Slowing Shopify Growth Spells Challenges for BNPL Partner Affirm

Shopify sign on building

As Shopify’s growth slows down, its buy now, pay later (BNPL) partner, Affirm, is feeling the burn.

Per its earnings report Wednesday (May 8), Shopify saw 23% year-over-year revenue growth in the first quarter of this year, comparable to its previous earnings report and down slightly from earlier in 2023, when it saw revenue growth exceeding 30%. Looking ahead, however, the company expects this progress to slow, predicting that revenue will “grow at a high-teens percentage rate” in Q2, with its gross margin dipping slightly.

Investors are taking note. As of Monday (May 13) morning, Shopify’s stock remains down nearly 25% from end of day Tuesday (May 7).

That revenue bump last year was due in part to the company increasing the price of its Standard plan in the second quarter, while increases to the price of its Plus plan are under way.

“In Q2, we begin to lap the initial pricing changes on our Standard plans that went into effect in April of 2023, resulting in a headwind to our revenue growth quarter over quarter,” Shopify CFO Jeff Hoffmeister stated. “… Q2 will simply be a quarter where the lapping effect of the Standard plan changes exceeds the initial benefit of the Plus pricing changes.”

Yet investors seem to be concerned that Shopify’s challenges run deeper than just changes to its plan prices. Affirm’s stock price dipped double-digits between Shopify’s earnings report in the morning Wednesday and that afternoon, and as of Monday, remains down more than 6% from when the market opened Wednesday.

Indeed, Shopify and Affirm are linked. In the United States, the former’s Shop Pay Installments payment options are exclusively powered by the later, and Shopify is coming to make up a larger and larger share of Affirm’s gross merchandise value (GMV).

“One of the stats last quarter that I was just most impressed with is some of our longer-lived partnerships were showing the highest growth,” Affirm CFO Michael Linford said in a fireside chat in March. “Our partnership with Shopify grew at over twice our total company GMV growth rate in Q2, and that’s a partnership that we started talking about in the summer of 2020.”

 Overall, the markets for both eCommerce and BNPL remain sizable. The PYMNTS Intelligence report, the “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” drew from a survey of nearly 14,000 consumers across seven countries to understand their omnichannel shopping behaviors. The results reveal that 29% of shoppers prefer to make purchases purely remotely, via digital channels, and another 14% opts to make purchases digitally for in-store pickup.

Additionally, a significant share of shoppers uses BNPL, per the PYMNTS Intelligence study “Tracking the Digital Payments Takeover: What BNPL Needs to Win Wider Adoption,” created in collaboration with Amazon Web Services. The study found that 28% of consumers had used deferred payments plans in the previous three months, and of those, 19% had used BNPL. Plus, the June survey of more than 3,000 U.S. consumers found that 43% of those who already use BNPL planned to use it in the next year, 15% of those who had not planned to utilize it going forward.