What happened
Shares of e-commerce outfit Shopify (SHOP -1.39%) gained 17.5% last month, according to data provided by S&P Global Market Intelligence. Most of this progress was made in the middle of the month, first following the unveiling of a new "buy now, pay later" payment option, and then in response to Shopify's decision to make its payments platform, Shop Pay, available for use outside of the company's e-commerce platform. Notably, marketers relying on Facebook and Alphabet's Google will be able to utilize Shop Pay.
So what
Shopify is of course the young company that does things differently than the king of e-commerce, Amazon. Rather than requiring merchants to list merchandise at a marketplace website where it competes with similar goods, Shopify equips online sellers with their own customized e-commerce platform. The company is now leveraging its brand name to venture into new areas of the e-commerce arena.
One of these areas is online payments. Shopify's Shop Pay will soon be available to facilitate sales at Facebook as well as Instagram, and later this year, for users of Google's online-selling platform.
Image source: Getty Images.
Just as promising of a growth engine is Shopify's newest effort to encourage sales by offering what essentially amounts to short-term financing. Expanding on a relationship established with Affirm a year ago that allows certain Shopify clients to offer installment payment options, last month this feature was opened up to merchants outside of Shopify's e-commerce ecosystems. Market research outfit Kaleido Intelligence estimates that $680 billion worth of annualized buy now, pay later sales will be made by 2025, nearly doubling 2019's total.
Now what
The expansion of Shopify's payment options clearly widens the company's revenue net. But neither of these developments came as a complete surprise, and neither is necessarily a game changer. Merchants and consumers alike already enjoy a wide array of payment choices, and the fragmented online payments market is still led by a well-established PayPal Holdings, which itself boasts control of a little more than half the market according to numbers from Datanyze.
On the other hand, Shopify's a compelling investment with or without last month's announcements.
COVID-19 helped drive last year's revenue growth of 86% to be sure, which in turn pushed the company out of the red and into the black. Its top and bottom lines were making forward progress well before the pandemic took hold, though, and the company was bound to reach this milestone sooner than later anyway. Online sellers and merchants are more than ready to embrace alternatives to the industry's familiar gatekeepers.
