cft

What’s behind Shopify’s sensational success?

With revenue up 86% last year and their stock price popping 4,200% in five years, what can we learn from Shopify’s journey?


user

Meghan Wenzel

3 years ago | 5 min read

In the last decade or two, we’ve witnessed massive changes in business, with the explosion of direct-to-consumer (DTC) brands and the increasing democratization of business, knowledge, and expertise.

Design plays a significant role in both of these trends, helping entrepreneurs understand user needs, build relevant and intuitive products, and bridge the gap between complex technology and consumers.

Shopify is the third-largest e-commerce platform behind Amazon and eBay, supporting 1.7 million businesses ranging from mom and pop shops to corporate behemoths. They had $2.9 billion in 2020 revenue, an 86% increase from 2019. Harley Finkelstein, the President of Shopify, praises the company for democratizing entrepreneurship by empowering merchants and lowering the barrier of entry to business.

What’s driving Shopify’s success and what can we learn from them?

What sets Shopify apart?

Pinpointing user needs and developing an ecosystem around them

While Shopify started as a simple e-commerce website builder, it has evolved into an entire entrepreneurship ecosystem. It helps entrepreneurs set up their online presence, develop their brand, expand their reach, sell online and in-person, manage payments and shipping, and even secure additional funding.

By starting small and then expanding based on user needs, Shopify has become a one-stop-shop for businesses of all shapes and sizes. They’ve focused on merchants’ core journey, goals, and pain points in order to provide a hyper relevant and highly valuable product.

After building out the tools for anyone to quickly and easily create an online store, Shopify has expanded their offerings to address common pain points such as the checkout, point of sale, and fulfillment experiences.

Shop Pay makes checking out quick, easy, and secure. Shopify Fulfillment Network handles inventory distribution logistics and provides automatic packing and shipping services. And Shopify’s Point of Sale hardware allows merchants to sell anywhere, accept various payment methods, and build strong relationships with their customers.

Shopify has also focused on making their products easy to use. With such a wide range of users, they’ve prioritized reducing the barrier to entry for budding entrepreneurs. Their platform is intuitive and flexible, allowing merchants to add-on, integrate, and customize according to their needs. Additionally, their price point is affordable, starting at just $29 per month.

Empowering their customers and enabling them to focus on what matters

Gartner named democratization as one of the top ten strategic tech trends in 2020. Democratization of technology means “providing people with easy access to technical or business expertise without extensive (and costly) training.”

By democratizing business knowledge and technical expertise, Shopify reduces the barrier to entry and invites entrepreneurs to experiment.

Instead of having every merchant write code to get their business up and running, Shopify has created extensive infrastructure for entrepreneurs to easily adopt, adapt, and expand upon. In addition to technical support, Shopify provides business knowledge and advice.

They’ve created a learning community for “everything you need to know about starting and scaling a business from proven experts who’ve done it before” complete with business courses, guides, forums, podcasts, and free tools.

Finkelstein notes that with social media and the direct-to-consumer landscape, “the main ingredient to success is not capital, it’s creativity. It’s not resources, it’s resourcefulness.” By abstracting away complexity,

Shopify enables their customers to focus their time and effort on what matters — crafting their brand, differentiating their products, and building their audience. Shopify provides the tools and infrastructure as well as the guidance and support to help entrepreneurs thrive. This in turn leads to enthusiastic, loyal, and highly engaged customers.

Enhancing customers’ capabilities to make them more competitive

Shopify has focused on building partnerships and delivering as much value as possible to their customers. While a mom and pop shop can’t compete with corporate titans like Nike and Unilever on their own, Shopify can aggregate businesses and create economies of scale and increase their collective leverage.

“The dream for businesses that sell online has long been to have the ability to offer things like two-day shipping, easy returns, premium customer service and overall operational efficiency without having to be on Amazon’s website.”

In order to turn merchants’ dreams into reality, Shopify partnered with existing logistics providers. While these large logistics providers aren’t motivated to work with each merchant individually, once Shopify aggregates and streamlines their orders, their collective business is highly attractive.

While the bulk of Amazon’s activity comes from third-party sellers (roughly 60%), these sellers operate independently and don’t have much negotiating power. Shopify, on the other hand, seeks to empower and highlight their merchants. While Amazon focuses on the consumer, Shopify focuses on the merchant.

Shining the spotlight on their customers, not themselves

Unlike competitors, Shopify allows businesses to retain their autonomy. Shopify purposely sells themselves as a blank canvas, allowing merchants to bask in the spotlight, while Shopify remains behind the scenes.

Every merchant determines the look and feel of their store, which is enticing for direct-to-consumer companies who want to maintain full control of their brand, profits, and customer relationships.

Warby Parker kicked off the direct-to-consumer trend in 2010. By cutting out the middleman, they were able to provide high quality products at lower prices. By selling directly to customers, companies have more control over their messaging, products, and customer experience.

Engaging with consumers directly, D2C brands can keep tabs on changing trends, respond to feedback faster, and iterate and pivot as needed.

“The whole spirit of the D.T.C. space is owning the relationship with the customer, having that direct line, and Shopify gives you that control much better than Amazon does,” says Paul Munford, an angel investor. While Amazon exercises strict control over its platform, Shopify aims to foster a more cooperative and collective environment.

E-commerce brands are often selling a community and identity more than just a product. For example, Allbirds sells shoes, but customers are really buying something to signal to others that they’re eco-conscious and hip. Allbirds purposely doesn’t sell on Amazon or other intermediaries, despite the likely growth they would bring.

Instead, using Shopify allows Allbirds to maintain their brand’s integrity and fully control pricing. While Amazon is hard to beat in price and convenience, Shopify helps their merchants compete through differentiated branding, story telling, and high-quality products.

Shopify does a great job of deeply understanding and prioritizing their customers’ needs. They’ve stayed abreast of changing business and technology trends and built an ecosystem of targeted products that enable customers to achieve their goals. Capitalizing on the direct-to-consumer push, Shopify is satisfied staying out of the spotlight while helping their customers shine.

They recognized the power of democratizing technology and expertise, as well as enhancing customers’ capabilities to make them more competitive and successful. They’ve focused on building partnerships and enabling customers, and in return, they’ve built a community of enthusiastic and loyal brands.

Upvote


user
Created by

Meghan Wenzel

As a User Researcher and Strategist, I help companies solve the right problems and build more relevant, efficient, and intuitive products. I started my UX career at a Fortune 500 company, and I've since helped established the research practice at three B2B startups. I'm currently a Senior User Researcher at Unqork, the leading enterprise no code platform.


people
Post

Upvote

Downvote

Comment

Bookmark

Share


Related Articles