By Isabella Diez, Co-President
Emerging as a small snowboard retailer, Shopify has now grown into an international billion-dollar company, and some say is now a direct competitor to the powerful Amazon.
Shopify Inc. is an online platform that assists customers with setting up the infrastructure required to run an e-commerce business. The company offers various capabilities, from selling and shipping products to gathering information on business operations.
In May of 2020, Shopify broke the lease of their office headquarters in Ottawa, as well as offices in six other cities, and moved their workforce of 7,000 to work virtually. Founder and CEO, Tobi Lütke announced plans for Shopify to remain virtual indefinitely. This abrupt change was quite unexpected, given that Shopify’s growth into a billion-dollar giant had happened only within the last 2 years. The change in their dateline from “Ottawa, Canada” to “Internet, Everywhere” was evidence of a shift in priorities for Shopify.
Shopify’s technology is now used by successful international business giants such as Staples Inc., Chipotle Mexican Grill Inc., KitchenAid, Heinz, and new companies which have recently experienced rapid growth and success such as Allbirds Inc., and Figs. Even merchandise platforms for celebrities such as Taylor Swift, Kylie Jenner, Lady Gaga and other entertainment personalities are powered by Shopify.
Interestingly, Shopify has made the biggest impact in the market not for celebrities or billion-dollar companies, but rather for small businesses such as mom-and-pop shops, startups, and entrepreneurs, who have been able to grow their business successfully by using Spotify. During the pandemic, Shopify was the sole reason many small businesses remained operational. Shopify was able to provide online tools, information, and the means for the local independent bookstore or mom-and-pop shop down the street to survive the challenging circumstances brought on by the pandemic.
An analyst with Wedbush, Ygal Arounian states that, “before Shopify, if you were a small, independent brand and you wanted to be online, you very much needed Amazon, that doesn’t mean that most brands aren’t still selling on Amazon, but now they can also build their own website and connect with customers directly.”
At the beginning of 2020, Shopify’s market capitalization was $46 billion and increased to $177 billion by the end of 2021. On Wednesday, May 6th 2020, Shopify’s shares soared 7% and it stood as Canada’s most valuable company with a market capitalization of $121.3 billion, exceeding the Royal Bank of Canada. This success can be attributed to the effects of the pandemic which escalated the need for goods and services to be provided online. Within the first three months of 2020, merchandise volume increased 46% to $17.4 billion, and solely in the months of April and May the number of Shopify supported stores increased by 62%.
It is common to hear comparisons made between Shopify and Amazon, in terms of the similar services they provide to their customers. However, it is the mission and mindset of each company that clearly differentiates the two. Amazon is praised and celebrated for prioritizing the customer’s needs by any means necessary. Oftentimes, this includes exploiting smaller merchants so as to be able to offer lower prices and faster shipping times to the customer. Shopify, on the other hand, focuses on the needs of merchants.
In 2019 Lütke was asked if “Shopify was the next Amazon.” His response was that, “Amazon is trying to build an empire and Shopify is trying to arm the rebels.” Lütke explains that Shopify is not a direct competitor to Amazon, given that Amazon sells products and Shopify does not. In fact, he says that Shopify works with Amazon through Amazon Sales Channel and Amazon Pay, and therefore Shopify is not directly in competition with Amazon, but some of Shopify’s clients may be.
At the height of the pandemic, Amazon ceased the selling of any non-essential items, impacting many small business owners and their ability to sell their products, which was essential to their survival. Shopify was a user-friendly and accessible alternative, allowing small businesses to continue their operations.
Shopify has experienced exponential success and growth over the last couple of years by identifying and meeting the needs of its customers. By prioritizing merchants, Shopify has created a platform that allows small businesses to grow their operations and, in so doing, has transformed the e-commerce industry.