The story of Shopify begins with three friends who wanted to sell snowboards online. From there, the company exploded into an ecosystem. It empowers small business owners from around the world to sell products. This case study looks at how Shopify has become an eCommerce powerhouse.
Company Overview and Goals
Shopify did not start out intending to exist as the massive eCommerce platform it has become. It began as a way for three friends to sell snowboarding equipment online. Tobias Lütke, Daniel Weinand, and Scott Lake created the website Snowdevil. Their goal was to sell snowboarding equipment. It seemed simple enough. Yet, they soon learned that building an eCommerce site was no easy task.
They were frustrated with their lack of options for creating an eCommerce website. Lütke explains that the software available back in 2004 made his “skin crawl.” They used a combination of Miva, OsCommerce, and Yahoo stores. They could not customise it. Things changed when Lütke was introduced to Ruby on Rails. The open-source software allowed him to build Snowdevil. It also opened his eyes. He decided to create a software platform for eCommerce websites. He knew there was an easier way to establish them.
Snowdevil had some success, but the founders wanted to take things a step further. They wanted to help other small operations launch an eCommerce business. According to Lütke, “In the end, Shopify is the software that I hoped to find in 2004 for Snowdevil.”
Shopify’s founders had one simple goal: make eCommerce accessible and available to everyone. They knew that eCommerce was the future of shopping. They also knew there were thousands of other people out there just like them. People had a specific product or group of products to sell. Lütke, Weinand, and Lake wanted to help other entrepreneurs. They knew there was a way to make it easy for small business owners to launch their eCommerce site.
In the early days, the company’s mission was product-centric. The goal was to make it easy for anyone to create an online store. Early customers used the Shopify tool to build their own website. Over time, though, Shopify evolved beyond being just a tool. It has become a multi-channel experience. It now allows businesses to succeed online and offline.
Today, Shopify serves both online and offline customers. Its mission has evolved. It started as “making it easy for anyone to create a beautiful and powerful online store.” Now, its mission is “making commerce better for everyone.”
At the centre of its mission is the desire to help customers succeed. This is for two reasons. First, Shopify wants to empower small business owners and entrepreneurs. There’s also the fact that Shopify makes more money when its customers are successful. The more sales merchants make on Shopify, the more money Shopify gets. So, everything Shopify does is centred around helping their customers grow their businesses.
Revenue and Business Model
Shopify officially launched in 2006. Back then, it made money by charging sellers a transaction fee every time they made a sale. The fee was calculated as a percentage of sales. This ended up discouraging high-earning customers. They were paying more money to Shopify as their business grew.
In 2007, Shopify adjusted its fee structure. Merchants started paying a subscription fee. The subscription fee included a small transaction fee. The transaction fee lowered as the subscription plan increased. This new structure encouraged merchants to pay more for a higher subscription. In return, they would save on transaction fees.
The plan resulted in higher revenue. Merchants were motivated to make more sales. Shopify still earned a cut from every transaction. They also had more reliable revenue because of subscription sales. They have followed this model ever since. Monthly subscription fees are relatively low for basic packages. As merchants grow their businesses, they will naturally require additional features. They can find these features in premium packages. This structure allows Shopify to continue increasing revenue through loyal customers.
Every new addition Shopify makes is in the interest of helping their customers. This basic premise has allowed Shopify to retain customers and grow at the same time. In the beginning, Shopify focused on helping small business owners. Over time, the audience broadened. Shopify now encourages enterprise customers to join the platform. Their pricing model includes a significantly higher monthly fee for enterprise clients. These clients bring in higher monthly revenue than independent merchants. Some famous brands that have used the Shopify platform include Tesla, Google, Wikipedia, and the LA Lakers.
Even with major brands as clients, the heart of Shopify is the small mom-and-pop type merchants. No matter the size, every client has the same access to tools. Analytics, website development, PoS software, and other tools empower small businesses to grow.
Propelling Business Owners
Shopify is rooted in helping first-time merchants learn the ropes of eCommerce. It started with intuitive and easy-to-use software. Shopify also publishes helpful how-to guides, manuals, videos, and FAQ pages. These documents are all designed to help new users learn how to sell online. Courses from Shopify Compass walk users through every aspect of building a business. These courses are included with a Shopify Business plan.
Users can also hire a Shopify Expert to assist them in any aspect of their business. They can hire experts in content, SEO, visual content, branding, slogans, troubleshooting, and more. If a customer has a question, Shopify has many ways to answer it.
Because there are so many ways to learn on Shopify, anyone can become a store owner. People who have limited or no knowledge of how to build a website can quickly launch an online store. They can be up and running in less than a day.
One way Shopify keeps up with every customer is through email marketing. They have mastered the art of segmenting emails based on audiences. Brand new store owners receive different emails than long-term merchants. Enterprise customers get different emails than small operations. Shopify understands its diverse audiences. It uses data to deliver email messages that are helpful, not annoying.
From eCommerce to mCommerce
By always focusing on helping customers grow their businesses, Shopify has grown and expanded. It has created an entire ecosystem that allows merchants to sell in various ways. They have options for desktop and mobile. There are now options for online and offline payments. Merchants interact directly with customers through messaging apps.
The first foray into expanding beyond a tool was through an API. The founders listened to their customers. They knew people wanted to build customisations and apps for their Shopify stores. So, the founders used their developer knowledge to create an API and app store.
This move allowed Shopify to transition. It moved from being a one-purpose tool to a full-fledged platform. Other tools got sold and folded into other companies. In contrast, Shopify was able to expand.
The API platform and app store were released in 2009 on Shopify’s third birthday. Merchants could now pick which add-ons to use for their stores. This allowed for greater customisation and easier eCommerce. A year later, Shopify launched Shopify Mobile. This free app lets merchants sell from anywhere using their mobile devices. They could also manage their online stores and review customer information.
Shopify was ahead of the game with the release of their app. By 2014, mobile had overtaken desktop as the most popular method for online shopping. They were perfectly positioned to take advantage of the rise in mCommerce. Mobile commerce exploded as a result of more people buying smartphones
In 2013, Shopify released its own payment option. The Shopify PoS allowed merchants to sell using Shopify Payments. This tool is still in use today. Merchants who use it avoid paying transaction fees. They also enjoy faster checkout times.
According to Shopify, merchants who use Shopify Payments convert 1.56 times higher on desktop. They also convert 1.91 times higher on mobile than those who use other payment methods. It syncs with Shopify Mobile. Merchants can now use their phones to accept payments in stores. They can also edit inventory. Shopify Payments makes automatic updates to physical retail locations.
With both mobile and desktop applications, merchants were able to sell from anywhere by 2015. However, they were still limited to only selling from the Shopify platform. In 2015, Shopify introduced another new feature called the Buy Button. These buttons allowed merchants to sell from a Squarespace, Tumblr, or WordPress website.
This was another game-changer for Shopify. It encouraged merchants with websites to continue transacting on the Shopify platform. It also helped merchants promote their businesses.
There were a lot of options available to make sales. Some merchants were starting to feel overwhelmed. The next addition to the platform was Multichannel Shopify. This dashboard allows merchants to manage all sales across all channels. It gives merchants more time. The less time they spend tracking down data, the more time they can spend building their business. And the more time they can spend building their business, the more money they can make for Shopify.
There are currently over 300 integrations in the Shopify app store. Many of these are designed to help merchants engage with customers. For example, in 2016, Shopify introduced a Facebook Messenger integration. This allows merchants to chat with customers directly. They can discuss orders, answer questions, and offer real-time feedback and service. Other integrations save merchants time through workflow automation and productivity tools.
Another vital aspect of integrations is the ability to monitor all sales. This includes both online and offline sales. Shopify broadened to include larger companies. It started servicing stores that already had brick-and-mortar locations. Shopify Payments connects merchants' brick-and-mortar stores with their online stores. Shopify QR codes make it easy for customers to find a merchant’s online store. All they need to do is scan a code on a physical item with their phone. Then, they will be sent to the merchant’s Shopify store.
Changing the State of Commerce
Shopify set out to make eCommerce easy for everyone. In the process, it discovered the growth potential of combining eCommerce with offline commerce. Many Shopify customers have been able to expand into an offline store. Others join Shopify to expand their offline store into an eCommerce business.
Shopify has proven to be an expert in the world of eCommerce. Much of its success can be traced back to the founders. They remain committed to helping other people who do not know what they are doing. The founders are acutely aware of their customers’ challenges. They start with the assumption that their customers do not know how to build an eCommerce business. From there, they offer tools, training, apps, guides, and more to help them get going.
Shopify has shown attention to customers and a focus on improving the merchant experience. This has helped Shopify grow into a $117 billion business. It has anticipated technological adaptations. It has not waited to see what other eCommerce websites do before taking action. Instead, its leaders listen to their customers. They learn their pain points. From there, they develop new tools and apps that will help everyone make more sales.
Shopify is having a significant impact on the world’s economy. A recent report shows that Shopify businesses supported over $1 billion in global economic activity from 2016 – 2018. The site hosts 1 million merchants selling from 18 countries. Shopify is not only making life easier for small business owners. Shopify is changing how consumers shop. Consumers have access to over a million merchants, many of them independent sellers. They are choosing to support independent merchants and small business owners. Shopify has changed the state of global commerce and will continue to do so in the future.
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