A thousand thanks to Zoro… and Redline… for the updates.
Clearly, the quick and clear IR response that rings in one tone with the CEO interview suggests this is not big news, but it is news to me nonetheless. When I composed a dossier for myself over the weekend, I searched the SHOP site and wondered why, if this “exclusive” partnership is a big deal, it is not mentioned along with news regarding Google, Alibaba, and TikTok.
I feel the “exclusivity” could have been better defined. Here is the call, thanks to TMF:
https://www.fool.com/earnings/call-transcripts/2021/08/17/gl…
"With regards to that, it is worth mentioning that we are on track with the rollout of our newly established exclusive strategic partnership with Shopify.
We continue signing up and going live with Shopify-based merchants on an ongoing basis. In parallel, the respective development and product teams from both companies are working together on a new and deeper integration of Global-e’s offering into the Shopify platform and checkout. This new integration is expected to be finalized later this year. Once operational, this new integration should allow an even more effortless go-live process for new merchants and even more seamless referrals of Shopify-based merchants from various channel partners."
Nothing wrong here, though there is no explanation of exclusivity, which is what I was looking for on the SHOP site.
Then an analyst asked:
“And if you can give us any color on particularly the Shopify relationship, how much of that contributed here in the June quarter versus what you’re expecting going forward.”
“Now, referring specifically to Shopify, we are seeing already an increase in our pipelines and the signups, especially on the SMB front, kind of the smaller size merchants. We do expect as we guided before that we will see more movement on the pipeline with larger brand probably toward next year and the beginning of next year as we complete the new integration that we mentioned in our comments.”
Well, this is confusing. Ok, larger merchants maybe take more time, but, in light of the news/no news situation, why are we touting “smaller size merchants” here?
Then, another question:
“So I guess, Amir, maybe if you could just sort of specify for us what the top two or three things that you need to get done with Shopify are in terms of the integrations.”
“The main things about the integration are technical. But I would say, generally speaking, it’s making our services kind of the same services that you know just built in straight into the Shopify checkout itself.”
This is exactly what was said on the interview as well. But then there is this:
“In terms of the impact, as we guided, this is what we’re seeing. We’re on track. We are seeing an already initial kind of traction, additional traction in our pipeline as it’s growing, including more and more SMB Shopify-based merchants that are going live with us. So we already see an increase in that.”
Isn’t SMB small and medium businesses? Why are we highlighting this here if we are after the Top 1% (literally)? Apparently the reason is technical:
“But I would say financially, we’ll probably see more of the impact toward kind of the first and second quarters of next year, and certainly onwards in the second half of next year once we have done the new integration kind of late this year, which would enable us to bring also it to the bigger enterprise-size merchants that are on Shopify.”
so what?
1/ Why did no analyst ask about the agreement’s exclusivity? Let’s go back to the SEC filings,
https://sec.report/Document/0000950123-21-011913/
“We have entered into partnership arrangements, and in the future may consider opportunities to enter into additional arrangements… For example, we have entered into a Services and Partnership Agreement with Shopify…making our platform services available to certain Shopify merchants through Shopify’s e-commerce platform. Entering into such relationship with Shopify will require us to incur non-recurring and other charges, significantly increase our near and long-term expenditures, including payment to Shopify of a fee equal to a percentage of the GMV for all transactions processed through our platform for applicable Shopify merchants, that may negatively impact our margins, and issue securities that may dilute our existing shareholders. The potential benefits of our relationship with Shopify are hard to estimate or quantify at this time, and we cannot be certain that our arrangement with Shopify will provide the revenue or net income that justifies such a transaction.”
So “making our platform services available to certain Shopify merchants”?
In other words, the stress on exclusivity was misleading because it implied that they would be handling the cross-border transactions for SHOP and not that they aim at the Top 1% of SHOP’s merchants. Moreover, the EC call’s SMB mentions square poorly with what we just heard on Sep 14-15.
So how does this change the thesis? For me, this is all about SHOP. So is the thesis shot?
No, but it is certainly diminished as the TAM got cut in half “overnight.” With the CEO bringing up SMB only to backtrack one month later, I am not so sure the focus on Top 1% was the plan all along.
What are the 500 merchants mentioned on the interview? Total or SHOP merchants? Let’s say they have 500 SHOP of max 20,000 SHOP. Let’s say they get half of all and at half the current GMV so that would still be 10x GMV from here for what should be the worst case back-of-the-napkin scenario.
Overall, focusing on the high end does not concern me, in fact seems very logical to me. In addition, SHOP is a shareholder and I think that matters.
Can anyone make sensible estimates of their actual TAM within SHOP?