Shopify focuses on their merchants to ensure platform retention

Shopify's second-quarter 2025 financial results was a revealing read into publicly traded SaaS companies churn and retention numbers.

Here are some of the interesting nuggets from their latest report.

The Key Metric for Longevity: Monthly Recurring Revenue (MRR)

At ChurnDog we talk a lot about churn rates and it’s impact on MRR, and one of the ways to understand churn and retention is to look at public data from SaaS companies.

So let’s look Shopify’s numbers.

• The Numbers:

  • MRR at June 30, 2025: $185 million.

  • Year-over-Year Growth: This represents a 9% increase compared to $169 million at June 30, 2024.

• The Insight for ChurnDog: Sustained MRR growth is fundamentally reliant on a low churn rate, as every lost customer is a direct loss of that predictable revenue stream. Shopify's focus on MRR validates that the most valuable merchants are those who stick around and continue to subscribe to the platform's core services.

So how does Shopify try to retain their customers?

Upselling and "Growth Retention"

The growth in Subscription Solutions revenue is not just from new merchants; it's heavily influenced by existing users moving to higher-value plans, a form of Net Revenue Retention (NRR).

Here are some key takeaways:

Subscription Revenue Growth: Subscription solutions revenue for the three months ended June 30, 2025, increased by 17% year-over-year.

The Primary Driver: This increase was driven by more customers subscribing to the higher priced plans, such as Plus, which are a lot more expensive than other Shopify plans.

The ChurnDog Takeaway: Shopify's success is tied to its ability to retain merchants as they scale and grow into enterprise-level businesses. Retention is achieved not just by preventing cancellations, but by proving continuous value that justifies an upgrade.

Strategic Investment in Merchant Success (AI)

Shopify’s future success depends on many factors, but the main driver of their success is its ability to retain merchants as they grow their businesses on our platform and adopt more features.

Here’s what they did to try to meet this goal

Targeted AI Acquisition: Shopify acquired Vantage Discovery Inc., a company focused on AI-powered search and content discovery services for retailers. According to their PR the goal is to improve how products are discovered.

The ChurnDog Takeaway: By improving the core platform tools, particularly those involving AI and search, Shopify makes its platform more valuable and sticky. An easier-to-use, more powerful platform for the merchant translates directly into lower platform-level churn.

But here are some other takeaways that suggest some caution for Shopify.

The Churn Headwind from Extended Paid Trials

Shopify did note a decline in their headline MRR growth rate, linking it directly to its onboarding strategy.

The MRR growth rate (9% Y/Y) was lower for the period compared to the previous year, and the 10-Q attributes this specifically to the impact of extending the length of the paid trials.

ChurnDog Analysis: One of harder questions for all software companies is how long should paid trials be set for. Longer paid trials are often designed to improve long-term retention by giving merchants more time to find value before the full commitment. However, it slows down the short-term MRR growth metric because merchants are included at their lower trial price for a longer duration. For Shopify, their priorities are clear, they want stable, high-quality MRR over rapid, potentially high-churn MRR. We think this also applies to most SaaS companies.

The Transaction Loss Spike as a Churn Indicator

A notable increase in loan and transaction losses, while not direct merchant churn, is a possible indicator of financial stress and potential failure among the merchant base.

• The Provision for Transaction and Loan Losses jumped to $80 million in Q2 2025 (up from $42 million in Q2 2024). This 90% increase was driven by:

  • Increases in losses related to Shopify Payments from higher realized losses.

  • Increases in losses related to lending services due to the expansion of offerings.

• ChurnDog Analysis: Increased payment and loan losses signal a higher risk profile for a segment of Shopify's merchants. For a company like Shopify, a merchant defaulting on a loan or incurring chargebacks is highly correlated with that merchant eventually closing their store (churning). The expansion of lending services introduces more risk, but this metric is a critical health check. It suggests a growing need for proactive merchant-side financial monitoring to catch these high-churn-risk stores early.

Shopify's Q2 2025 report demonstrates a healthy, growing user base where retention is measured by the increasing financial commitment of the existing cohort. The company's retention strategy centers on two levers:

1. Monetizing Loyalty (MRR): Proving value to merchants to the point where they are comfortable paying more for higher-priced plans like Shopify Plus.

2. Platform Stickiness (AI): Making the platform so powerful and easy to use (via AI/search) that merchants are less likely to leave.