Shopify is quietly becoming an ecommerce giant. It underpins tens of thousands of small businesses – the company reports that 1.7 million businesses in approximately 175 countries are using its platform as of May 2021.
To put that into perspective, as of May 2020, Shopify’s gross merchandise volume (GMV) was 40 percent that of Amazon Marketplace. And the company was given a further boost by the pandemic – in 2020 it generated $2.93 billion in revenue, which is an 86 percent increase from the 2019 figure.
At its most basic level, Shopify helps entrepreneurs build an online storefront, but the Canadian ecommerce app has expanded well beyond that core functionality. The company’s efforts to branch out have ranged from acquiring Primer, an AR app, to starting an esports team.
“Commerce is going to be everywhere”
“We believe the future of commerce is going to be everywhere,” Shopify’s president Harley Finkelstein told investors on the Q3 2021 earnings call.
This omnichannel tactic is reflected in Shopify’s huge range of partnerships and apps – a key part of Shopify’s business is its app store, which provides plugins for merchants to expand their online shop. These include drop-shipping, SEO and a point-of-sale app that allows merchants to sell their products in person.
The ecommerce platform has over 7,000 apps available for its merchants to use. Some of which are listed below:
In October 2020, Shopify announced that it was partnering with TikTok. This allows merchants to run TikTok ads through their Shopify dashboard. Then in August 2021, the two companies announced that they were extending their partnership to allow Shopify merchants to add a shopping tab to their TikTok profiles and sync their product catalogues, creating a mini-storefront that links directly to their online store for checkout.
Snap and Shopify partnered in 2019 to allow small businesses to buy ads for Snapchat directly in the Shopify app. At the time, Shopify said that over half of its merchants are so-called “solo-peneurs” who find advertising difficult.
Facebook and Instagram
Shopify has been partnered with Facebook as far back as 2015. Facebook is a self-proclaimed home for small businesses, and so the partnership is perhaps a natural move for both companies. This partnership has been extended several times. First in 2020, when it was announced that Shopify was partnering with Facebook to create Facebook Shops. This allows merchants to create storefronts on Facebook and Instagram. Then in 2021 Shopify announced it was expanding its ecommerce checkout option, Shop Pay, to both Facebook and Instagram, allowing merchants who don’t use Shopify to use it for the first time
Roku became the first streaming app to be available in Shopify’s platform in September last year. The aim was to open the door to small and medium sized businesses advertising on CTV. The app is designed for merchants to use on their own, and with a limited ad budget.
Shopify merchants are not just traditional SMBs, as shown through their partnership with Spotify. The partnership allows Spotify artists to build out merch stores, at the point where their fans are listening.
“By bringing entrepreneurship to Spotify, we’re empowering artists to think beyond the traditional merch table with new ways to monetize, and to experiment with their brands through commerce,” said aid Amir Kabbara, Shopify’s director of product.
Rather than going directly to companies like Roku and Snapchat, many small businesses are now working through Shopify instead. As Harley Finkelstein told investors: “By integrating these apps, our more complex merchants can seamlessly connect their workflows, saving them time and money and giving them direct control over their data,” he said.
The company has big aspirations in social commerce, and sees its existing partnerships as just the starting point.
And interestingly, Apple’s restrictions to the Identifier for Advertisers (IDFA) released last year might benefit Shopify.
Earlier this month, Meta’s stock plummeted as Apple’s privacy moves took a toll on ad revenues. In the earnings call, chief operating officer Sheryl Sandberg said that SMBs on Facebook were suffering.
“The iOS changes definitely hurt advertisers across the board, but they’re much harder for SMBs,” said Sandberg. “A SMB really needs to buy a very small targeted audience that they’re looking for. And the larger the business, the more you’re able to personalise the ad less. So we’re definitely seeing that this has more of an impact for SMBS,” she added.
Meanwhile on Shopify’s earnings call, when asked about the impact of the IDFA changes, CEO Finkelstein said that Shopify’s tools might actually mean SMBs turn to the app as an alternative to targeted ads.
“On the ad side of things, near term, these changes may reduce the efficacy of ads. We think that these changes will further incentivize merchants to try other ways to connect with their buyers on top of ads,” he said.
He cited partnerships with the likes of TikTok as a way that SMBs could reach consumers without targeted ads.
“Longer term, we expect the merchants are actually going to benefit from further embedding of commerce itself into other surfaces, and from things like retargeting tools like Shop, for example, that give more control to the buyer,” ,” Finkelstein added. “And that’s why we continue to announce new partnerships. And so we actually think that by connecting more merchants on our platform with more buyers directly through these channels, they’re not necessarily going to be affected by these changes in the long run.”