Part
01
of one
Part
01
Shopify's GMV from Drop Shipping
Introduction
Drop shipping is a business model that allows entrepreneurs to start an e-Commerce business to sell products purchased from a third party supplier and shipped directly to customers. This type of service provides a lower-risk approach to selling products online; however, lower profits margins are most likely in all industries. According to Fit Small Business, companies can predict their income using a base of 20% margin, and 2% conversion rate to determine profit. Shopify, an e-Commerce hub for retail dealers, enhanced their platform features and functionality in 2019, enabling more global merchants to launch businesses and sell more with better efficiency. Shopify's extensive list of the top dropshipping apps used through their site includes AliExpress, Dropified (eBay), DSers-AliEpress and Oberlo (Shopify) alternative, CJDropsshipping, Spocket (U.S. and E.U. only), Eprolo, SpreadrApp (Amazon), Printfil, So-Light Ali (for products on Orbelo and Alibaba), Modalyst (AliExpress partner), Syncee, HyperSKU, DropCommerce, and ShopMaster.
Percentage of Shopify GMV (Gross Merchandise Value) Derived from Drop Shipping
- Shopify is the de facto option for drop shipping through its Oberlo App, allowing access to suppliers overseas. For instance, in the second quarter of 2018, merchant solutions accounted for 55% of the total revenue for Shopify.
- Approximately 80% of the businesses on Shopify are drop shipping sites that use the Shopify or Shopify Plus plans; Approximately 4% of sellers on Amazon and eBay sell on Shopify to remove risk for their businesses and to be able to drop ship some of their products.
- GMV for the fourth quarter of 2018 was $14.0 billion, an increase of $4.9 billion, or 54% over the fourth quarter in 2017. Gross payments volume grew to $5.8 billion, accounting for 41% of the GMV processed versus $3.5 billion, or 39%, for the fourth quarter of 2017.
- In 2019, the fourth-quarter revenue and gross merchant value grew 47% year-on-year and exceeded $20.6 billion for a total of $61 billion, consequently, GMV increased to $16.3 billion from $41.10 billion in 2018. This growth established an increase of 49% or $61.10 billion in revenue in 2019. GPV grew to $25.7 billion, which accounted for 42% of GMV processed versus $16.6 billion, or 40%, for 2018. Subscription solutions revenue grew 37% to $183.2 million driven primarily by growth in monthly recurring revenue. Merchant solutions revenue grew 53%, to $322.0 million.
- Shopify's Gross merchandise value grew 119% to $30.1 billion in the second quarter 2020, compared to the first quarter.
- Total revenue in the third quarter of 2020 was $767.4 million, a 96% increase from the comparable quarter in 2019, with subscription solutions revenue at $245.3 million, up 48% year-over-year. Shopify's merchant solutions program revenue grew 132%, to $522.1 million, driven primarily by the growth of Gross Merchandise Volume.
- Categories of GMV for the strongest growth in the second quarter of 2020 include Food, Beverages, and Tobacco doubling from the first quarter.
- GMV for the third quarter was $30.9 billion, an increase of $16.1 billion, or 109% over the third quarter of 2019. Gross Payments Volume grew to $14.0 billion, accounting for 45% of the GMV processed in the quarter, versus $6.2 billion, or 42%, for the third quarter of 2019.
- Stores with sales over $1,000 are either drop shipping, have a niche product from local manufacturers, have an Amazon/e-Bay presence or are larger, well-known brands. These stores represent about a quarter of all subscriptions, but 90%+ of gross merchandise value. Niche drop shippers over $1K (12%) buy products from 3rd parties (typically through AliExpress) and ship directly to customers using Shopify's Oberlo App.
Research Strategy
We begin our research by locating annual percentage totals for the gross merchandise values gained through sources that highlight Shopify's annual and quarterly reports, along with data from the company's news pages on its website. Data is separated by quarterly segments listed on annual reports. All data represents credible information regarding total revenues and gross merchant values and percentage totals for growth year-over-year.