Last Weeks Earnings Winner, BIGC and What to Expect this Week
Action continues to be packed in this end of year rally, be prepared and know what to look for here
We gotta talk about a big winner from last week, that I mentioned I added in my last publication, as well as prepare ourselves for this week. It’s a big one!
This earnings season continues to bring excitement as we see the Russell 2000 finally breakout. It recently peaked in February of 2021 after a parabolic rise at the back half of 2021. From there it consolidated until October 2021, where it broke the trend line. It appears likely that may of our portfolios will perform well during this time.
Small caps historically have indicated a “risk-on” environment that typically gives a bid to growth stocks and more speculative stocks. When small caps rally it has the potential to mean that the end of the market rally is near, but this can last months. The Santa Claus rally has historically led to higher stock prices as well. Basically, near term we’re looking good but long term, there are a lot of risks on the horizon.
It’s more important than ever to know that these rallies are to be enjoyed but always be prepared for “the big crash”.
I spent a majority of the weekend studying this business and trying to assess the opportunity and understand why we are seeing accelerated growth. I think there’s a few things we should know: how is BigCommerce different than Shopify? What have they done to accelerate growth? What does this latest earnings report mean? Can they continue this trend of accelerated growth, and, why?
BigCommerce vs Shopify
You would be very surprised to hear that BIGC is very similar to SHOP when it comes to performance and functionality. However, they are uniquely different in their own way. The Gartner Magic Quadrant for Digital Commerce is a good place to get started when comparing:
There is way we can leverage the Gartner Magic Quadrant as investors. Let me direct your attention to the X and the Y axis where the X axis represents “completeness of vision” and Y axis represents “ability to execute”. As an investor, think about this as a score card for a potential investment ideas and birds eye view of the competitive landscape. Let’s break down each quadrant:
Niche Players: Could be emerging players but still don’t have a strong position in the market just yet
Challengers: Businesses executing very well and can have strong sales/market share
Visionaries: Pioneers of products that may be changing the game
Leaders: A market leader with excellent execution and vision for the future of the respective industry
In this magic quadrant above, we can see Shopify is executing at the top of the industry. This would explain its exponential sales growth but what it may lack is a true vision for the future future of digital commerce. There are other players pioneering the innovation on this front. I will touch up more on this later, I know there’s a lot of Shopify share holders out there and I can explain why this is. Don’t hate the messenger!
BigCommerce, surprisingly, is closer to the leader quadrant than Shopify with a challenger level of execution. In my research, I found this to be the case especially when thinking about the functionality of each product. Basically, BigCommerce is doing more on the store front and Shopify is focused on offering an all-in-one solution for retailers.
How exactly do these two compare to each other? I spent hours of research and comparison between the two companies and it’s honestly quite simple how they are positioned in the market between each other. First, it’s important to know that when it comes to a pure e-commerce platform these two are the market leaders. The Gartner Magic Quadrant above is titled “digital commerce” meaning that it’s not necessarily made exclusively for e-commerce enablement websites like BIGC and SHOP. The leaders are most likely made for a majority Gartner’s clients client base, which is the enterprise and can be designated for something else. For example, Salesforce is a CRM system with commerce capabilities and not necessarily exclusively focused on affordable online store development. It’s kind of like ordering a cheeseburger when all you really want is the cheese, you get a lot of other stuff included.
Shopify and BigCommerce address the individual, smaller or larger, retailer looking to host a store online. They are priced similar and have similar business models. But, they are different.
Shopify does a really great job addressing smaller businesses and new merchants. Their platform is easy to pick up (learn) and provides a lot of customizations as they grow. However, Shopify can become more expensive because the customizations are dependent on the third party apps. Overall, this is tailored to the smaller, SMB, business. In addition to their e-commerce business they have other parts of their revenue model which includes: payments platform, POS systems for retail (similar to LSPD), fulfillment, marketing, etc. Their other “merchant services” consist of a majority of their revenue. This means they are in the business of helping their SMB clients rather than only focusing on their e-commerce platform capabilities.
BigCommerce is a pure e-commerce platform and does not focus on a lot of the other functionalities Shopify does. They focus on using third party vendors for a lot of the capabilities their clients may have. For example, they’ll use PayPal for a lot of their payment processing and Affirm for buy now, pay later. BigCommerce has a larger “out-of-the-box” platform offering and is geared more toward the enterprise (larger clients). Clients of BIGC will often say, “BigCommerce is more geared for the enterprise, there is no question about it”. They have more embedded capabilities than Shopify and continue to focus primarily on the software platform of the future for e-commerce and are innovating in this space. This likely explains why BIGC is further on the spectrum of visionary than SHOP, because of their focus on digital commerce development.
Basically, they compete heavily against each other but the business models of both uniquely position them in the market. Many clients of Shopify could use BigCommerce and be just fine, and visa versa. BigCommerce is made more for the enterprise and Shopify is made more for the smaller business. Big commerce focuses on being a digital commerce platform and Shopify focuses on enabling the SMB commerce capabilities.
Keep reading with a 7-day free trial
Subscribe to Dillon’s Newsletter to keep reading this post and get 7 days of free access to the full post archives.