Let me try to contribute a bit more to this board. I am in ecommerce and have been in this business for almost 15 years now. I’ve seen how the landscape changed over time for small businesses, which is the majority of Shopify’s customer base.
I sell on Amazon and have a Shopify store as well. Currently, our Shopify business is less than 2% of our Amazon business. Let me be clear, IT IS TOUGH selling on your own website, and I feel it’s most likely going to be tougher in the future as Amazon grows their logistics capability. The main reason is Amazon Prime, where you send Amazon your inventory and Amazon ships them as they get orders and customers get them in 2 days. Merchants won’t have the ability to compete with that. Amazon’s share of business will only grow larger, and selling on Shopify or other sites will get tougher.
Now, Shopify will get its share of business because merchants don’t feel secure selling only on Amazon, as it is risky to sell on just one channel that’s not under your control. However, it requires so much effort to grow the website business that > 90% of merchants will not succeed. Personally, I have not allocated much resource to my Shopify site as it is not practical now. I’d be happy if Shopify grows to be 20% of my business, but I am not sure at all if that can be achieved.
That leads to the question: What’s Shopify’s potential. I really have no idea. If we assume it can generate 10% of Amazons ecommerce-only business, I don’t see it becoming a 100 billion company. Maybe 20 billion? Again, I have absolutely no idea. Just want to offer you views from my side of the world.
My Shopify position was 6%, and I trimmed it to 4% this morning. I will feel things out in the coming days to decide on how big of a position it warrants in my portfolio. I do want to really thank Saul for my Shopify purchase. I would not have bought it if it weren’t for Saul.
If u had posted this 6 months ago I am not sure anyone would have bought shop. Your assessment is real and insightful. Validates some of Lefts concerns paralleling issues Tinker has espoused on for 2 months. Great post thx for sharing.
Interesting use case Macinthebox. I actually see Shopify’s position strengthening as the direction ecommerce is going for many products isn’t standalone websites or necessarily via Amazon but via social. The fact that you can use shopify to sell on facebook or instagram etc I think is a MASSIVE advantage. (Not sure what WIX is doing about that).
Ant
ps I added not trimmed today.
Interesting use case Macinthebox. I actually see Shopify’s position strengthening as the direction ecommerce is going for many products isn’t standalone websites or necessarily via Amazon but via social. The fact that you can use shopify to sell on facebook or instagram etc I think is a MASSIVE advantage. (Not sure what WIX is doing about that). Ant
Here is a story from last month where a coffee & tea company uses Instagram for selling & marketing. It sounds like the future for any retail that does much business via store front. Do these stores also need a web site? https://www.marketplace.org/2017/09/06/life/business-designi…
The business of designing a restaurant for Instagram
By Lizzie O’Leary and Eliza Mills
September 07, 2017 | 10:16 AM
If you’ve walked into a restaurant recently and thought it felt like stepping into a photograph, it was probably intentional. Restaurant design is ever-evolving, and these days, it’s inspired by Instagram. … Instagram is a huge asset for Pearl’s. “It’s basically like free marketing,” Miranda said, “if you’re not using this tool, then I’m sorry, you shouldn’t be doing business in this day and age.”
Miranda estimates that 30 to 40 percent of their business comes from people who catch a glimpse of the cafe on social media. The rest, he attributes to location — the shop is located on a popular shopping street, and is across the street from a large high school.
The drinks themselves are also designed to photograph well. Pearl’s best-selling drink, the orange yuzu, seems designed for social media — it has an ombre gradient that turns from an orange (the yuzu juice) to vibrant purple (hibiscus tea). …
Thanks for the perspective. Another alternate anecdotal evidence – I have a friend who owns a software development company in India. They have built e-commerce stores for SMB using Shopify. One story he is particularly fond of is of a local retail saree shop (saree is traditional Indian clothing). The owner only owned a brick mortar store prior to building e-commerce store and all his clientele was local. Today on his e-commerce store he gets 20 to 25x the original traffic from all over the word !
So I suspect you will find stories all over the spectrum using anecdotal evidence. I am sure there will be many who will maintain Shopify store for the sake of completeness and for some it will be a spectacular success. It is important to remember some of the biggest brands including Tesla and P&G are building their online stores using Shopify.
I think a better way would be to gauge their Gross Merchandise Value current value and growth. For Shopify it was $7.7 billion in 2015, $ 15.8 billion in 2016 (100% increase). From the most recent quarter GMV for the second quarter was $5.8 billion, an increase of $2.5 billion, or 74% over the second quarter of 2016. . In 2017 they will be somewhere between 25 to 30 billion in GMV. So clearly not just the subscription but online stores of merchants using shopify platform is booming.
For perspective Amazon retail sales trailing 12 months was around 140 to 150 billion dollars. So they are already selling more than 10% of Amazon’s revenue on their platform !!
I think it will be hard to predict if it will be a 100 billion dollar or not. I will not venture out into that. But using back of envelope calculations somewhere between 20 to 40 billion dollars in the next 5 years should be a certainty assuming some margin of safety.
SHOP is not a stock I wish to take sides in but I do want to comment on
IT IS TOUGH selling on your own website
I’ve been in IT most of my professional life and I have developed quite a few websites. One of the hardest ideas to get across to website customers has always been that Google is 50% or more of the website traffic. You have to design to make Google happy and if Google isn’t happy you won’t get much traffic. Another hard to get across idea is customer testing. Just because you think your website is great does not make it so.
My point is that selling on your website is hard if you don’t get traffic and if visitors don’t like the website. My most successful website was for a marina in Venezuela (the site went dark on October 1 because the new owner of the marina did not renew the hosting). A large number of Caribbean marina searches landed on our marina website even if you searched by marina name because our marina pages had higher Google page ratings.
You might find this interesting:
Denny’s SEO Anthology
Without a doubt, Google has influenced the World Wide Web more than any other company with the possible exception of Netscape which fell victim to competition. The ability to search millions of pages and to get meaningful results in seconds is awe inspiring. But as a consequence, Google’s Robots have enslaved all of us who want to have successful web pages. It’s Search Engine Optimization (SEO) or die. For me it has been a wonderful adventure, full of exciting surprises. Here is a list of my SEO related essays over the years which you might find interesting.
After posting, I looked up Shopify’s GMV, which is definitely more than I expected. I was especially impressed with the latest growth rate.
After looking around a bit more, I think products with one or more of the following have a much better chance of succeeding with Shopify: a strong brand, unique, have repeat purchases, or niche enough / not yet tapped by Amazon. Those type of products probably occupy a larger percentage than I thought.
However, one thing to keep in mind is Amazon constantly expands into new markets / categories. When they do, they have a high success rate of taking over. I used to feel my industry was unlikely to be affected, but I was wrong. The key metric is the GMV. If Shopify can keep it at a healthy growth rate, they have a bright future, but I feel it won’t be easy. We will need to keep a close eye on that.
Another thing to note is Shopify does not take much of a cut of the sales, where Amazon does (either by Amazon’s own margin or commission they charge). So the GMV of the two companies is not apples to apples. Just something to keep in mind when evaluating Shopify.
Thanks MacInTheBox for sharing your experience with SHOP! I agree that if you are selling a traditional product, you must be in Amazon. My problem with being in Amazon is that it is a race to zero but that’s a discussion for another day.
Like others on this board, I have been in software development many years. Some of my clients do not fit traditional product mode. For example, a personal trainer who creates videos and has online classes or a professional motivation speaker for top executives. For businesses that provide services, custom websites work best.
Imo web development is still in the dark ages. You can hire a developer to build a custom site, pay a provider to offer a boxed-in solution or you can DIY it with something like WordPress. Whichever solution you chose it is an on-going process.
If web development is so bad, why would I buy 1% more SHOP yesterday? Glad you asked. Web development has the biggest area for improvement and SHOP has the lead right now. Since I am in the industry it is easy for me to follow. Another point to make is that Shopify and Amazon have partner together so that you can have an Amazon and custom site: https://www.shopify.com/blog/52368069-shopify-and-amazon-par….
Like TWLO, I do not believe that SHOP is for the faint of heart.
