Why Wix Just Acquired This Shopify Supplier | The Motley Fool


Wix.com (NASDAQ:WIX), the world’s leading drag-and-drop website building tool, has been on a spending spree as of late. In the last five months alone, the company has made three different acquisitions in an attempt to bolster its offerings with the latest one coming less than a month ago.

On June 15, Wix announced it had acquired a leading marketplace and dropshipping platform called Modalyst for an undisclosed price. Let’s see why this acquisition fits so well into Wix’s growing suite of tools. 

A merchant stands in a co-working space looking off in thought.

Image source: Getty Images

What is Modalyst?

Before diving into the rationale behind the acquisition, it’s probably best to lay the groundwork for what Modalyst offers.

Modalyst is a dropshipping marketplace. That means the company serves online sellers by allowing them to easily connect with a network of global suppliers. This, in turn, enables merchants to offer a wider selection to their customers without requiring them to spend more on inventory. 

The company has been voted the best dropshipping software by several reputable news sources, and a part of its success is thanks to the platform’s seamless integrations with top e-commerce services such as Shopify, BigCommerce, and Alibaba

Why did Wix acquire it?

It’s no secret that Wix has been making a push toward e-commerce lately. The company is expecting to cross $10 billion in gross payment volume across its platform in 2021, which would be an 85% increase from the prior year. From shipping and payments services to customer retention tools and more, Wix provides solutions to meet just about any business’s needs. Dropshipping is just one more layer of functionality.

According to Wix, dropshipping marketplaces have a profound impact on both merchants and suppliers. “On average, Wix Stores that add dropshipping products increase Average Order Value by 40% and sales revenue by 79% within the first four months,” the company said in its acquisition announcement. 

With Wix’s more than 5.5 million premium subscriptions across its platform, Modalyst should be able to easily upsell and boost its customer count from the 350,000 online stores it has already served. While Wix hasn’t directly stated what it plans to do now that Modalyst is under its umbrella, the company could certainly offer a discounted price for Wix Stores or pair it with any number of its other solutions for a cheaper bundle. 

What does this mean for shareholders?

Since this acquisition came at an undisclosed price, it’s probably fair to assume the deal wasn’t big enough to create any significant changes to Wix’s financials. This should, however, increase the value proposition for both existing and potential users. 

At the end of 2020, Wix CEO Avishai Abrahami said he believes the company will power 50% of anything new built on the internet within five to seven years. While Wix’s competitors likely see that as audacious, acquisitions like these are helping the company quietly become a complete digital operating system for businesses of all types. 

With Wix’s holistic approach to its services and the ease of use of its core platform, Abrahami’s words might not seem too far-fetched in the years to come. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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