Shopify reports strong Q4, plans to ramp up investments in automation, fulfillment for 2020

Shopify is planning to invest in automating processes in retail, expanding its fulfillment efforts and growing its international customer base for 2020.
Written by Natalie Gagliordi, Contributor

Shopify is planning to invest in automating processes in retail, expanding its fulfillment efforts and growing its international customer base for 2020. The e-commerce platform provider outlined its strategy as part of its fourth quarter results, which comfortably topped estimates.

Shopify focused on three key investments in 2019: its purchase of warehouse automation and industrial robotics startup 6 River Systems, the launch of the Shopify Fulfillment Network, and international expansion. The plan for 2020 is a continuation of this approach. 

Shopify is currently building out its AI-powered fulfillment network, which will see the company spend $1 billion over the next five years. As part of that spending, Shopfiy announced in September that it bought 6 River Systems, a warehouse automation and industrial robotics startup, for $450 million. Shopify said it's seeing strong interest from merchants as it continues to add partners and optimize the network. 

With 6 River Systems, Shopify is aiming to automate warehouse fulfillment and certain retail processes for its merchants. Shopify CFO Amy Shapero on Wednesday said that the company will continue to invest in the growth of 6 River Systems' warehouse fulfillment technology as well as getting that technology integrated into the Shopify Fulfillment Network. The company said it's still in the early stages of its 5-year plan for the Shopify Fulfillment Network, with fewer than 1 million fulfillments since its launch.

"Our merchants need us to get this right and that will take time, but we are committed to the long-term viability of the Shopify Fulfillment Network," Shapero said. "Shopify Fulfillment Network is still in the early part of the product market fit stage, and we're working to ensure performance and merchant experience before we start to scale."

"In 2020, we expect to continue to focus on building the software that connects the network and enables merchants with our partners supplying warehouse capacity and services and outbound transportation," Shapero added.

Additional investments in the Shopify platform will center around the upcoming launch of Shopify's all-new point-of-sale (POS) system, along with bringing new financial services to market. The company is also opening a new R&D center in Ottawa that will incorporate technology from 6 River Systems. 

Meanwhile, Shopify has its sights set on a broad international expansion. To get there the company relies on a partner ecosystem as way to offer purpose built commerce apps for international markets. Shopify said it will increase its investment in its developer and partner ecosystem throughout 2020.

As for the numbers, Shopify reported a net income of $800,000, or a penny per share, on revenue of $505.2 million -- up 47% from a year ago. Non-GAAP earnings were 43 cents per share. Analysts were expecting earnings of 24 cents per share on revenue of $482 million. 

Shopify said merchant solution revenue rose 53% to $322 million in the fourth quarter. Revenue from its subscription business increased 37% to $183 million. Shopify said it had exactly 1,069,000 merchants on its platform at the end of fiscal 2019. This compares with 144,000 merchants on its platform 5 years ago.

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