Merchant business has been growing by leaps and bounds but gross margins have been steadily declining.
Hi Chris, Here’s how it goes. The subscription business is pure recurring income, naturally, with very low start up costs and very high margins as you’ve pointed out. Their customers pay a monthly subscription fee and a transaction fee for each sale. The subscription business revenue is growing at about 70% per year.
The merchant solutions is helping the merchant handle his or her business: Collecting payment, shipping out merchandise, printing out UPS labels, the whole works. This business is growing at 140% per year - but this is currently putting margin pressure on Shopify because of all the start-up cost associated with starting up all these businesses and with 140% growth. Increasing operating efficiency hopefully means the operating margin will start to improve with time.
Hope this helps.
Saul