Shopify retailers look to AI to help with important sales choices

 Shopify retailers look to AI to help with important sales choices

Based on forecasts from LSEG, Wall Street anticipates sales growth of 22.38% to $1.67 billion over the previous year.

Shopify must demonstrate to investors that its AI products can spur growth when it releases its financial results on November 2—a week after e-commerce behemoth Amazon said it would provide its merchants with new generative artificial intelligence advertising capabilities for the upcoming Christmas season.

Based on forecasts from LSEG, Wall Street anticipates sales growth of 22.38% to $1.67 billion over the previous year.

At a conference in September, Shopify's Chief Financial Officer Jeff Hoffmeister said that the company's AI technologies would be a "superpower" for sellers who want assistance in deciding on their product mix and regional development.

Shopify offers online retailers services and software. Additionally, it offers applications that let retailers sell straight on websites like Amazon and Walmart, who are also developing AI features for retailers.

After completing its logistics division divestment in May, the business unveiled Shopify Magic in July, a package of AI-powered product descriptions, virtual assistants, blog posting, and email marketing tools for merchants. Shopify introduced the AI software Sidekick as part of their AI suite to assist sellers in making decisions about marketing, promotions, and inventory while reducing their reliance on third-party widgets.

Analysts predict that sales of Shopify's merchant products—which include Shopify Magic—will rise 21% to $1.2 billion in comparison to the previous year, marking the company's first quarterly decline.

In contrast, as part of a significant drive to attract more merchants to its marketplace, Amazon's third-party seller services expanded by 19.8% during the third quarter.

According to MoffettNathanson analyst Michael Morton, Shopify should outline its strategy for attracting additional business clients, such as Meta and boot manufacturer Hunter. However, Morton does not think the e-commerce platform's artificial intelligence capabilities will be a differentiator in the short term for luring in bigger customers.

Shopify Magic is a component of the company's long-term plan to increase the number of merchants using its platform and charge more for its services.

The Ottawa-based business increased the cost of its monthly memberships in April. Shopify Magic is included with Shopify memberships at no extra cost.

During the company's second-quarter call, Shopify President Harley Finkelstein said that adding bigger merchants to the platform raised sales volumes for Shopify's point-of-sale, lending, and payment products as well as "cross-sell" volumes.

According to CFRA Research analyst Angelo Zino, generative AI would be "tougher sell" for retailers that are suffering from falling demand and are less inclined to try new things.

"As long as [Shopify] are able to demonstrate that there are productivity advantages associated with [AI], there's going to be an opportunity for them to monetize it, although possibly not as much initially," Zino said.