Rising inflation and higher interest rates are weakening consumers’ buying power and consequently, e-commerce purchases are dropping. Despite its already tepid results, Shopify Inc SHOP is fighting back by innovating across all fields, such as by looking for a way to fill a lucrative gap in marketing data left by Apple Inc’s AAPL policy changes that shook the online ad industry over the last 18 months by offering retailers a new way to target potential customers.
Shopify’s Stock Fell From The Pandemic Glory
Between the beginning of the pandemic and November 2021, the Canadian e-commerce group saw its stock price expand five times as retailers and consumers favored ecommerce purchases. But, in the post-pandemic reality, its shares have lost three-quarters of their value since 2021’s peak, leaving them almost where they were when COVID-19 started its relentless march across the globe. Although it was among the hottest pandemic stocks as online shopping boomed and even became Canada’s most valuable company, Shopify’s shares plummeted 75 percent last year.
As most iPhone owners have refused to give their consent for being tracked, with Apple’s privacy change, marketers lost access to valuable data they have been using to target ads for years. Therefore, Meta Platforms Inc META-owned Facebook and Instagram did not only become more expensive for ads, but also much less effective without the ability to fine-tune the targeting. Shopify’s biggest rival, Amazon.com Inc AMZN is one beneficiary of Apple’s new policy, because its ad targeting is based on “first party” data: information that an advertiser holds about its own customers.
By allowing third-party merchants to promote their products on its marketplace, Amazon saw its advertising revenue grow by 30 per cent to $9.5 billion, excluding currency fluctuations, over its third quarter of 2022.
Now, Shopify has also entered the game with a new tool that allows users access to customer data and therefore, gives them the ability to better target their ads.
Shopify’s new tool offers retailers similar targeting capabilities like Amazon but outside Amazon, as it covers Meta’s Instagram and Alphabet Inc’s GOOG network, including Google search results and YouTube. To improve ad targeting on Meta’s platforms, merchants can upload their customers’ information to a pool that Shopify argues is classified as “first party” data since Apple only forbids using “third party” data gathered from other companies’ sites. The only concern retailers have lies in sharing their data with a larger group as their rivals could also be there and target their customers.
A Much-Needed Growth Opportunity
Shopify’s president, Harley Finkelstein, told the Financial Times, that last year’s alliances with Meta and Google concerning the company’s marketing tool could offer a much-needed growth opportunity at a time when looming recession and cash-strapped consumers are slowing down the e-commerce industry and forcing the company and retailers of all sizes to make business cutbacks.
After cutting costs, Shopify is now cutting meetings
As employees return from the holidays, the Canadian e-commerce firm is conducting a “calendar cleanse” to cut back on large, long, unproductive meetings. As employees spend about 18 hours a week on average in meetings, Microsoft Corporation MSFT conducted a study based on thousands of its software users, with the results showing that the time spent in meetings more than tripled over the first two years of the pandemic with weekly meetings more than doubling. Share of one-on-one virtual meetings increased from 17 percent in 2020 to 42 percent last year, according to a study of 48 million meetings analyzed by collaboration analytics firm Vyopta, showing that corporations are trying to limit the number of participants.
Shopify is certainly joining this trend as from January 5th, it will remove all recurring meetings with more than two people “in perpetuity,” while re-upping a rule that no meetings at all can be held on Wednesdays. Meta and Twilio Inc. TWLO are among many who instituted no-meeting days. Shopify also limited big meetings of more than 50 people to one a week. and encouraged workers to remove themselves from large internal chat groups.
Innovation is the cost-cutting word
Soon after the pandemic took the world hostage, Shopify went “digital by design” in May 2020, allowing its employees to work from anywhere indefinitely. Last year, it also changed its compensation practices to let its employees decide themselves on the cash and equity structure of their pay.
Unfortunately, this positive HR strategy comes as a cost-cutting measure after slashing 1,000 jobs this summer as the company’s CEO, Tobias Lutke, overestimated the pandemic’s beneficial impact on e-commerce, which he acknowledged.
2022 was an investment year
Back in October, Shopify’s president Harley Finkelstein told analysts in October that Shopify ultimately wants to be profitable but he did not put a timeframe on the return to profitability. Like all companies, Shopify made its share of mistakes, but it is at least making an innovative effort to improve its business model as opposed to only slashing costs.
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