Monday 8 March 2021
At this point, most people have heard of Shopify. The $140 billion eCommerce platform offers retailers a plug-and-play option to set up their online store. Some of the biggest companies in the world – Google, Hasbro, The Economist, Heinz, Red Bull, Tesla – use Shopify’s platform to enable eCommerce on their website.
This article takes a look at Shopify’s strategy to build an ecosystem around their core product and the incentive structure they build for retailers to achieve it. These incentives push retailers deeper into Shopify’s ecosystem, making them stickier customers. Shopify charges additional fees for retailers to use their core product and then removes these fees the more they use Shopify’s associated products. It means the more of Shopify’s services they use, the less they pay.
For the retailer, they save money. The unit economics for every item sold is better. For Shopify, their customer is more reliant on them for the eCommerce platform and the associated services.
Shopify took the eCommerce world by storm by making it easier than ever to start an online retail business. Now they are building out the ecosystem around it – everything from Shopify Payments, Shopify Shipping, Shopify POS, Shopify Capital and on-demand printing Printful. While there are plenty of competitors, Shopify is doing everything possible to create incredibly high switching costs for its customer and cement their advantage in the market for eCommerce platforms.