Shopify (SHOP Quick QuoteSHOP - Free Report) recently announced the launch of its Shopify Capital in Australia to provide quick and easy funding of up to $2.5 million AUD for innumerable merchants.

This is the peak sales period in Australia and merchants across the country are piling up inventory, planning advertising campaigns and sorting logistics. However, to upscale their business operations, merchants require access to timely funding.

Management recently stated that while 62% of Australian merchants are comfortable with seeking funds for their business, two-thirds are deterred by high-interest rates, while more than half cannot access funds on time due to the time-consuming application process.

In fact, traditional lenders often do personal credit checks, take equity in the business, ask merchants for cash flow projections and provide a timeline to repay the funding provided.

Nevertheless, the ongoing global inflationary pressures, reduced consumer spending, decreasing cash flow in the market and worldwide supply-chain disruptions posed several challenges to retailers on the path to a profitable business.

Amid such market volatility, retail businesses grow wary of borrowing funds to boost business operations.

Shopify is banking on this macroeconomic condition in Australia to expand its footprint in the region by introducing Shopify Capital, which is unlike any traditional financing system.

Shopify Capital does not check credit scores or stake a claim in the business and ask for cash flow projections. Rather they provide merchants with $2.5 million AUD through the Shopify platform they use to run their store. SHOP then employs its own model to approve funding for the business In a short span of two working days.

As merchants make sales, they repay on the agreed fixed percentage of daily sales, which lowers cash flow risks by removing the uncertainty of compounding interest rates and hidden fees. Also, there is no stipulated time limit for repayment.

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Shopify Capital Aids SHOP to Expand Merchant Base in Australia

The current macroeconomic situation not only affected small retailers but also dented Shopify’s profitability. Inflation and possible signs of recession aggravated the current market scenario and slowed down e-commerce progress.

Also, rising inflation surged operating expenses. In the second quarter, non-GAAP operating expenses soared 75.7% year over year to $845.9 million, inducing an adjusted operating loss of $41.8 million.

Shares of Shopify, currently carrying a Zacks Rank #3 (Hold), have fallen 76.1% compared with the Zacks Internet Services industry’s decline of 24.6% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shopify has been forging strategic alliances with major tech giants and spreading its operations globally to address the issues of local merchants to boost its e-commerce platform.

Shopify collaborated with companies like Apple’s (AAPL Quick QuoteAAPL - Free Report) iPhone tap-to-pay feature and the major social media platforms like Twitter and Meta Platforms’ (META Quick QuoteMETA - Free Report) Facebook and Instagram.

The recent integration with Apple enables shoppers to use Apple smartphones against the terminal to pay for goods. While this may not be a new feature in retail, Apple’s recent Pay Later installments added a whole new dimension to retail marketing.

The Twitter sales channel allows merchants to connect with consumers directly from their Twitter profiles. Shopify’s integration with Twitter will benefit SHOP from the growing trend of influence marketing strategy.

Meta Platforms’ Facebook and Instagram are two of the most popular social media platforms among the creators and users alike. Integration with Meta Platforms will help Shopify address the growing trends and help merchants promote and sell their products via Facebook or Instagram at a much reasonable cost.

Also, at a time when the rising cost of capital is impacting the profitability of businesses in Australia negatively, retail businesses are cautious about investing further in their business through debt financing. However, the recent launch of Shopify Capital may lure merchants to the platform owing to its flexible funding program.

Since the global unveiling of Shopify Capital in 2016, SHOP has provided a funding worth of $3.8 billion USD, the average being 36%, higher than its peers' tally. With its recent offering in Australia, ahead of the nationwide peak sales season, SHOP is expected to generate a staggering ROI in the long haul.