Shopify’s Revenue Breakdown
Shopify breaks its revenue down into Subscription solutions and Merchant solutions. From Shopify’s 2019 total revenue of $1.57b, Subscription solutions made up ~40%, a continued decline from 46% in 2017.
- Subscription solutions are the monthly subscription plans all merchants pay to use Shopify’s software platform. This includes the enterprise-level Shopify Plus, which sees annual or multi-year terms when merchants sign up.
- Merchant solutions include payment processing fees from Shopify Payments, financing from Shopify Capital, Shopify Shipping, Shopify Fulfillment Network (including warehouse solutions), Shopify POS (point-of-sale terminals) and various solutions that round out the platform. Though there is much to be excited about in this revenue segment, management has shared that a significant majority of sales are from Shopify Payments.
Merchant solutions revenue grew 53.9% in 2019 and 67.4% in 2018. Shopify Payments attributed for ~73% and ~72% of the growth in respective years. As of FY19, Shopify noted 2/3 of their merchants in 15 countries enabled Shopify Payments. Though they did not share which countries and how many merchants, ~85% of their 2019 revenue was generated in four countries so we can estimate the bulk of future adoption could come from these countries (Canada, U.S. U.K., and Australia) in the near term.
A quick look at Shopify Payments:
- It allows merchants to accept and process payment cards online and offline.
- It was first introduced in 2013 in the U.S. and Canada.
- Revenue is earned through transaction fees. These fees are calculated as a percentage of GMV.
- Shopify’s 2019 GMV was ~$61b.
Compared to Merchant Solutions, Subscriptions Solutions grew ~38% and ~50% in 2019 and 2018. Though this segment saw ~50% lower growth rates compared to Merchant Solutions, not all revenue figures are equal, and we will start with gross profit to examine what that means.