Technology

DROPSHIPPERS MUST KNOW THE HISTORY BEFORE BEGINNING!

Today Shopify is the leading e-commerce platform in the United States with 23% percent market share the company has a stock value of 40 billion US dollars. And it is one of the top 40 largest companies in North America by market value Shopify has become the second largest in terms of sales of all marketplaces in the United States. Only behind Amazon overtaking eBay in September 2019. Actually Shopify is headquartered in Canada’s capital city of Ottawa in the downtown area. Ottawa does in fact have a thriving technology sector on the west side of the city about a 40 minute drive from downtown during rush hour. Surprisingly Shopify capitalizes on the larger downtown population of software developers by not being located in the tech sector. But instead of being closer and more convenient for the downtown population the stock has had an astronomical run from its IPO price of just 17 dollars all the way to 324 dollars. At this time Shopify is making worth over thirty nine billion US dollars or 50 billion Canadian dollars Shopify sales. This makes Shopify not only the largest tech company in Canada but the ninth largest company overall in Canada with this Shopify capital. 

Although Shopify’s sales revenues in 2018 were only just over 1 billion dollars the market is factoring in big growth prospects and huge potential for this company. In 2004 Tobias Lutke was trying to open an online store to sell his premium snowboards through his own brand called Snow devil to his dismay. it was very difficult for him to find an e-commerce platform that didn’t have limited design themes or made it difficult to integrate with other services. The only main ecommerce platforms were eBay or Yahoo stores which were easily affordable to use. But neither of which were very scalable. Another option was to pay large sums of money to have a big company build an online store for you. At one point in a especially frustrated moment on a Friday evening Tobias Lutke said ‘well if I spend all of the weekend working really hard I can probably create the software myself and then we won’t have any of these problems anymore. Leudtke and a software developer got together with his friend Scott Lake and they began building an e-commerce platform themselves that would suit their needs as a flexible platform where a store could easily be created to sell any type of goods. 

In June 2006 after raising $200,000 from friends and family and receiving 250,000 from angel investors the two launched a customizable online store builder which was called Shopify. Shortly after the launch of the platform Scott Lake left the company Bellucci hired Daniel Wayne. And a chief design officer Tobias Lukey Scott Lake and Daniel Waymond are credited as the founders of the company Tobias Lukey is the kind of person who is known for being obsessed with optimization. He used to count the steps of different routes to get to school to find the most efficient way. When he started Shopify he was mainly interested in the programming aspect as he was a software programmer and wanted to treat the business side of things like a black box. But now he fused the business as an engineering exercise. 

A few years after its launch Shopify was starting to become financially sustainable. In 2009 Shopify launched its developer API or application program interface and Shopify App Store. The API launch is particularly interesting for the company as it allows Shopify developers to get on board and make software calls to Shopify back-end servers or routines or tools. Giving them the ability to develop their own applications and have Shopify manage the e-commerce heavy lifting in the background. For example if a Shopify website builder wants to be able to charge a user’s credit card they don’t need to write that code from scratch. They can instead hook into Shopify’s API which has methods to handle that functionality. This was a very important milestone for Shopify as they were able to start building their developer community. Basically harnessing the power of an external resource as many developers don’t work directly as employees for the company, yet they contribute to the Shopify ecommerce platform by creating apps and selling them on Shopify App Store. 

With more activity in the Shopify community it began to snowball customers come in. Because they see all of the new features and apps and possibilities for their e-commerce business and then with more customers to sell to more developers flock to the platform as a way to sell more apps and the cycle continues which helps the platform grow. But once this community or sort of network of developers and customers come together it becomes very difficult to switch away. Because that’s where the money is and that’s where the apps and the focus is similar to how the Apple app store in the Android App Store are dominant players for phone apps. Shopify built its own e-commerce app store and this helps to create a mode around the company making it very difficult for other app stores to exist. Simply because the platform has grown to be so dominant although people were using the platform and there were many sales being made. The company was running on fumes according to the CEO whose father-in-law was actually writing him monthly checks to help him continue working on this business. 

So Shopify decided to launch a build a business competition in order to encourage people to start businesses using the shopify platform and to help get the word out. However Tobias Lutke actually bet the entire company on this competition by taking the final $100,000 they had in the bank and making it the winning prize for the competition either it would succeed or the company would be bankrupt as it was heading there anyways. However the Builder business competition was successful. In 2010 winners with the two highest consecutive revenue months between January and June was a company called DODO case which made luxury protective iPad cases and sold them on Shopify platform. The new sales generated because of the competition paid back Shopify’s $100,000 prize payment. More than that enough to keep the business running 1,400 new companies joined in the competition. But one of the most important and unexpected outcomes was learning what new customers needed most. Shopify quickly adapted and made the changes needed to help Shopify experts, answer customer questions and board them onto the platform they built. A business competition has grown over the years with winners.

Million dollars worth of products were sold on the Shopify platform in 2010. People were starting to take note of the Canadian capital’s fastest growing company. Even investors with deeper pockets were attracted to the company. Shopify raised 7 million dollars followed by another 15 million dollars at the end of 2011. Shopify was growing rapidly on the business and needed more engineering talent to build out new mobile features. They decided to acquire a small 20 person company in Ottawa called select start studios or s3. That was focused on mobile building iPhone and iPad apps and Android apps. In an incredible move Shopify fired s3’s customers basically would no longer support them and instead brought on the Shopify developers including the CEO to begin working on Shopify’s mobile plans. At this point in 2012 Shopify was hosting 21,000 storefronts that were selling merchandise on Shopify. Shopify had over 50 different payment options available for customers worldwide. They could track engagement through Shopify zone analytic dashboard as well as Google Analytics. Shopify account pricing plans all came at a basic price of Shopify cost about $26 a month. Now Shopify fee is $29 per month. But Shopify fees could go up to a 160$ a month Shopify fee for the unlimited version from Shopify subscription of 9$ Shopify Cost for Shopify lite.

Selling on shopify grew explosively from 10 employees in 2011 to over 100 in 2012. Shopify was also seeing results from the 22 million it had raised through its series A and B offerings and the team from the select start acquisition who was working on a whole slew of features including the redesigning of the Shopify website to put mobile first. They were also building out the company’s iPhone apps. Shopify was also giving its customers the option to get responsive templates from its theme stores. Meaning themes that would work nicely on a desktop screen and on mobile devices. In August 2013 Shopify announced the launch of Shopify payments which allowed Shopify merchants to accept credit cards without requiring a third party payment gateway like Paypal. Shopify payments also ties store inventory and sales directly to revenue in payments information so that you can see in real time. When Shopify payments came in, the company also announced a revolutionary point of Shopify sales system. This allowed Shopify merchants to sell online and in brick and mortar stores. Before Shopify, POS merchants who wanted to run an online store as well as a brick-and-mortar retail store had to keep track of two sets of inventories, two product catalogs and two payment systems. 

Now they could add shopify products or update inventory on one side of the system and it instantly updated across the board the point-of-sale system revolved around using a tablet and iPad. For example to accept payments from debit and credit cards however Shopify relied on third-party card machines to read the credit cards. But Shopify sold the card reader, the receipt printer, the cash drawer and other hardware. Shopify was already democratizing online commerce by lowering the barriers to entry and providing access to this kind of high-priced software to everyone at an affordable price. Now it was looking to democratize the rest of commerce and this was the first step this is why Shopify raised a hundred million dollars in Series C funding in December 2013 and was going to put the money to use to target the offline retail market. The company stood at 85,000 active Shopify stores and Shopify experts on Shopify including big names like GE, Google, Wikipedia, Tesla and Gatorade were all using Shopify as top shopify stores top Shopify stores. On April 14th 2015 Shopify filed for an IPO or initial public offering on the New York Stock Exchange and the Toronto Stock Exchange. 

Respectively Shopify went public on May 21st 2015 and the stock popped 60% on the New York Stock Exchange and started trading at $28 a share which was a massive gain from the 17 dollar listing price in US dollars. They had raised a hundred and thirty-one million dollars on the IPO. Not long after the IPO on September 17th 2015 Shopify announced that it was approached by Amazon for a partnership. Shopify stock jumped 20 percent making it a $35 and 55 cents stock which is still very far away from its current price $300. Amazon was running a webstore service for merchants to set up their own direct sales websites. However Amazon was shutting down this feature. But they partnered with Shopify to help merchants transition over to the Shopify platform in exchange for allowing Shopify customers to list on Amazon. And all Shopify customers would be able to use Amazon Payments. This was a great deal for Amazon who no longer wanted to support their webstore service but also an excellent deal for Shopify who acquired a whole bunch of new merchants on their platform. 

In April 2017 Shopify introduced a bluetooth-enabled debit and credit card reader for brick-and-mortar retail purchases called a chip and swipe reader. As well as one that would go into the phone jack of an iPad, a dock and retail stand that could read swiped credit cards. Sort of like what the company square has, these readers could handle an entire week’s worth of transactions before needing to be docked and charged. They made these modular devices for shoppers. Because they’re the ones interacting with the point-of-sale system. And Shopify wanted to make sure that they had a great and seamless experience even in the real world. So Shopify made it free to all Shopify

merchants who didn’t have a current Shopify point-of-sale solution. For in-person selling or on the go this was highly portable. Today Shopify has a number of different hardware devices including the Shopify tap and chip card reader which accepts payments, supports Visa, MasterCard, American Express, Discover, Apple pay, Google pay and connects wirelessly to your tablet or mobile phone. 

In May 2017 Shopify bought Oberlo which connects Shopify merchants with suppliers who ship products directly to consumers. This is a way to make Shopify dropshipping easier. I want to sell something at my Shopify store, let’s say a microwave. Now I need

to start manufacturing microwaves. However I may not have the expertise or know-how in order to do that or to find a supplier that does. But by going through the overload platform you can connect my Shopify store with suppliers such as Aliexpress. Perhaps someone on Aliexpress is selling microwaves and lets me customize them by putting your own logo on the microwave. So when someone comes to my online store and buys a microwave the order gets fulfilled by the supplier on Aliexpress. They ship your branded microwave directly to the consumer and it looks like it came from your store. All I need to do is to drive traffic to my Shopify store to get sales. But the beauty of this business, it uses the sort of just-in-time model. Though it may take a little bit longer to get something that’s being delivered from China but you hold no inventory and the order is only placed when you have a customer. So this reduces the risk of inventory which is usually the bane of existence of a retail store.

Oberlo has been extremely successful for Shopify and there are tons of people using Oberlo Chrome extension as the backend for their Shopify stores from shopify app store. Shopify made two acquisitions in 2018 buying return magic. In June the company that was a Shopify plus partner and is an application for processing returns and refunds to give customers a convenient shopping experience. This is an important aspect of Shopify’s business. Especially for building trust and loyalty and engaging customers they had processed 300,000 returns when they had joined Shopify. Also in November they bought ticked ale a Swedish brand discovery company which had a brick and mortar store in New York but they created a global community that allows you to discover the world’s greatest independent brands. 2019 was a big year for Shopify, in January they launched Shopify Studios; a full service television and film content and production house where they partner with well-known creators to create and even finance projects for streaming platforms and television. In April they integrated with Snapchat to allow merchants to buy Snapchat directly from the Shopify app store. Something that Shopify already had with Shopify Facebook and Shopify Google. Then in May they acquired a new york-based startup called handshake that offers an e commerce platform for businesses selling goods at the wholesale level. The team would be operating as part of the Shopify Plus platform, the premium commercial side of the business. In June Shopify announced that it would launch its own fulfillment network which was a new wave to get orders to customers more easily and quickly similar to how Amazon does fulfillment by amazon. 

You will now be able to bring your products directly to a Shopify determined fulfillment center or warehouse. A small fee is usually paid to store the Shopify products. But if there is an order, Shopify will take care of all the shipping logistics for you while putting the merchants brand and customer experience at the forefront. This is another way that Shopify is democratizing retail by bringing this feature which it mainly is available to larger players and some Amazon merchants. But mainly smaller businesses using Shopify with anywhere between 10 to 10,000 sales per day to further bolster. This business Shopify also acquired a company called 6 River systems. In September of 2019 that specializes in warehouse management and automation. 6 River uses artificial

intelligence to boost productivity including inventory replenishment, picking, sorting and packing. And also has a variety of robots called Chuck similar to Amazon’s Keifa’s systems or Amazon robotics that collaborate to transport items around the warehouse. Automatically Shopify spent 450 million dollars on this company. So it is their largest acquisition to date. By this time Shopify had over 820,000 Shopify merchants using the platform. They made 41 billion dollars in total sales in 2018, they had 218 million buyers. In 2018, 25.8 million Shopify apps were installed. They had over 350,000 paid Shopify themes and Shopify apps purchased from Shopify app store. 700,000 people were employed by partners of the company. Shopify’s revenue in 2018 for the full year was over 1 billion dollars and at the same time partners had made over 1.2 billion dollars as part of the partner ecosystem to give a sense of how much commerce Shopify is handling. If you look at these companies as the largest retailers in the United States, Shopify is now the second largest retailer in the country. Recently surpassing eBay in terms of  gross merchandise volume which is the amount of business done through their platform as Shopify enables more businesses and those businesses grow. Shopify capital simply grows its share as well while Amazon’s, eBay’s and Apple who’s in fourth place all of their businesses rely on people purchasing through their website or apps. Shopify’s position is much more diversified as it has a larger group of self-sustaining businesses on its platform. Shopify stock is already up over a 138% in 2019 alone the New York Stock Exchange listed Shopify hit a high of 400$. Earlier this year which is an astounding price in return for investors considering the firm just IPO at a couple years ago for $17 a share Shopify’s revenue growth has been on the rise going up over five times in just four years from 200 million in 2015 to over 1 billion dollars in 2018. Company earnings are still negative though as Shopify continues to spend Shopify capital in order to take market share. 

Now Shopify does have some big player competitors in the space with new Shopify alternatives. These are some just to name a few Amazon of course is the largest almost near a trillion dollar valuation though. Of course a large chunk of that comes from retail we’ve seen that Amazon has a partnership with Shopify. But Amazon also has a different business model where all of its merchants sell through the Amazon platform on Shopify. Each merchant has their own individual store which is fully customizable, independent and decentralized. As compared to Amazon, eBay is also very similar to Amazon. In this sense if people are selling a single item, eBay seems like the place to go. But for merchants there’s no reason why someone’s selling on Amazon or Ebay couldn’t be using Shopify as well or using Shopify to manage multiple sales channels so eBay competes as a place to sell. But doesn’t provide the same type of offerings to entrepreneurs. It has some overlap with Shopify such as the credit card swipe hardware that works with a tablet or iPad for accepting payments. however it is more of a payments company and doesn’t have a storefront builder for people to create their own stores. 

Wix may be the closest Shopify competitor to Shopify alternatives, as they specialize in creating storefronts using artificial intelligence including free and paid plans. Wix also has been growing very rapidly. Shopify has far outpaced it. Now being about six times the market cap of Wix an acceleration from being just two times the size of Wix. A few years ago Wix offered a host of e-commerce tools as well as including integrations with drop shipping managing inventory and multiple sales channels including Facebook and Instagram. And they also have Wix payments to put dozens of payment providers in one place similar to Shopify. Although Shopify is the leader in the space, Wix that’s doing its best to mimic and compete with Shopify on new ideas . We’ve seen Shopify continue to innovate to bring value to its customers, merchants and partners for doing business worldwide. The company has been investing in artificial intelligence especially with its acquisition of Six river systems they have been democratizing ecommerce by using their scale to lower prices for payments, shipping and even loans with Shopify capital. Using their unique sets of data the company has been innovating and experimenting with brick-and-mortar stores and even using augmented reality apps to explore new ways of shopping.

The CEOs’ original values run through the company’s culture including always improving, optimizing everything and doing everything in their power to put their customers first. Employees are even encouraged to use the platform for their own stores. So they can learn exactly what it feels like to be a Shopify customer. Shopify is aiming to be the world’s first global retail operating system and by democratizing ecommerce at the astronomical page. We’ve seen the company’s future holds plenty of opportunity as it seeks to democratize commerce in general for everyone. 

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