerce operations, called POS Go. In the fourth quarter, Todd Snyder, Tecovas and Viori added stores that are using the company's hardware.
Shopify has built for economic shifts. Executives said they are accustomed to working to respond to this moment, while preparing for what’s coming next.
“Pre-COVID, you saw us operating with a particular efficiency, but also a particular eye on growth,” Finkelstein said. “During COVID, when things shut down, we went to work to help merchants move online. We also simultaneously during COVID went to work on building the greatest point-of-sale product because we knew at some point, post-COVID, stores are going to reopen. And once stores did reopen, we went hard in replacing all of those legacy systems with ours. So I think we’ve always operated well in any environment.”
The company will also have an eye on profitability in 2023. Internally, that will lead to more focus on efficiency. It’s what this time calls for, and that’s different from the boom times. Such swings are inevitable, but both can contribute to strength over time.
“Profitability is a consequence of growth and efficiency combined over time,” CEO Tobi Lütke said.
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Marketing
09 June 2023
'There's a lot of ways to frame value'
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
Photo by Kelly Common on Unsplash
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.
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