Shopify at Morgan Stanley Tech Conference 2024 Takeaways

Harley and Jeff spoke with Keith Weiss at Morgan Stanley's Tech Conference last week.

A few things stood out to me:

* Headcount. Last year, Shopify was at 14,000 people. Now they are at 8,000. That is a very different number, and they are committed to staying at or around that number, even in the face of Enterprise sales team growth.

So if you are a Shopify VP, all those open recs -- canceled! So sayeth Jeff.

* The reason that Shopify can do well in this current climate is they have the brands people love/want. The company thinks that consumer spending is pretty decent from their point of view, which matches their recent Q4 performance.

* It was just a year ago that they were being asked about Shopify Fulfillment Network. How happy are they that this is in the rear view mirror?

At least they only have to throw a few hundred million at Flexport every year until they get to "default alive." 😀 That's very different than trying to build it themselves.

* They are also pointing to the fact that Shopify is the "second biggest checkout in the United States", and how that gives them advantages of scale.

It's an impressive stat, I would shout about it too.

* Gross Margin pressure?

The CFO revealed the Stripe, Adyen, and Paypal contracts will renew in the next few years. Sounds like the costs of accessing those payment processors/networks could increase and put more downward pressure on gross margins.

* What about a Shopify Marketplace?

I think Harley's answer was too cute by half. Listen to this:

" But right now, we're still sort of in the model of teaching our merchants how to fish and getting them -- helping them find better customers in terms of giving them the fish and giving them customers that may be something we do in the future. We're not doing that just yet."

Teaching to fish = helping people with advertising. Giving them fish = marketplace. Sounds like they may not do it "YET", but not never. Of course, Tobi a few years ago said "they will not do this obvious thing."

What Harley really means here from my point of view is that they do it today but there is not much scale there. When there is scale there, we will talk about it.

Second, I also feel that he is saying they are not explicitly trying to build something like an Amazon. They want it to end up in a different place.

All told -- Shopify is in a place where most of its cash generation will come from keeping its expenses (mainly headcount low) and driving top-line growth rather than acceleration of known margin-expanding products. Their advertising and other products are just so sub-scale relative to the payments business, don't expect meaningful contribution for a number of years.

Personally, I counted more margin headwinds than tailwinds. And if I didn’t know any better I would say that famous 3% attach rate is under attack by the upcoming payment renewals.