In the world of e-commerce, the holiday season is prime time for retailers to make their mark. And with giants like Amazon rolling out new AI tools for sellers, Shopify is under pressure to prove that its own AI products can ignite growth. Investors eagerly await Shopify’s results, with Wall Street expecting a revenue increase of 22.38% to $1.67 billion compared to last year.
Shopify’s Chief Financial Officer, Jeff Hoffmeister, has touted the power of their AI tools, claiming that they will act as a “superpower” for sellers in need of assistance with merchandise selection and geographic expansion. Shopify’s suite of AI-powered tools, called Shopify Magic, includes product descriptions, virtual assistants, blog posting, and email campaign tools. It even features an AI app called Sidekick, which helps sellers with inventory, promotions, and marketing decisions.
However, analysts predict that sales of Shopify’s merchant products, including Shopify Magic, will increase by only 21% to $1.2 billion compared to last year. This marks the first deceleration in four quarters for the company. In contrast, Amazon’s third-party seller services grew by 19.8% in the third quarter as the company focuses on attracting more merchants to its marketplace.
Michael Morton, an analyst at MoffettNathanson, is looking for Shopify to outline its plan for attracting larger enterprise customers. However, he does not believe that the company’s AI tools will be an immediate selling point in capturing these clients. Instead, Shopify Magic is part of the company’s long-term strategy to bring more merchants onto its platform, with the aim of offering them higher-priced services.
Shopify President, Harley Finkelstein, reported during the company’s second-quarter call that bringing larger merchants onto the platform has increased sales volumes for Shopify’s loan, payment, and point-of-sale tools. It has also led to higher “cross-sell” volumes.
While generative AI may be a tougher sell for merchants in the current economic climate, Angelo Zino, an analyst at CFRA Research, believes that as long as Shopify can prove the productivity enhancements associated with AI, there will be opportunities to monetize it. However, this may not translate into immediate results.
Shopify’s success will ultimately depend on its ability to demonstrate the value of its AI tools and attract more enterprise customers. As the battle for e-commerce dominance heats up, it remains to be seen if Shopify’s AI products will give them the edge they need to compete with giants like Amazon.
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