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Shopify's (SHOP) Commerce Components to Attract Merchants

Shopify SHOP recently announced the launch of its new solution — Commerce Components — which is a composable stack for enterprise retail. The solution will allow retailers to integrate the components of Shopify with their systems.

Shopify’s latest venture to create the Commerce Components platform will help address the issues faced by retailers, like changing customer demand and faster checkouts. Brands like Mattel MAT are one of the first customers of Shopify’s new solution.

The recently launched solution will aid Mattel to get access to 100 million existing Shop Pay customers, who have opted for Shopify’s one-click checkout.

Commerce Components will also provide a dedicated accounts team with solutions architects, prioritizing 24/7/365 specialized support. Shopify’s latest venture is targeted toward large retail enterprise businesses and will help boost its top-line growth.

Shopify Inc. Price and Consensus

Shopify Inc. Price and Consensus
Shopify Inc. Price and Consensus

Shopify Inc. price-consensus-chart | Shopify Inc. Quote

Shopify’s New Platform to Drive Prospects

Shopify’s e-commerce business boomed during the COVID-19 pandemic as global brands and small stores set up online platforms to sell products due to retail market closures. However, once the economy opened and retail stores started winning back their lost customers, SHOP lost its momentum. Inflation and possible signs of recession aggravated the current market scenario, which slowed growth in the e-commerce market.

Also, rising inflation surged operating expenses. In the third quarter, non-GAAP operating expenses soared 52.6% year over year to $845.9 million, inducing an adjusted operating loss of $45.1 million.

Shopify shares have returned 13.6% compared with the Zacks Internet Services industry’s decline of 16.5% in the past six months. However, Shopify has been investing heavily in research and development, and sales and marketing to create new platforms and forge strategic alliances with major tech companies to generate services and address the growing trends in the social media marketing space.

Shopify collaborated with companies like Apple’s AAPL iPhone tap-to-pay feature and major social media platforms like Meta Platforms’ META Facebook and Instagram.

The recent integration with Apple enables shoppers to use Apple smartphones at the terminal to pay for goods. While this may not be a new feature in retail, Apple’s recent Pay Later installments added a whole new dimension to retail marketing.

Meta Platforms’ Facebook and Instagram are two of the most popular social media platforms among creators and users alike. Facebook’s short-format videos and reels on Instagram are enjoying increasing popularity among content creators who can create short content, while users spend more than 20% of their time on these social media platforms.

Integration with Meta Platforms will help Shopify address growing trends and help merchants promote and sell their products via Facebook or Instagram at a much more reasonable cost. While Shopify concentrates on building its platform as a support system for small retail entrepreneurs to set up online businesses, the launch of the Commerce Components platform will help attract large retail customers, driving its top line.

Although short-term growth prospects look bleak for SHOP amid the current market volatility, the recent solution launch and integration with major tech companies will help it generate new revenue sources in the long haul, impacting revenue growth positively. This will also add to its shareholder wealth.

Shopify currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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