Shopify (NYSE:SHOP) stock jumped over 6% on Wednesday after the announcement of increases to pricing plans.
The Canadian e-commerce company announced in a blog post that prices for its basic, mid-range, and advanced services will be increased for the first time in over a decade. Prices for each plan are slated to increase about 33%.
The company will now charge $39 for the basic plan, up from $29, $105 for its Shopify plan, up from $79, and $399 for the top-end plan, up from $299.
“The price we charge for access to the best tools in commerce has remained largely unchanged for the last 12 years,” COO Kaz Nejatian wrote in a blog post. “Today, after much deliberation, we’re announcing a change in favor of better serving our mission and our merchants.”
Price increases for existing customers are anticipated to take effect in April. Additionally, existing merchants may switch to an annual plan to lock in current pricing. The new pricing plans are in effect immediately for new merchants on the platform.
“We don’t think these prices warrant a change for the vast majority of merchants, given the time and effort required to shift platforms, and our view that Shopify’s platform, in many respects, offers superior e-commerce functionality at a reasonable price,” Baird analyst Colin Sebastian commented.
Keybanc analyst Josh Beck echoed these sentiments, pointing to recent precedents set at other companies. In each case, price increase benefits have outweighed customer retention issues, he said.
“We would note a slew of SMB oriented companies such as Intuit (INTU), Wix (WIX), SquareSpace (SQSP) and EngageSmart (ESMT) have effectively implemented SMB pricing increases, with the benefits of increased pricing far outweighing minimal churn impacts,” he advised.
That said, Barclays analyst Trevor Young voiced a degree of caution, noting that the magnitude of the price increases is significant. As such, he retained his Hold-equivalent rating given the uncertain impact of the move on customer conversion and retention.
Shares of Shopify (SHOP) gained 6.02% after the market open on Wednesday.
Read more on Deutsche Bank’s bullish outlook for the company.