A simple solution for online shopping is getting big-time attention
When Tobias Lütke, Daniel Weinand and Scott Lake decided to start selling designer snowboards through SnowDevil.ca back in 2005, they built their own sales platform to avoid shelling out for an expensive third-party solution. But after just one winter, the entrepreneurs quit selling boards to concentrate on selling their platform instead and Shopify was born. Some compelling proof that was a pretty good call: on Cyber Monday 2013, more than 1.4 million consumers visited online stores hosted by Shopify—more than Target, Sears and Best Buy combined. The only portals in North America to draw more traffic that day were eBay and Amazon.
Shopify seems to have found a solution to one of the Canadian retail landscape’s perpetual headaches: how to dive into online sales without spending a fortune. While limp online sales in Canada continue to cause a lot of hand wringing (Forrester predicts e-commerce’s overall share of sales won’t hit the 8% market share currently seen in the U.S. for another four years), the startup founded in Ottawa’s Byward Market has found a marketer-pleasing way to make the process cheap and easy. All before Target or Canadian Tire have even launched local online shopping.
Here’s how it works: Shopify offers brands a tool to create an online store, manage inventory and accept payments via a monthly subscription that’s a fraction of the cost of the enterprise-level providers that rule the e-commerce world. Today more than 80,000 companies use the software. First billed as a small to medium business (SMB) solution, the streamlined service soon attracted giant brands like Budweiser, Tesla Motors, GE and Gatorade. Big investments followed, including a $100-million round in December 2013 led by OMERS and Insight Venture Partners, the same firms that led Hootsuite’s $165-million financing round last summer.
The man responsible for big brands flocking to Shopify, including The Los Angeles Lakers, Wikipedia, Google and Herschel backpacks—all new clients from 2013—is its chief platform officer, Harley Finkelstein, who is charged with making sure the service works as well for big business as it does for its large base of SMBs. With about 200 “big brands” now using Shopify, Finkelstein is gunning to prove that it can work for any size brand, even Canada’s biggest retailers.
“Could Shopify scale up to provide e-comm for a huge business like Best Buy or Indigo? Absolutely. We have stores doing many tens of millions annually without any issues,” he says. “I suspect in the future we’ll be hearing from the likes of Loblaws and potentially Indigo, stores like that.”
Having soft-launched its enterprise-level service, Shopify Plus, in January, the company is now gearing up to take on the enterprise e-commerce providers like Magenta and Volusion that supply the technology that big retailers rely on for their online stores. Flying in the face of the notion that e-commerce has to be laborious and expensive, Shopify offers online storefronts easily customizable with images, colours and fonts to match client branding and the backend to manage inventory and accept payments—even mobile ones—for $1,000 a month. By comparison, the cost of its competitors in the enterprise space can regularly fly north of six figures (its SMB rate, for retailers with lower volume sales, is $24 a month).
It’s not just price that’s attracting the enterprise clients, though. Finkelstein insists clients like GE can afford a store that runs them hundreds of thousands annually, but are attracted to Shopify for its ease of use. He says the main thing he hears from big brands is that they don’t want to be bogged down with costly service calls or have to send employees to two-week training seminars in order to run the company’s online store, and Shopify is built specifically to curtail those kinds of concerns.
“If any of your staff know how to use email, they can build your store,” he says. As a bonus, there are no charges above the $1,000 monthly rate, unless a marketer uses an add-on app for additional services like accounting.
On a smaller scale than the big-box retailers Finkelstein is targeting, Shopify is already the backend for many well-established brands. The electronic carmaker Tesla runs a Shopify-hosted site, Tesla Gear, that looks slick and simple, decked out in its brand colours, red and white. The shop sells everything a Tesla owner might want, from $4,000 hood panels to winter wheels, power wall connectors and branded swag like hats, T-shirts and lunch boxes.
For marketers, the fact that the platform can scale either up or down also offers the chance to test the online waters without the stress and high upfront costs of large-scale ecommerce providers. With the low barrier to entry, Shopify can even be used to build ecommerce into a campaign—think of selling tagline tees or small-run novelties like Pizza Hut’s eau du pizza perfume. That’s what Budweiser did last winter for its Red Light campaign, selling score lights for consumers’ homes via a Budweiser-branded Shopify store. This month a second run of the lights go on sale as part of this year’s campaign, again via Shopify’s platform.