As main street struggled and platforms such as Instagram became unlikely e-commerce giants, Shopify exploded in popularity. Almost 300 million consumers worldwide purchased from a Spotify merchant in 2019 alone. It turned out to be a winning proposition: if you had invested $ 5,100 in Shopify in 2015, when the company went public, your initial investment would be worth around $ 111,000: an astronomical return of 2076% on your investment. But Shopify has still not achieved consumer recognition. “It’s everywhere, but nowhere at the same time,” says Professor Sean Sands, a retail and e-commerce expert at Swinburne University in Melbourne.
Not anymore. With the launch of Shopify, Shopify’s new consumer shopping app, the company takes center stage. The new app eliminates the need for stores to set up their own site and offers users product recommendations on the brands they have already expressed interest in – there is no advertising. “The way to think of Shop is that it’s really a personal shopping assistant,” said Harley Finkelstein, director of operations for Shopify. “It’s an app that allows for a more intuitive online shopping experience.” The application is already operational in the United States; a British launch has yet to be scheduled.
It is an ambitious decision that would position Shopify as a competitor to Amazon or Etsy. But Finkelstein insists that they are not trying to steal Amazon’s crown. “The intention is not to create a market,” he said, “but to allow consumers to not only find new local businesses, but also to interact with their favorite brands. Unlike Amazon, Shopify will not hold inventory – brands will control their own supply chains, unless they choose to use the shipping capabilities of Shopify.
Whether or not Shop is an online market is a moot point. It should be emphasized that, unlike other online markets, brands using Shop will not be short term: apart from the payment transaction fees of Shopify (which are between 2.4 and 2.9%) , Shop will not charge brands a commission for renting space on the Platform. In comparison, Amazon charges 75p per item, plus fees between 7% and 45%. “The advantages of Shopify are that [Shop] helps more consumers buy in more Shopify stores, “says Finkelstein. “As they succeed, we succeed with them. ”
Is Shopify the next big retail giant? Not yet. But that’s how they want it. “We love the fact that we are the brand behind the brand that gives entrepreneurs a good look,” says Finkelstein. “I think it may be our Canadian side that shows a little.” (Shopify is based in Ottawa.) National Bank of Canada analyst Richard Tse has been following the actions of Shopify since the IPO in 2015. “Everyone says they’re trying to compete with Amazon,” says Tse . “And on the surface, [Shop] may look like this.
But what they’re really trying to do is generate more sales to their merchant customers. ”
Is there any reason that Amazon boss Jeff Bezos should be alarmed? Perhaps. Research by eMarketer has shown that Shopify exceeded eBay’s share of e-commerce sales in the United States last year, leaving it only behind Amazon. If the store takes off, it will be an attractive proposition for small and medium-sized retailers tired of Amazon’s high fees and its aggressive approach towards its partner suppliers. Finkelstein promised that Shopify would not use Shop to mimic one of Amazon’s most notorious practices: creating white-label versions of top-selling products and selling them at a cheaper price, which actually undercut retailers.
Shopify is almost simple to use: it requires almost no technical or coding skills. “It’s really easy,” says Tamsin Gordon, marketing manager for jewelry brand boutique Maya Magal. Gordon worked at online retailer Not on the High Street, where she would depend on developers to manage the website for her. When Gordon moved to Maya Magal, which is a much smaller operation – there are only four employees at the head office – she started managing the site herself. “It’s simple,” she says. “I can change the website front end, do inventory counting, extract analytics, check what’s selling – I can do it all myself.” Before, I had to force the technicians to do it. ”
Shopify has made starting an online business accessible. “Technology has basically democratized its ability to build a big business,” says Finkelstein, “and Shopify is a big part of it … what we’re trying to do is just level the playing field, so that small businesses can compete with largest companies and hegemonic retailers. Finkelstein uses the example of Kylie Cosmetics – reality star Kylie Jenner recently sold the company’s majority stake to Coty in a $ 600 million deal – to illustrate her point. He tells me that Kylie Cosmetics has only 13 full-time employees. “They challenge people like Sephora, Mac and L’Oréal, but they do it with fewer people,” says Finkelstein. “They [Kylie Cosmetics] are able to use Shopify technology to leverage their existing community and sell to a global audience. “
What is also remarkable about Shopify is the fact that the company seems safe from the recession. It was founded by Tobias Lütke in 2006, after the Canadian entrepreneur of German origin set up an online snowboard store and realized that there was a gap in the market for a technology platform. which would allow you to easily create and personalize an online store. In 2008, the fledgling company hit the financial crisis and, surprisingly, continued to grow. “When the economy is going through tough times, Shopify is traditionally doing well,” said Finkelstein. He explains, “If you have lost your job or need to supplement your income, a great way to do it is to start a small business. ”
As in 2008, the global coronavirus-induced recession has turned out to be lucrative. “Even before the pandemic, between 10 and 15% of retail activities were carried out through electronic commerce,” says Tse. “Shopify recognized that there was an opportunity to build a platform, products and services tailored to this change.” The coronavirus was a stiff tailwind in the sails of Shopify. “We have seen new stores created on our platform grow 62% more between March 13 and April 24 than in the previous six weeks,” said Finkelstein. “Many more people are now trying to get into entrepreneurship.” In the United Kingdom, new online store creations increased by 70% over the same period.
To cope with this increase in the number of entrepreneurs registering new brands – and consumers who are turning more and more online for their purchases – the team proposed new complementary functions to Covid-19. “The goal was to create products to help entrepreneurs and small businesses survive this situation,” says Finkelstein. They quickly introduced gift cards and features to allow for in-store collection.
The impact of Shopify on retail is not uniformly positive – it is a catalyst for the sometimes questionable practice of dropshipping. If you bought clothes from an Instagram brand that took a long time to arrive, that looked nothing like the photographs and were of poor quality, you have probably been the victim of dropshippers. Some dropshippers have created Shopify stores to market the products they find from other suppliers – typically AliExpress, “the Chinese Amazon” – and use Instagram and Facebook ads to market them to consumers. When they bite, the dropshipper places the order with the seller and has it shipped directly to the customer, pocketing the profit margin.
Direct delivery from China is often a bad experience for buyers. As you would expect, Finkelstein disagrees: many Shopify merchant merchants are dropshippers, who favor the platform for the ease and speed with which they can create dropshipping stores. “In my opinion, dropshipping is basically a great gateway into entrepreneurship for people who are reluctant to take risks,” says Finkelstein. Later, he adds, “Customers don’t really care [if their products are dropshipped]. Dropshippers will be allowed on the Shop app.
Sophie Slater, of the sustainable fashion brand Birdsong, which uses Shopify technology, is cautious about using Shop because of the dropshippers on the platform. “If you look at something like Etsy [the online marketplace]”Said Slater,” they had good intentions, were certified B Corp [an ethical accreditation system for businesses], but then authorized dropshipping, which ruined its appeal. ”
The impact of Shopify on our retail habits has been disruptive. He has facilitated the challenger brands – small scrappy arrivals with skinny teams and low overheads – who are now becoming the established incumbents – Kylie Cosmetics, Jeffree Star, Gymshark, Allbirds. Such is their ubiquity, it is easy to forget that all these companies were only created in the last decade. All of them use Shopify. Older brands are increasingly turning to these new children and trying to emulate their success. “We see bigger brands trying to be more entrepreneurial … brands like Heinz ketchup or Lindt chocolate use Shopify because they themselves want to be able to build a flexible, adaptable and that they don’t necessarily want to hire 300 to run a direct-to-consumer business, “says Finkelstein.
Already, the coronavirus pandemic has cost us some prominent brands: Warehouse, Debenhams and Laura Ashley have all joined the administration. The Center for Retail Research predicts that more than 20,000 UK stores will close in 2020, an increase of 28% from 2019. Is Shopify accelerating the decline of our main streets? “It really is a story of two worlds of retail,” says Finkelstein. “On the one hand, there are the retailers who resist change … on the other hand, you have the resilient retailers, who reacted to Covid in a completely different way. They seized new opportunities, activated curbside pickup and local delivery options. These resilient retailers will thrive, insists Finkelstein.
The impact of Shopify on our consumer and retail habits is starting to be felt. He transformed sales, allowing Davidson’s in the retail world to take the corporate Goliaths and win. Will the Shop app transform the way we shop? Very probably.