Techopia Year in Review: Shopify’s surging success comes with a price

Shopify

No one would deny that Shopify had a monumental year, but between the record revenues, merchant milestones and company expansions, 2017 took some of the shine off Ottawa’s e-commerce giant.

Shopify’s (TSX:SHOP)(NASDAQ:SHOP) stock price nearly tripled over the course of this past year, starting the year around $57.65 on the TSX and peaking at $151.88 in September. Fuelling that rise were consecutive quarters of revenue growth and milestones such as this past August when the firm announced it had surpassed 500,000 merchants using its platform.

During the firm’s first-quarter earnings call in May, CEO Tobi Lütke told investors and analysts on the line that Shopify had “hit its stride as a public company.”

To match that stride, the firm has been planning ahead for expansions across Canada. In March, Shopify announced it had leased 18 floors inside the building at 234 Laurier Ave. to make room for 2,500 more Ottawa employees. The firm also opened a Toronto office with space for an extra 200, and announced plans for as many as 500 new employees in a second Waterloo office.

The public eye

As Shopify grew, the tech firm entered further into the mainstream and into the scrutiny of the public eye.

Early in the year, Shopify found itself entangled in political controversy as activists called on the online storefront provider to drop alt-right website Breitbart News from its service. Petitions arose calling on the Ottawa firm to “stop endorsing hate,” referencing shirts on the Breitbart store featuring pro-Donald Trump slogans such as “Get in Line” and “Border Wall Construction Co.”

Shopify protest
Protesters pressuring Shopify to cease hosting Breitbart's online storefront.

It was Lütke himself who responded for Shopify in an open letter penned on Medium.com. He made it clear that Shopify does not endorse Breitbart, but defended hosting its online store as a matter of free speech. As long as the store operates within the law, Shopify won’t step in to decide who can and cannot sell using its platform.

Political detractions wouldn’t slow Shopify’s roll. The firm stepped into new territory in the summer with its first hardware product, a point-of-sale card reader, and opened up its chatbot assistant to all of its merchants for free.

In April, the company also quietly acquired a Lithuanian company, Oberlo, in a deal worth US$15 million. The company offers a dropshipping app for the Shopify platform, which allows merchants to re-sell existing products on their stores.

Though the firm would go on an M&A dry streak for the rest of the year, it also raised $575 million in a supplementary share offering in May – a move meant to bolster the pocketbook for future acquisitions.

The firm continued its roll of blockbuster partnerships in 2017. Kicking off the year Shopify announced a deal that would see its merchants able to sell directly through Amazon’s marketplace. Throughout the year it would add partnerships with eBay, Instagram and UPS.

Shopify even had a brush or two with celebrities, bringing Prince Charles to the Ottawa offices to help launch businesses on Canada Day and welcoming Sir Richard Branson for a new initiative promoting female entrepreneurship.

Troll tolls

But before the year was up, Shopify would have another battle on its hands. Shopify’s shares took a significant hit in October after a video released by Citron Research alleged the firm was violating Federal Trade Commission guidelines by overpromising merchant success.

The attack seemed to irritate Lütke, who referred to the firm’s accuser as a “short-selling troll.”

Responding to the claims during the firm’s third-quarter earnings call, he asserted that the claims were “preposterous” and “unsubstantiated.” Rather, he said Shopify’s brand and messaging is about celebrating entrepreneurialism and persevering through its challenges.

“Most of our content is about how hard being an entrepreneur is, because it is hard, and we are here to help those willing to try it,” he said.

Those entrepreneurs would deliver for Shopify before the end of the year. Over the Black Friday and Cyber Monday weekend, Shopify merchants collectively surpassed more than US$1 billion in gross merchandise volume. At times, merchants were selling more than $1 million per minute during what is traditionally the busiest shopping weekend of the year.

Shopify’s share prices would return to pre-short-seller highs following that weekend. Heading in to 2018, the Ottawa firm’s shares are slightly under that mark, trading around $135 on the TSX.