“We’ve had several customers beat us to $1 Billion in Revenue” - Tobi Lutke
Tobi on Kylie Jennar’s (don’t care if I spelled it wrong) business: “7 people staff, 900 million in sales after 2.5 years. This took Nike 24 years. It’s so hard to even understand the scale of what’s going on”
Granted, most businesses on Shopify won’t make that much. But, it’s a clear demonstration of how commerce is changing.
I sold out of Shopify, but every time I hear Tobi Lutke during an interview, I strongly consider buying shares again. Not only am I impressed by him and the eCommerce market opportunity, but I think I have underestimated Shopify’s growth potential because I don’t comprehend how fast their Merchants’ revenue can grow.
We’ve seen a couple $1 Trillion market cap companies. The world of commerce is changing and Shopify is a major part enabling that. I think I’m underestimating how fast some of Shopify’s merchants can compound their businesses.
I’m torn. We saw Shopify’s expenses grow, margins slide a bit, and see the potential for revenue to slow. Part of me thinks this is a result of Tobi literally not caring one bit about market cap or short term stock price. I think they are making the decisions about what they truly believe is best for the business long term and ignoring the rest.
I view Square as a potential competitor with Shopify, there’s threats from Amazon, we just saw Adobe acquire Magento and Marketo, and Shopify’s stock has languished a bit.
The tide has gone out a bit, many negative headlines are swirling around. I’m considering re-opening a position in Shopify. When I think about how large this company could become long term, it’s hard to ignore. It’s also a bit differentiated from some of our other companies.
Here’s two interviews with him. The first is at Code Commerce and is mostly about Shopify. The second is from The Knowledge Project Podcast with Shane Parrish, host of Farnam Street. In that one, we get more insight into Tobi as a person.
https://www.youtube.com/watch?v=6isvTuasA24
https://fs.blog/tobi-lutke/
In the Code Commerce interview, Lutke talks about how big consumer product brands become Shopify Plus partners. It basically boils down to their eCommerce department processes being too big and slow. One brand manager opens up a Shopify merchant account to start selling their stuff, it’s so seamless and easy, that eventually the entire eCommerce department adopts it.
He claims Shopify is seeing bigger trends moving towards direct to consumer distribution which is a benefit to Shopify.
Shopify can clearly excel in the age of Amazon. They go as far as making it easy for their customers to sell on Amazon, but because they don’t want Amazon to have all of their data and I think they benefit from Amazon a bit…as stated above, big CPG brands have to rely on Shopify to have a chance. This also brings a risk. What if so much pressure is put on these CPG brands that some/most go out of business. Does Shopify lose major revenue? I would guess this scenario isn’t as apocalyptic as we think.
But the other question… what if Amazon eventually falters? Could that offer a major opportunity for Shopify? I think yes.