The digital retail platform has tried to lean hard into a model that has helped Target pull off its turnaround.
Retailers have turned to celebrities to stand out from their competitors. That’s not a new tactic, but it’s one that has accelerated in recent years as influencers and people famous for being famous have built product empires.
It’s a world that has evolved well past George Foreman slapping his name on a grill and making a billion dollars. Target (TGT) – Get Target Corporation Report has been a major winner in this area partnering with Chip and Joanna Gaines for a line of Magnolia merchandise sold at all its stores. The retailer has also worked with Chrissy Teigen (on a cookware line) as well as countless high-end designers for limited-edition collaborations.
Celebrity product lines have become the norm, but their impact on the bottom line has a mixed track record at struggling retailers. Michael Strahan has a well-regarded menswear line at J.C. Penney and the Kardashians have a jeans line that was once part of the plan to turn Sears around.
Now, Shopify (SHOP) – Get Shopify Inc. Class A Subordinate Report has turned to the Kardashians (and some other big names) to help it in its battle to win market share from Amazon (AMZN) – Get Amazon.com Inc. Report.
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Shopify Bets Big on Celebrities, Influencers
Shopify has been struggling for the past year or so as the high cost of developing infrastructure has become clear. The company saw its loss increase to “$345.4 million, or 25% of revenue, versus a loss of $4.1 million, or 0.4% of revenue, for the comparable period a year ago,” according to the company’s earnings release.
Now, as it works to build toward profitability, Shopify President Harley Finkelstein made it clear that celebrity names are going to be a major part of the digital sales platform’s strategy during the company’s second-quarter earnings call.
“The world’s biggest superstars are also building their brands on Shopify Plus. In Q3, the Kardashian brand continued to build their Empire on Shopify with their latest brand, Courtney Kardashian’s vitamin and supplement company,” the president shared.
Kylie Jenner also has her cosmetics brand on Shopify and the family has used the company for a variety of their namesake brands.
And, in addition to the popular reality star family, Shopify has been steadily adding big names.
“Additionally, Food Network star, Giada De Laurentiis introduced Giadzy a new line of sauces and condiments. Ciara launched On Emission, her new line of clinical skincare. And homegrown Toronto celebrity, Matty Matheson, launched a new workwear brand, Rosa Rugosa,” Finkelstein added.
Shopify Eyes Profitability
While Shopify has struggled, it maintains a strong balance sheet.
“Turning to our balance sheet. Our cash, cash equivalents, and marketable securities balance on September 30 was $4.9 billion, which is $2 billion lower than June 30, reflecting $1.7 billion deployed for the Deliverr acquisition,” outgoing CFO Amy Shapero said.
Shopify spent a total of $2.1 billion buying Deliverr, a fulfillment, and logistics company.
“We expect these investments will allow us to emerge from this macrocycle stronger and will position us well for long-term growth and sustainable profitability,” Shapero said.
The CFO, who left the position on Oct. 27, believes the company has positioned itself for profitability.
“The discipline and rigor that we continue to apply across the organization, beginning with software development to ultimately the commercialization of our solutions, will position us well for long-term growth and improving profitability when exiting this macrocycle,” she added.
The challenge, of course, is that Amazon has created a market where investment is endless. When your main competitor keeps raising the bar when it comes to customer expectations, that creates a difficult operating environment for a company that, while it has made a lot of strides, remains well behind its rival.
Target has shown, however, that the right acquisition (Shipt) and smart celebrity deals can keep a company competitive without matching Amazon’s spending dollar for dollar.