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| DATE | 2021-02-16 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] Pandemic Economy - The New Depression Apply Cart
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https://www.wsj.com/articles/shopifys-secret-weapon-is-thousands-of-new-business-owners-11613484000?mod=hp_lead_pos13
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Shopify’s Secret Weapon Is Thousands of New Business Owners
Americans are opening online stores during Covid-19 pandemic, but many
startups fail
Sarah Girouard used Shopify to open an online store for her winter-hat
company, Early Apres. Cody O’Loughlin for The Wall Street Journal
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Feb. 16, 2021 9:00 am ET
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Small-business formation is surging in the U.S., and e-commerce company
Shopify Inc. SHOP -0.19% has been reaping the gains of that business boom.
More Americans are opening online stores and selling goods and services
to make money as the effects of the pandemic have wiped out jobs and
disrupted in-person activities like dining and shopping. The shift has
brought a wave of new business to Shopify, which sells subscription
services that enable people to put up websites, accept online payments,
and ship and track orders to customers.
But Shopify’s business model carries risks. Analysts expect the surge in
e-commerce that drove much of the company’s growth to taper as the
pandemic ebbs. “There could be a material deceleration in sales growth,”
said Tom Forte, an analyst with DA Davidson.
Another risk: Many of the startups that use Shopify’s services are more
likely to fail than grow meaningfully, said Robert Fairlie, an economics
professor at the University of California, Santa Cruz. “How can you get
capital, and how do you scale up in this kind of environment and this
kind of uncertainty?” he said.
Sarah Girouard fulfilling orders from the basement of her Wilmington,
Mass., home.
Photo: Cody O’Loughlin for The Wall Street Journal
Most of Shopify’s more than one million customers are first-time
entrepreneurs, said Harley Finkelstein, president of the Ottawa-based
company, which will report fourth-quarter results on Wednesday. “Imagine
a future where everyone is an entrepreneur. We’re moving in that
direction,” he said.
Eric Girouard launched in September a workwear company, Brunt, selling
boots to construction workers on a Shopify site after he saw how quickly
his wife, Sarah Girouard, started offering winter hats online. She was
making $25,000 to $40,000 a year from a side business she ran entirely
by herself, he said.
“It was a basic website, but it was working and she was getting paid,”
said Mr. Girouard, who had initially expected to spend upward of
$100,000 designing a virtual storefront for Brunt. He created his
Shopify site for less than $25,000, including the cost of hiring two
contract workers. “It made me realize the world had changed,” he said.
Sarah Girouard has been making between $25,000 and $40,000 a year on her
side business, inspiring her husband, Eric Girouard, to launch workwear
brand Brunt, selling boots to construction workers on a Shopify site.
Photos: Cody O'Loughlin for The Wall Street Journal (2)
New business applications hit their highest level on record last year,
rising 24% from 2019, according to the Economic Innovation Group, a
bipartisan research organization, which used data from the U.S. Census
Bureau. The most active sector was retail trade, which recorded a 54%
increase in new business formation. The bulk of those were merchants
that sell goods online or directly to clients, according to the EIG.
That activity helped to boost Shopify’s profit 72% for the first nine
months of 2020, compared with the year before. The growth also made the
company’s stock one of the market’s best performers. Its share price has
more than tripled since January 2020, to a market capitalization of
roughly $177 billion, about the same as oil and gas giant Chevron Corp.
The jump in entrepreneurship during the pandemic is largely a result of
hard economic times, said John Haltiwanger, an economics professor at
the University of Maryland. Unemployment surged at the start of the
pandemic and joblessness remains high. Many Americans are trying
whatever they can to generate income.
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