Shopify; Ruobing Su/Business Insider
- Shopify has a market cap of $42.3 billion - making it worth more than Twitter, Snap, Square, and Lyft.
- But you'd never search for products on the e-commerce company's website. Instead, the company is a backend for entrepreneurs to build their own shopping website.
- Kylie Cosmetics and Allbirds both use Shopify.
- The approach to building an e-commerce empire is quite different from Amazon, Ebay, or other online giants, where users can easily search for what they want.
- We asked Michael Perry, a product director at Shopify, why the
retail er prefers to stay behind the scenes as the "backbone" for retail entrepreneurs. Here's what he told us. - Visit Business Insider's homepage for more stories.
Rachel Premack: Just to start off, how would you say Shopify looks at retailers or sellers as part of the platform?
Michael Perry: We've always played kind of a background role for sellers - to be a hub and spoke model to allow them to sell and connect with their potential customers everywhere.
Shopify has quickly become home of entrepreneurship. Our philosophy and focus since Tobi (Lütke), the founder, started the company, was to allow for more voices to be at the table rather than few and to drop the barrier of entry as low as possible so that everyone could chase their ambitions and dreams and be an entrepreneur.
We've powered 800,000-plus entrepreneurs from around the world. We've invested very heavily in dropping that barrier of entry.
This multichannel experience allows them to reach their customers online - in the traditional way like through Instagram, all the way into the home of their brick and mortar businesses or pop-ups.
And then we've been quite vocal over the last couple of years about internationalizing Shopify so that it's not just for English speaking entrepreneurs, but for entrepreneurs all around the world.
A slew of Shopify tools allow small businesses to grow
RP: And those entrepreneurs or sellers who don't have a big name brand or aren't immediately recognizable to customer - how can they make it on Shopify?
MP: Obviously, we take it very seriously to help them develop their business and our assistance in the development of their business so that they can become a big name brand. We've become very popular for some of the B2C brands on our platform, like Allbirds and Kylie Jenner and the such. But not everyone has that instantaneous success as some of them have found.
REUTERS/Lucas Jackson
Tobi Lütke, founder and CEO of Shopify
We've made huge investments in some of our marketing technology to allow for them to run Facebook ads in a very competitive way. We partnered with Google last year to be the launch partner for smart ads, which kind of helped with all the optimization and bidding so that we can partner with Google so they can run ads in a very competitive way. We recently announced a partnership with Snapchat, so they get their brand in front of a younger audience in a very competitive way.
We have multiple offerings in the marketing suite to help them drive that direct to consumer relationship experience. Most recently with the launch of Shopify chat, that allows for our entrepreneurs to tell their story and to talk directly to their customers and to really leverage them.
One authentic competitive advantage the entrepreneurs have is their voice and their story.
Small businesses are considering expanding on Shopify over Amazon - here's why
RP: I talk to Amazon third-party sellers quite a bit, and one of the things that they've been talking about recently is this concept that it's just getting too expensive to sell on Amazon, especially with the FBA cost and ads and so on.
So, how does the Shopify margin look different if you're selling it through a Shopify website versus selling through the Amazon marketplace?
MP: I think that the important thing for us to obviously clarify is that Amazon is a very traditional marketplace to the extent that they're taking a cut of the transactions.
We are really just trying to be a Software as a Service (SaaS), the back office to all of these businesses, and we charge a monthly fee.
That is a huge advantage for sellers because you know, then they're not losing on every single sale. We want to empower people to grow their business in a very fruitful and meaningful way and that's why we've gone with a monthly subscription revenue model.
REUTERS/Chris Wattie
An employee works at Shopify's headquarters in Ottawa, Ontario, Canada.
RP: Does that monthly fee change based on how many sales you're driving or anything like that?
MP: Not on sales. We have a variety of plans depending on what the needs are for your business. So it starts with Basic Shopify, which is a very popular plan that a lot of our merchants are actively using.
Then it goes all the way up into Shopify Plus, which is a bit of a more white-glove tailored experience. It's a premium cost and it's more common for larger brands, certainly more direct to consumer well-known names that you've probably had shopped from they're typically using Shopify Plus.
'Amazon plays a very unique role in helping them acquire customers, but it doesn't help them acquire relationships'
RP: Why do you think that is that sellers are moving to Shopify from Amazon?
MP: I think at the end of the day, one thing that's always been really, really important for entrepreneurship and I grew up working in family businesses, and if you go all the way back to the beginning of commerce, there's one thing that's always remained true regardless of the area, regardless of technology. And that's the importance of owning the customer relationship.
REUTERS/Lucas Jackson
The logo of Shopify hangs behind the Canadian flag after the company's IPO at the New York Stock Exchange on May 21, 2015.
MP: It's very, very important for entrepreneurs to be able to establish and build lifetime value with their customers and for them to drive repeat business into them, to do all of these things that help their business grow and for them to build this magical businesses they envision for themselves.
I think Amazon plays a very unique role in helping them acquire customers, but it doesn't help them acquire relationships and it doesn't help them grow their business in that same meaningful way.
I think there's a place for there to be some complimentary opportunities where people sell on Amazon as well as power their business on Shopify. But more importantly, I think that you see this gravitational pull because customers equally crave that relationship.
As consumers, we like to be able to walk into a local business where everyone knows your name. You like to get preferential treatment. You like to have a relationship.
We are all consumers at the end of the day. Shopify is the business with allowing for those relationships to happen. And that that is the special sauce. That is your secret magic.
E-commerce is becoming less anonymous
RP: It's sort of like the difference between going into a dressing room and kind of being ignored by the people running the dressing room versus, you know, someone coming back to the room and asking if you need a different size or something along those lines.
MP: Totally. Exactly. I mean, I think that we all buy on Amazon. And I can't tell you a single merchant or entrepreneur I bought them from on Amazon.
I don't know if I've given them repeat business or not, but the businesses that I'm buying for online, tend to be the direct to consumer experiences. I do know who they are and I do know their story and I do like feeling special.
REUTERS/Chris Wattie
A room is seen at Shopify's headquarters in Ottawa, Ontario, Canada, October 22, 2018.
And I do like preferential treatment and emails and things of that nature because I like the relationship component. I think that more and more people are recognizing that that's a really important part of the buyer experience.
You want that helper to help you with your changing room to get your size. You don't want to be ignored. So, I think that that plays a huge role in the gravitational pull and how commerce is reshaping right now.
RP: So, it sounds like e-commerce was getting less anonymous overall then.
MP: I think we believe in that deeply and I think that our multichannel offering, because we believe that every offline business will have an online component and vice versa potentially. I think that we're realizing and trying to scale and accelerate the abandonment of anonymous shopping and really kind of own the relationship development.
Shopify isn't likely to change its course and become a front-facing player
RP: Then, on the opposite end of that, why is Shopify kind of more of an invisible, background player providing the structure for these websites? Do you ever try to see a future where you can actually just go on Shopify.com and search for something?
MP: You know, I can't comment on that because I don't work on Shopify.com products and I'm not familiar with the road map, but I highly, highly doubt it today.
I think it's really important that we always put entrepreneurs up front and center. I think it's really, really, really important and I think that we recognize that and that's why people prefer to choose our platform because we're not putting our logos everywhere and being on everyone's face.
Carlos Osorio/Toronto Star via Getty Images
Shopify's headquarters.
We're allowing them to own the vision. We're allowing them to have the flexibility to build their business. It's our job to power that ignition.
We want to be the enablers. We want to be the people that are powering the next way of great entrepreneurs. And in the process of doing that, I think we feel very comfortable on how things net out at the end of the day. So, I think it's just a matter of philosophy and I think it's just a matter of what the approaches and on what people's appetites are. Our approach and our appetite is very uniquely entrepreneurs first.
Shopify is seeing significant year-over-year growth. Could it unseat Amazon as the leading online retailer?
RP: So, Shopify just took over eBay as the second largest platform online selling and saw 48% year-over-year revenue growth in its most recent quarterly earnings report. Given that, do you think it's possible for Shopify to take over Amazon or even edge out Amazon as the largest retailer online?
MP: You know, that's not really the way that we approach or look at it. Amazon is an incredible business and incredible marketplace and we've partnered with them on a bunch of things before to help our merchants sell directly on Amazon. They are a very traditional marketplace.
We operate the commerce operating system. It's allowing for businesses to sell everywhere and it's our job to power entrepreneurs.
So, we want to go and build a relationship with Amazon, build relationships with Walmart and eBay and these other marketplaces because we believe that our entrepreneurs should be leveraging them to the best of their ability - the same way we've gone and built those relationships with Facebook and Google.
I think Amazon's a great business. Our job, of course, is to make sure that we help not one company become great, which is Amazon, but help millions of entrepreneurs build the next Amazon; build the next great company. And that's our mission and focus.
As Shopify experiences remarkable growth, Perry says it's crucial to 'preserve that magic' that's fueled Shopify from the early days
RP: I think that's just about all my questions. Could you share what you think Shopify's biggest challenges or hurdles are over the next few years?
MP: I've done a lot of media interviews. That's the first time anyone's asked me that question, so kudos to you.
I think if I'm being 100% candid in that, I think that this is just the honest to God truth - building a business is really hard.
And when I joined Shopify some time ago, it feels like a million years ago, we were a small company and we had a lot fewer merchants and we had just explosive growth over the last three or four years.
When you're experiencing this kind of velocity, it's preserving that magic that got you here, as well as making sure that you keep everyone on board with the brand and the vision and the mission.
And that's every business's challenge and I think that's what separates the great companies from the good companies. I don't even know how many employees Nike has. I think every person that works on Nike knows that they're building products for athletes.
Reuters
I think it's really, really important for Shopify and I think that we're doing a great job of this today, but we have to continue to double down indefinite to constantly remind us internally and externally, we're the entrepreneurship company and we're here to build things for entrepreneurs.
And I think that's that balance of making sure we play that background role and knowing when we can leverage the brand and do things all the right way.
Because as long as entrepreneurs maintain front and center and as long as everyone stays on board with that vision and mission, we could feel really good about who we are as a company, and I think that's the problem that we're going to continue to develop internally for years to come.
RP: It kind of reminds me of, I'm sure you followed like the rise of Glossier, but it's interesting to me that they won't expand to Ulta or CVS or Sephora or wherever. If Glossier did expand there, it'd make a lot more sales and be more visible and these sorts of things but they kind of lose the magic and what makes them special.
It seems like it's definitely challenging kind of balancing growth as well as maintaining the ethos of the company.
MP: I think we'll know that we're headed in the right direction when everyone else around the world views us as the entrepreneurship company as well.
And that's what we've been trying to strive for and push towards and that helps all these things collectively.
This interview was lightly edited and condensed for clarity.