Shopify Inc. SHOP-T is increasing the base price of its advanced merchant subscription plan, a long-expected hike following the increase of its Basic plan prices last year.
Shopify, which provides an online platform for retailers, will raise the fee it charges merchants on its annual Plus plan to US$2,500 a month, up from US$2,000 currently. That amount will be reduced to US$2,300 for those who commit to a three-year plan.
Existing Shopify Plus merchants can lock in their current pricing if they sign up for a three-year plan by April 24, according to a company e-mail to merchants obtained by The Globe and Mail.
The Shopify Plus plan includes priority access to support, lower credit-card fees and greater customization options for checkout. The plan is intended for larger merchants who require more complex tools and are growing quickly.
In its last quarterly report, the Ottawa-based company said that for the nine months ended Sept. 30, 2023, overall subscription revenue increased to US$1.3-billion from US$1.1-billion for the same period the year before and accounted for 27 per cent of total revenue.
Shopify said its Plus subscription revenue contributed US$44-million in the third quarter.
In a Thursday note to investors, Scotiabank analyst Kevin Krishnaratne estimated that if all merchants signed up for a one-year contract at the new price it could result in up to a 3-per-cent gross profit gain for fiscal year 2024.
“Although the subscription pricing changes were likely well expected by investors, we still view the moves as reflecting the pricing power in Shopify’s model, noting very little churn impacts from the Basic plan pricing increases made last year,” Mr. Krishnaratne told investors.
In addition to the subscription price increases, Shopify is raising its online credit-card payment fees for U.S. merchants. Currently, those merchants pay 2.15 per cent, plus a fee of 30 US cents per transaction on domestic cards. That will rise to 2.25 per cent for consumer cards and 2.95 per cent for business cards, plus the same fee.
It’s unclear whether these new credit-card rates also apply to Canadian merchants. Shopify did not respond to a request for clarification by late Friday afternoon.
The company is also increasing its fees for merchants who sell more than US$800,000 within a monthly billing cycle. Merchants will pay the greater of either their fixed platform fee, or a percentage of transactions. Previously, that percentage was 0.25 per cent; now it will be 0.4 per cent.
In an e-mail, Shopify said that the price it charges its Plus merchants has remained largely unchanged since 2017, even in the face of inflation. The company said the pricing update will allow it to help more businesses expand and comes along with hundreds of new features including AI commerce tools.
Shopify will report its fourth-quarter 2023 earnings on Feb. 13. Analysts expect the company to report revenue of US$2.07-billion, a 19.9-per-cent increase over the same quarter last year, and an operating profit of US$390-million, compared with a loss of US$188.7-million in 2022, according to a consensus estimate from Bloomberg.
Irene Galea