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Shopify Stock Benefits As Platform Learns More About End-User Customer

Will Ashworth

Shopify (NYSE:SHOP) had a good few days following its release of the company’s inaugural first global State of Commerce report on June 5. SHOP stock gained 9.1% in the wake of the report, versus a 2.2% gain in the Nasdaq Composite index.

Shopify Stock Benefits As Platform Learns More About End-User Customer

Source: Shopify via Flickr

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The insights seem to support a continued bullish stance on SHOP stock, in particular, these five findings.

Shopify Merchants Sold a Lot of Stuff

Shopify’s report found that the company’s merchants (~820,000) sold to 218 million buyers in 2018, 34% higher than a year earlier. That’s 25 times the population of New York City.

Interestingly, U.S. consumers tend to buy more items per online purchase than other countries, averaging six items per purchase, double those of other countries, such as Canada, Australia, and Japan.

Speaking of Japan

The Japanese are found to be prodigious shoppers, both in terms of time spent online when buying — an average of 27.6 minutes. The same goes for the average amount spent per transaction — $141.72, or 74% more than the average U.S. buyer per transaction.

This penchant for shopping explains why Alibaba (NYSE:BABA) opened a second data center in Japan in January. It’s catering to the “new retail” industry who require the best in artificial intelligence, machine learning, and analytics in the cloud to compete online and in the store.

With the Japanese leading the charge in omnichannel retail, the Shopify platform is a natural for merchants of all sizes looking to remain competitive in one of the world’s most robust retail arenas.

Brand Loyalty is Leading to More Spending

One of the most loyal groups of customers I know of are Lululemon Athletica (NASDAQ:LULU) shoppers. They’re relentless in their pursuit of new items produced by the athletic wear brand.

It turns out that over 62 million buyers from Shopify merchants purchased something from the same store at least twice, representing over 14% of all buyers overall. In fact, on average, buyers purchased from the same store 3.8 times in 2018.

The Japanese are said to be the biggest repeat buyers among 12 countries including the U.S. That said, 73% of North American respondents from Shopify’s online global survey of 3,832 Shopify merchants along with a survey of 2,653 consumers revealed that once someone finds a brand they like, they stick with it.

By providing Shopify merchants with the best apps to run their businesses and collecting as much data as possible about the end-user customer, Shopify is able to cater its offerings to meet those needs.  

5 P.M. is Buy Time

Interestingly, while the peak browsing time for Americans and Canadians is midnight and 8 p.m. respectively, they both tend to make actual purchases at 5 p.m. just as the workday is winding down.

Not coincidentally, 36% of North American buyers often make purchases to cheer themselves up, usually after a bad day at work.

For Shopify, this means having its systems in prime form and ready for business just as most of us are ready to call it a day.

Online Buyers Spend More

Although Shopify is best known for helping stores sell online, it’s pushing hard into the brick-and-mortar side of retail because it knows that omnichannel retail is the future.

For North America, Shopify’s report found that although a majority of buyers prefer researching a product online than in the store, they overwhelmingly prefer making the purchase in-store rather than online.

That said, in the Shopify merchant universe, the average online buyer spends $75 per order compared to $62 in the store. In the future, Shopify’s success will come if it can continue to provide merchants with the ability to sell anywhere, anytime.

Bottom Line on SHOP Stock

I believe that one of Shopify’s biggest threats will come from Square (NYSE:SQ) which is slowly making inroads into the online world.

However, if Shopify continues to pay attention to what the data is telling it, I think owners of SHOP stock ought to be confident that its stock will be higher five years from now.   

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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