Just a week after e-commerce titan Amazon announced the rollout of new generative artificial intelligence (AI) advertising tools for its sellers this holiday season, Shopify is on the verge of unveiling its own AI capabilities and how they can propel growth. The company is expected to showcase remarkable revenue growth of 22.38%, amounting to $1.67 billion, compared to the previous year, as per estimates from LSEG.
In September, Shopify’s Chief Financial Officer, Jeff Hoffmeister, spoke confidently about their AI tools, dubbing them a «superpower» for sellers seeking assistance in making strategic decisions concerning their product offerings and geographical expansion.
Shopify is a renowned provider of software and services to online sellers, equipping them with apps that facilitate direct sales on popular marketplaces like Amazon and Walmart, both of which are actively integrating AI enhancements for their seller community.
Last July, Shopify introduced «Shopify Magic,» a comprehensive suite of AI-powered tools encompassing product descriptions, virtual assistants, blog posting, and email campaign features tailored to empower merchants. Part of this suite is the AI app «Sidekick,» designed to assist sellers in making informed choices about inventory, promotions, and marketing strategies, reducing their reliance on third-party widgets.
Market analysts anticipate a 21% surge in sales of Shopify’s merchant products, including the Shopify Magic suite, reaching $1.2 billion compared to the previous year, marking the first deceleration in four quarters.
In a comparative context, Amazon’s third-party seller services reported a 19.8% growth in the third quarter, reflecting the company’s substantial push to onboard more merchants onto its platform.
Michael Morton, an analyst at MoffettNathanson, is keen to see Shopify’s strategy for attracting enterprise-level customers such as Meta and renowned boot-maker Hunter. However, he does not believe that Shopify’s AI tools will serve as an immediate selling point in targeting larger clients.
Shopify Magic is an integral component of the company’s long-term plan to lure more merchants to its platform who are willing to pay a premium for its services. In April, the Ottawa-based company increased its monthly subscription fees, with Shopify Magic included as part of these subscriptions at no additional cost.
During the second-quarter conference call, Shopify President Harley Finkelstein underscored that the inclusion of larger merchants on the platform resulted in increased sales volumes for Shopify’s loan, payment, and point-of-sale solutions, along with higher «cross-sell» volumes.
While generative AI may pose challenges for merchants contending with slowing demand and hesitance to embrace innovation, Angelo Zino, an analyst at CFRA Research, believes that as long as Shopify can demonstrate the productivity gains associated with AI, there remains an opportunity to monetize it, albeit with potentially gradual initial adoption.
