Square Partners with UPS, Amazon and Shopify on Target

The deal with UPS will enhance the value of Square’s e-commerce platform as it battles Amazon and Shopify for market share.

Ruchi Gupta - Author

Feb. 3 2020, Published 8:38 a.m. ET

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Square (NYSE:SQ) and UPS (NYSE:UPS) have teamed up to offer solutions targeting small businesses. The pact involves UPS bringing its shipping service to Square’s platform where merchants come to set up digital storefronts.

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UPS deal will help Square merchants

The integration aims to make it easier for Square merchants to access UPS’s shipping service for order fulfillment. In addition to providing convenient access to shipping service from one of the world’s leading logistics providers, Square merchants will also enjoy favorable shipping rates. For example, sellers on Square’s e-commerce platform will be eligible for up to a 55% discount off UPS’s shipping rates.

The deal with UPS will enhance the value of Square’s e-commerce platform as it battles Amazon (NASDAQ:AMZN) and Shopify (NYSE:SHOP) for market share. Square can count on convenient access to shipping services and potential cost-savings to draw more merchants to its platform.

The company could benefit in many ways if the UPS deal helps it attract more merchants to its platform. First, Square provides a suite of payment and accounting solutions to businesses that generate revenue for it through fees. Therefore, having more merchants on the network means bigger fee revenue opportunities.

In addition, Square makes loans to businesses from which it earns interest. Therefore, the UPS deal could create more loan customers for Square. In addition to operating e-commerce platforms, Amazon and Shopify also extend credit to their merchant customers.

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Square made 85,000 loans totaling $563 million in the third quarter. The loans business falls under the subscription and services division where the revenue rose 68% YoY (year-over-year) to $280 million. Square’s total revenue increased 44% YoY to $1.3 billion in the third quarter. The company will report its fourth-quarter earnings results on February 26. Shopify will report its fourth-quarter results on February 12.

Amazon released its fourth-quarter earnings on January 30. The company reported a 21% YoY revenue increase. PayPal (NASDAQ:PYPL) reported its fourth-quarter earnings on February 29. The company posted a 17% revenue increase.

Great start in 2020

So far, Square stock has had a great run in 2020. The stock gained 22% YTD (year-to-date) through January 30. That placed Square ahead of Shopify stock with 20% YTD gains and PayPal stock with 8.27% YTD gains. Meanwhile, Amazon stock has gained less than 2.0% YTD.


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