Hi, I’m Jaryd. 👋 Every other week, I pick one company/startup you probably know, and go deep on their go-to-market strategy, how they acquired early customers, and what their current growth engine looks like.

+ every Friday — I bring you 5 short-form insights from the startup/tech universe.

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Hi friends 👋

Hope you’re all having a great week so far!

In the last deep-dive, we looked at How Etsy Grows — a mega-niche marketplace for crafty-folks to sell handmade and vintage goods. We looked at why marketplaces are interesting business models, why they’re so challenging, as well as the mechanics of how to kickstart and scale one…plus spoke about dinosaur dildos more than we should have. 🫣

I picked Etsy because I’m interested in businesses that help people make money and create financial independence. These are usually marketplaces, and Etsy is a great example of one that’s empowered people to set up stores, sell stuff, and quit their 9-5s.

But how does the proverbial saying go… There's more than one way to eat a Reese's, no?

Well, if Reese’s was making money by becoming an online e-commerce entrepreneur — then, absolutely.

Today, we’re looking at the platform for sellers.

Shopify (NYSE: SHOP) has made many of their customers millionaires, and has been handsomely rewarded for that value creation with a $42.48 billion market cap (33X since their 2015 IPO). I think they give us a great case study on growth despite their 2022 performance and recent layoffs, where like all of their peers, they’re seeing the effect of a pullback in e-commerce demand following those crazy pandemic surges. Yes, we all played a hand in by buying random shit we didn’t really need.

[Some quick housekeeping before we start] If you learn anything in this deep dive and find it valuable…considering subscribing, hitting the little heart button, or sharing with a friend 💟

Great — let’s get into our first ever deep dive on e-commerce platforms!

How Shopify Grows

(Click that link ☝️ to read the full thing in your browser/app — sadly, it gets cropped in email)

Intro
- A brief history of e-commerce
- Marketplaces vs platforms
- How Shopify started
How they grow
- Getting early customers
- Pricing as a growth tool
- Growth engine: App marketplace
- Growth engine: Free tools
- Content-driven growth
- Other strategic initiatives
Takeaways

If you’ve read my previous deep dives — you know how much I love a little backstory. And they say consistency is key…

A brief history of e-commerce

E-commerce (e-com), simply, is selling stuff online. And like those dinosaur dildos on Etsy — that comes in many shapes and sizes. So, I think a good place to start is breaking out e-commerce into three different types:

E-Commerce websites (D2C). The brand is the seller. They control their own supply, and their customers come to the site to buy from them.
E-Commerce marketplaces: Sellers create stores on the site, list their stuff for sale, and consumers come and buy from them. The brand maintains the ecosystem of supply and demand and gives the two-sides the tools they need to transact.
E-Commerce platforms. In a way, these products sit somewhere between websites and marketplaces. These brands provide sellers with the tools to (1) set up their own e-commerce websites (D2C), and (2) help them manage all their own operations — but they don’t bring sellers an audience of buyers.

Here are some examples:

But, slightly getting ahead of myself here.

E-com started in ‘91 when the internet was made available for commercial use. Security protocols (like HTTP) and DSL (Digital Subscriber Line) were soon implemented, and these protocols opened the gates for secure online transactions and solid internet access. The US and Western Europe saw a huge rise in businesses using the internet to sell stuff.

This started the dotcom bubble. The market was bullish, investments were flowing in, and it grew rapidly — until March 2000, when it all came down. 🐂 ⇒🐻

Since the dotcom crash, the industry has been introduced to a huge wave of new players. From more marketplaces and platforms — to adjacent services making transacting easier (i.e PayPal).

This is a 30,000 foot view of the evolution of e-com, or, the history of online shopping.

But, before we get into Shopify, I want to talk a bit more about marketplaces vs platforms.

Marketplaces vs platforms

Sometimes the lines can get blurry between whether a product is a marketplace, or a platform. And not just from a customers perspective, but also from the point of view of a founder who’s deciding what type of model they want to create.

Platform or marketplace? It’s a deceptively simple question that many e-commerce companies nonetheless struggle to answer.
The choice of which path to take can have broad implications for brand identity and growth strategy, as well as practical ramifications, especially where payments are concerned. As a business grows and evolves, these will only be magnified, particularly when a company sets its sights on international markets.
For this reason, it’s important for companies to make the distinction between the two models early on, and plot a course that makes the most sense for their business goals. Doing so can help avoid costly detours and dead ends, and focus resources and energy where they are needed most.
— Michelle Vautier (VP of Payments & Risk at Patreon), via Plaid: Are you a platform or a marketplace?

So, this is what I’ve gathered are the main differences:

What it means to be a marketplace: (Etsy)

Marketplaces make their money through transactions closed, meaning:

Their business is all about volume of sales closed. i.e Etsy makes their money by taking a % on all purchases as a facilitator.
They control the checkout experience. i.e I buy on Etsy, the UI and feel is shared across all stores, Etsy communicates with me.
They bring sellers more buyers. i.e Etsy’s job is to ensure there is enough demand liquidity to keep supply happy.
They promote discovery of sellers and items for sale. i.e Etsy runs ads on other channels, and cross promotes things you may be interested in buying on-site.
Trust is instilled in the marketplace brand. i.e I trust Etsy, so I buy on Etsy.
They are accountable for quality and reputation. i.e If I get a bad egg, I turn to Etsy to fix it.
They focus on helping merchants AND catering to the end consumer. i.e Etsy has two-sides of the market to deal with and make happy.

What it means to be a platform: (Shopify)

Platforms on the other hand, are more about providing other businesses with the backend services and marketing channels they need to connect with customers, meaning:

Platforms are all about providing merchants with the tools they need to build, market and manage e-commerce. i.e Shopify makes their money primarily as a business tool.
Businesses using the platform are responsible for the checkout, and closing the deal. i.e I buy from Bonobos, not Shopify.
They don’t bring sellers new customers. i.e Bonobos needs to build an audience and drive traffic to their own store.
End customers of, say, Bonobos, don’t even know Shopify is involved. i.e Shopify isn’t branded across their customers e-com sites. Customers need to trust Bonobos.
Platforms aren’t responsible for sales and accountability of sellers. i.e When things go wrong, Bonobos is responsible.
They focus on helping merchants, NOT catering to the end consumer. i.e Shopify just needs to make Bonobos happy, and get more companies like Bonobos using them.

For a platform, success hinges on providing a customer (merchant) with a beautiful online store, a seamless shopping experience, and a robust digital infrastructure that will allow them to scale their business. Success is defined in terms of increased conversion and retention rates, as well as rapid, sustainable growth.
— Michelle Vautier (VP of Payments & Risk at Patreon), via Plaid

Simply put, marketplaces are a shop — whereas platforms help others build shop!

Okay! Let’s talk about Shopify.

Shopify — the business builder

Today, Shopify is like the operating system for e-com entrepreneurs. It’s the gold-standard when deciding where and how to start an online store.

Just a look at that market share 👇

But, it all started out as an online shop to buy snowboards. Talk about a pivot.

In 2004, German programmer Tobias Lütke was living in Canada with his girlfriend. Being an avid snowboarder, he decided to start Snowdevil — an online snowboard shop. But, he found the e-commerce software available at the time to be clunky and expensive.

I set up our online store based on a variety of different systems such as Miva, OsCommerce, and Yahoo stores. Truth be told, all those systems made my skin crawl because of how bad they were. The final straw was when I got a custom design made for my snowboard store and I couldn’t get it to work in Yahoo stores. We had this great CSS-based layout done with all these new fanged ‘web standards’ and the customizability of Yahoo Stores barely allowed me to change the background color of the top frame.
— Tobias Lütke, Co-Founder, via Quora

So, he decided to lean into his programming skills and write his own e-commerce engine.

💡 He was dissatisfied with what he found on the market, so he decided to take control and build something himself. If you’ve read all my previous deep dives, you should be seeing a theme emerge here: To find a startup idea, solve your own problems!

It is incredibly powerful if you solve the problem you actually have yourself. It’s really tough to develop a good product when you don’t have very close proximity to the people who actually use your product. The closest proximity you can have to those people is to be that person.
— Tobias Lütke

After he launched Snowdevil on-top of his own tool, other online merchants were so impressed with what he built that they started asking to license his software to run their own stores.

Tobias and his co-founders quickly realized that software had more potential than snowboards.

So, in 2006 — while Sean Paul’s Temperature was #2 on the Billboard charts— Tobias Lütke, Scott Lake, and Daniel Weinand closed the doors on Snowdevil, and Shopify was born.

Shopify launched their software product as a set of tools for merchants [..by merchants 🙄] to simplify building their own e-com sites. The first version gave sellers the essentials like customizable store templates, tracked order feeds, inventory organization as well as payment processing and PayPal/credit card integration. (Fun fact, the name comes from Shopping + Simplify)

Significantly — launching in 2006 gave Shopify a very strong why now.

Lenny Rachitsky has an excellent piece on “why now” and its value for startups. For the MBA kids, this is a macro tailwind. For surfers, this is a wave you need to catch. I am neither, so I’ll stick with why now just being a change in the world that sets a startup up for success.

For Shopify, there was a huge growth in e-commerce again after the dotcom crash. This allowed them to enter the market and solve a growing, untapped, market need — simpler e-com.

And e-commerce has continued to grow, making Shopify’s why now a strong and continuous current of growth. 🌊

However, Shopify only became a platform in 2009.

By 2009, Shopify had established its value as a simpler, cheaper, and better e-commerce tool that replaced old tools like Yahoo! Stores and Microsoft Commerce. Cognizant of the evolutionary power provided by open-source platforms, developers-by-trade Lütke and Weinand made the crucial decision to construct Shopify’s first external API and an app store. The API and App Store enabled Shopify Partners (designers, devs, agencies) to incorporate modifications to improve merchant experience and opened the door to SHOP as a platform.
— Albert Wang, Shopify: A Sustained Success Story

Here is an at-a-glance roadmap of Shopify’s expansion from 2007, through 2009 (tool⇒platform), up until today. These are all strategic moves we’ll look more into as we unpack their growth story.

And on that note — let’s get into how Shopify grows!

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How They Grow

Shopify’s focus is on merchants. Unlike marketplaces where we’re wrapping our heads around chickens and eggs, and figuring out where the flywheel starts — things are much simpler here.

Demand drives Shopify’s growth.

This gives them a pretty clear-cut strategy — acquire more businesses.

So let’s look at how they started doing that, and how they’re sustainably doing it today.

Getting early customers

From the inception of Shopify through to about 2009 — they did three things that brought them early customers.

1. Seeking out customers where they are — the Ruby on Rails community

As a B2B product, there are three growth levers at your disposal to get your very first customers. According to extensive research by Lenny, these are:

Tapping your personal network
Seeking out your customers where they are
Getting press

Shopify leaned into #2 — seeking our their customers where they were, online.

When I built Snowdevil, some colleagues in the Ruby On Rails developer community asked if I’d license the code from our store. That pointed me to building Shopify.
We had an early waitlist, with a few thousand emails that we launched to. This was in 2006. Looking back, it actually set the pattern for a lot of SaaS. We launched the beta and had a few hundred stores. Still some of those cohort selling today!
— Tobi Lütke, via Lenny’s Newsletter: How today's fastest growing B2B businesses found their first ten customers

When Tobi decided to build his online store by making his own e-commerce engine — he did that with Ruby on Rails (a now widely popular programming language). Rails started in 2004, so it was still in its infancy, and Tobi managed to get very involved (and known) in the developer community.

And this is where Shopify was discovered and born.

2. Growth engine #1: Referrals + bringing channel sales to the SaaS world

One of the early experiments Tobi ran was to figure out if they could tap into the distribution network of web design companies.

Their goal was simple. Instead of trying to reach all these individual entrepreneurs, they focused on the people who are going to be building 30 to 100 websites a year for people who want to sell on the internet.

So, they spun up a referral program with a simple deal, “If you bring on a customer onto Shopify, we’ll give you 20% of the lifetime revenue of that account”.

That becomes a very compelling deal as you can imagine to these web developers — who’ve been battling with expensive and janky solutions (like Tobi had been) when setting up stores for their clients. They were given a tool that they could use for their clients to (1) make their own lives easier, and (2) get to make perpetual revenue from that vs. their once-off web design fee.

That brought them in a ton of customers and became their main growth channel in the early days, and still is a substantial growth engine today.

This strategy is called channel sales. But at the time, it was pioneering in the SaaS world.

3. Launching their “Build a Business” competition

Another experiment Tobi ran in the early days was launching a “Build a Business” competition.

The competition offered $100,000 to the team that built the biggest business within 6 months on Shopify. This is how Tobi described it:

This is an opportunity of a lifetime – not only do contestants have the chance to pursue their dreams and become their own boss, but they can win cash for doing it.

Significantly, they did this in partnership with Tim Ferris, launching the contest in conjunction with the release of his new book. If you’re unfamiliar with Ferris, the super simplified version is that he’s a thought-leader and influencer in the entrepreneurial world. This created press and brought them more attention.

The competition ended up bringing them 1,000 new customers and over $3m in revenue from those stores. And longer-tail, this brought them a lot of word-of-mouth growth.

Not a bad ROI for $100k.

Needless to say — they kept doing that each year, and still do.

Pricing as a growth tool

With merchants signing up, the next piece was for Shopify to monetize them. And the way they do this has been key to their growth.

Aligning the business model with customer success

Shopify has two revenue streams — (1) Merchant Solutions (71% of revenue, Q2 2022), and (2) Subscription Solutions (29% of revenue, Q2 2022).

Merchant Solutions is essentially Shopify’s take-rate on stuff being being sold on their platform. As more people come to Shopify to sell, and as those businesses do better, Gross Merchandise Volume (GMV) goes up and that becomes a bigger pot of value than more linear subscriptions.

This is like that value-based pricing we spoke about a few weeks ago in How Intercom Grows. Charge customers more as they get more value!

Pricing this way aligns the business model with customer success. Shopify now focused their product development on building features that helped customers sell more because every sale for a customer means more revenue in transaction fees for Shopify.

Where its competitors live primarily off of subscription software revenue, Shopify's approach has always been to offer its easy-to-use website builder for as cheap as possible and monetize through growth in payments, shipping and financing instead.
Both approaches have their merits and demerits:
The prior approach is faster to start, more predictable, but caps the upside a business can see when its merchants grow.
The latter (Shopify's approach) is slower to start, more volatile through its early years, but has tremendous upside in explosive growth along with your customers at scale!
— Arjun Rakesh and Ruchin Kulkarni, via Top of The Lyne

Charging based on successful sales was introduced in 2007. And each year, that segment of revenue has grown as Shopify has developed away from being a tool, towards a full-fledged platform and ecosystem for sellers.

So, let’s look at what really kicked Shopify into the platform-sphere — and what has been one of their biggest growth engines.

Growth engine #2: Building a marketplace for apps [2009-]

Pre-2009, Shopify was a tool. It was only when they started building an ecosystem around Shopify did they become a platform.

And this ecosystem was shaped by their open API and app store, which within a few months, quadrupled their revenue.

Lütke and Weinand’s developer backgrounds—and their focus on helping a broader base of users—enabled them make a critical transition from tool to platform by building an API and an app store.
At the time, they just saw this as an opportunity for like-minded developers to sell their apps. It was also a chance to give Shopify merchants more customization options. But this move was pivotal to Shopify’s growth because it helped them expand when other web businesses were shrinking.
— via Product Habits

On Shopify’s third birthday — their app store was released. And here’s what Tobi said about it:

E-commerce is a highly individualized business. Every store wants to offer a unique buying experience but providing too many features makes the software cumbersome and difficult to use. The Shopify API solves this by allowing merchants to install exactly the features they need to get the most out of their store…and our Partners can get a recurring source of revenue by developing great applications for these stores.

That meant even more people and businesses became invested in Shopify.

In the app store, developers could sell their apps (Shopify takes 20%) and merchants could browse, buy, and directly install these add-ons. This opened up an entire new set of customizations for entrepreneurs to customize their stores.

💡In How Notion Grows — we looked at the tremendous value generated from Notion’s community-driven template marketplace. Similarly here, by allowing others to contribute to the value of the product — way more value is made available to customers than would be possible with Shopify’s team alone.

This massively widens their addressable customer base, because now more types of people can use Shopify for anything, or add functionality, do subscription sales, or do whatever without Shopify cluttering and muddying the messaging of the core product.

Referrals and their app marketplace were the first two things they did that really gave them strong engines to scale — but their app marketplace is what started building them defensibility through stickiness (their moat):

What [the app store] really starts to do is build the moat, where Shopify becomes the absolutely dominant platform because they’ve got all the apps. They are very much like WordPress in blogging, it’s really hard to shake that inertia because they have all the plug-ins. Shopify has exactly that in the e-commerce world.
— Ben Gilbert, via Acquired Podcast

You might be seeing a growth loop emerge here 👀

So we’ve looked at 2 growth engines so far, (1) referrals and (2) the app store. But they have another engine at work helping them acquire more merchants.

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Growth engine #3: Creating a SEO & brand moat with free tools

Shopify has built an ecosystem for entrepreneurs. And part of this ecosystem is a set of free, search optimized, tools that anybody starting a business can use. For instance — their Business Name Generator.

Compared to referrals and the app store, this is a relatively smaller engine of growth — but it still brings them 2 million organic visits a year and 188,000 inbound links.

Free products. Free tools. Free generators. Interactive content experiences that help their target audience accomplish a specific goal. An investment in free tools like a Privacy Policy Generator and Logo Maker has helped Shopify have a presence in the search engine results page for over 70,000 different keywords and phrases.
It’s helped them create what we call an SEO & brand moat.
— Ross Simmonds via Foundation Inc: The Growth Toolkit: How Shopify Landed 188,029 Links & 2M Visits

First, what’s a moat?

This is an economic term Warren Buffet came up with to describe a business’ unique competitive advantage. Or, what defends a ~~castle~~ company against ~~enemy intrusion~~ competitors.

Let’s look closer at how free tools add to Shopify’s defensibility with SEO and Brand.

The arbitrage opportunity of launching a free product

People starting a business have loads of questions and needs outside of just setting up their site. So, before they’re even thinking about Shopify, they will be Googling for answers and resources.

Shopify’s free tool strategy is to create awareness and give these potential customers some value as early as possible. This has given them SERP (Search Engine Results Page) dominance which brings them sustainable organic traffic. SERP dominance, simply put, is “when a brand has invested so strategically into content & SEO that they have captured a placement in search results for the vast majority of search terms associated with their market and ideal customers”.

Today, there are over 70k words or phrases you can type into Google and be met with a link driving you to a free tool created by Shopify.

That’s SERP dominance!

Ross Simmonds from Foundation Inc talks about the arbitrage opportunity of launching a free product, I’ll let him explain:

People want tools.
People want graders.
People want products.
People want templates.
People want calculators.
People want generators.
Don’t believe me? Consider this… There are 5 million searches for “mortgage calculator” per month. There are 135k searches for “business plan template” per month. There are 35k searches for “privacy policy generators” per month.
That’s a lot of people.
And there are millions of other examples of people going to Google looking for tools, products, graders and calculators to help them solve problems. In some cases, entire business models have been built on the back of these tools. You can reach out and hire a local lawyer right now to write a privacy policy on your behalf for anywhere from $500 to $2,500.
Or… You can use the free privacy policy generator created by Shopify.
This is arbitrage in action. In economics, arbitrage is the practice of taking advantage of a price difference between two or more markets. Shopify is able to deliver value through a free tool that would cost you hundreds or thousands of dollars to achieve in the standard market.
The reward? The Privacy Policy page boasts more than 75,000 organic visits a year for Shopify. The tool has been linked to more than 1,700 times and currently ranks for more than 445 keywords.

Canva for instance are spending more than a dollar per click to capture people looking to make a logo. But Shopify is able to capture a significant amount of traffic just by building a lightweight logo-maker and offering it to their target market for free.

Doing this creates a lot of other benefits beyond just traffic:

Lead generation through these experiences
Generating backlinks from people, boosting their site authority
Building stronger brand rapport with their market (i.e Shopify = for businesses)
Getting more people talking about Shopify
Offering early value for free (low barrier to “trying” Shopify)
Strengthens their SEO moat by ranking for new keywords
Weakens their competitors through arbitrage

So, while this SEO strategy isn’t quite a growth loop, SEO as a channel is definitely still an engine driving awareness and merchant acquisition.

Which leads us to another important aspect of SEO and brand building for Shopify.

Content-driven growth

I wanted to talk about free tools by itself because it’s a unique strategy that very few other people are doing (at least as far as I can tell).

But, free tools is one tactic within a broader content education strategy that creates a ton of SEO and brand value.

Shopify’s business, especially given their Merchant Solutions revenue stream, is all about merchant success. And customers can often be setup for success with the help of great resources. Learn is Shopify’s content hub, and it includes:

A blog: They have a curated blog that is contributed to daily by customers and their marketing team.
eBooks: They have in-depth ebooks that give their customers insights and position them as an e-commerce publishing authority.
Free business courses: They have step-by-step video courses by e-com entrepreneurs for people across all experience levels.
Guides: Similar to their blog, except more tactical advice and answers to questions.
Community: This includes community events and a forum.
Their podcast: They have a Shopify Masters podcast which gives listeners actionable insights into starting up a store through interviews with successful store owners
E-Commerce research: They publish detailed reports on the state of e-commerce with trends based on their unique data.

All of these resources are extremely helpful to existing Shopify customers as well as the general ecosystem of entrepreneurs. This has established them, similarly to Intercom, as an authority in their space (e-commerce and D2C) and generates them a huge volume of organic traffic.

Around the beginning of this piece, I laid out a timeline from 2007 through to today of the different strategic initiatives Shopify have launched that have contributed to their growth.

Let’s look at each of those in a bit more detail. 🔬

Building a fully-fledged ecosystem

Shopify have launched a bunch of product and marketing efforts that support their greater business engine. I’m not going to go into all of them, but here are the ones that I think have been most significant and have a nice takeaway.

Shopify Mobile [2010]

In 2010, mobile adoption was seriously booming. Just as one example, global smartphone shipments grew by 74% from 2009 to 2010.

This was a significant tailwind that Shopify quickly through up the sails to catch.

They released a free app and gave merchants yet another way to manage online sales. Shopify Mobile was a game-changer because it allowed sellers to monitor their online stores, look up customer information, and fulfill orders from their phones.

More people were getting smartphones and buying and selling online. This was a huge opportunity to command a new channel, and Shopify was on top of it.

💡 Takeaway:

Stay on top of big picture opportunities. Changing tides with technology are a big one that often make things much cheaper for you, or open you up to far more customers.

Shopify Experts [2011]

At this point, Shopify had 11,300+ stores and were generating over $125 million in revenue. Looking closely at their customer base, it was clear they had merchants across all experience levels, and that the less experienced merchants were usually less successful.

So, they spun up an experiment to give people access to curated professional support.

They released Shopify Experts, which was an “online directory of experienced Shopify pros” that had extensive knowledge of Shopify and could pass down advice to less experienced sellers.

This did three important things to help them grow:

Retention and LTV: It helped existing customers become more successful (i.e make more money for their store, and therefore for Shopify)
Acquisition: It made it easier for people thinking about getting into e-com to feel confident and give it a go
Brand. It continued to bolster Shopify’s brand as being all about helping small businesses start and grow —strengthening their authority on succeeding at e-commerce. This had immediate and long-tail benefits.

💡 Takeaway:

Be a resource and asset for your customers as best you can. Your product isn’t just the software you give them. Think of the whole product experience, and make it a core value that when they succeed, you succeed.

Shopify Payments and POS [2013]

2013 was pivotal for Shopify because they started paying attention to how their merchants were selling offline.
They released Shopify POS — which offered in-store and online inventory synching, out-of-the-box credit card processing, and reporting for merchants selling in brick-and-mortar shops.
The new Shopify Payments feature was bundled in, too, so merchants could sync payments on- and offline.
— via Product Habits

This made transacting way easier for merchants, not only saving them having to use third party integrations, but giving them another way to drive more revenue across the Shopify platform.

But POS wasn’t just another helpful feature. It opened up a whole new market segment. It allowed them to expand outside of the internet, and get a piece of the offline commerce pie.

In 2014, when the company brought POS to Shopify Mobile, over half of all e-commerce traffic came from mobile devices.

💡 Takeaway:

Be very in sync with your customers’ problems and keep an eye out for what points of friction exist in their lives outside of your product.

Shopify Plus [2014]

When companies grow, they often move to capture more upstream customers. And in most cases, this requires a shift in their acquisition strategy because enterprise require more effort to close, and demand more as customers.

For D2C and SMBs, Shopify’s growth is product-led.

But in 2014 Shopify wanted to catch bigger fish for a very simple reason. They sell more, so Shopify would make more. To do this, they launched Shopify Plus — adding a sales-assisted model to their books. This gave the likes of Unilever account managers, SLAs, and all that fancy stuff.

Today, Shopify Plus and these big customers bring in over a quarter of the total revenue.

💡 Takeaway:

Don’t overthink your sales model. What you start with can evolve as you grow, and probably should as the types of customers you want to go after over changes.

Omnichannel partnerships [2015-]

People who want to buy stuff are all over the place…

They’re swiping through life hacks on TikTok, scanning for the next Elon tweet, trying to figure out how to get around the new Instagram interfaces (or is that just me?), and apparently Googling “Why does cucumber taste like shampoo?”…hmm.

That means people who want to sell stuff need to be all over the place too.

That’s called ~~following the money~~ omnichannel commerce. And yet again, as the number of places shoppers could go to increased, Shopify leaned into this rapidly expanding landscape and made solutions to help brands sell wherever their customers are.

They plugged into all of these channels, like integrating advertising on Google and Facebook. This made is super easy for brands to build, manage, assess Google Smart Shopping campaigns and Facebook campaigns from right within the Shopify ecosystem.

This became very handy for smaller customers as they didn’t not need to focus separately on all these different channel tools.

💡 Takeaway:

Understand your customers landscape. What tools do they use, and why? Where else do they do business, why? And what opportunities existing for you through integrations into those places?

Shopify Capital [2016]

Short story here — they started funding small businesses.

The cool part is that low interest repayments were automatically made from sales on the Shopify platform, showing once again, Shopify has always tied their success directly to merchant success — and merchants know it.

Here’s how it works:

Shopify want as many merchants as possible
But merchants need to make money for Shopify to make money
And often you need some money to start making money (i.e marketing, production)
So…Shopify give it to them with great terms
They can start making sales and grow their GMV on Shopify (paying them back)
They become happy entrepreneurs who talk highly of Shopify and increase their LTV on the platform
These entrepreneurs tell other people who feel inspired
They come to Shopify, and need some capital
…on it goes

💡 Takeaway:

Support your customers as best you can. It pays all kinds of dividends.

…And that’s it for Shopify folks! [Takeaways 🍕 coming up right below]

As usual, I had a ton of fun researching and writing this piece.

If you learned something or just enjoyed this deep dive — consider hitting the like button, subscribing if you’re new here, or sharing this newsletter with a friend. 💟

See you on Friday for our new (short-form) weekly column, 5-Bit Friday’s!

— Jaryd ✌️

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Share How They Grow

Takeaways 🍕

Solve your own problems to find an idea to work on. “It is incredibly powerful if you solve the problem you actually have yourself. It’s really tough to develop a good product when you don’t have very close proximity to the people who actually use your product. The closest proximity you can have to those people is to be that person” — Tobi Lütke . And once you have it — go validate it!
Find the why now for your startup idea. “Why now” is a change in the world that sets a startup up for success. For Shopify, it was the rapid growth in e-commerce and the need for a simpler way for people to setup stores. Why now comes in many shapes and sizes, and when you have one, it creates a macro opportunity for your startup to ride. Learn more here.
To get very early B2B customers, there are typically three tactics to use. All B2B companies essentially have used a combination of just three growth levers to get their first customers: (1) tapping into your personal network, (2) seeking out your customers where they are, and (3) getting press.
Try tapping into your customers network with a referral loop. Shopify brought channel sales to the SaaS world by creating a partner network and giving them a very lucrative incentive to bring their own clients into the Shopify platform. Referrals, when incentives are aligned properly, can be a sustainable engine of growth.
Think of out-the-box ways to create hype and usage of your product. Shopify experimented with a “Build a Business” competition. It brought the right people (entrepreneurs) to Shopify for the perfect reason — to build a business! — and success of entrants tied directly into success for Shopify.
Align your business model with customer success. When Shopify started, their pricing was flat. By changing their revenue model to charge more or less based on their customers’ success — their pricing became value-based. And value-based pricing is the best way to charge for your product because it (1) shows your customers you’re vested in them, and (2) focuses your team on prioritizing the things that will help your customers be the most successful.
Creating an ecosystem around your product is a growth engine AND huge moat. Shopify’s app marketplace is what took them from a tool, to a platform. And becoming a platform is what has made more people invested in Shopify, driven more referrals, widened their addressable market, locked customers and developers into the ecosystem, and thus created a huge amount of defensibility for them.
Experiment with free tools as a way to build your brand and SEO authority. Think about what else your customers need and search for in their overall journey, and try find an arbitrage opportunity there with free tools. It builds your SEO and brand moat, and can drive leads and lower barriers to trying your product out.
Invest in content — it has immediate and long-tail value. The more helpful resources you put out there for your customers, the more likely people are to discover and talk about you.
Stay on top of big picture opportunities. Macro things are always going on, sometimes these can be challenges, sometimes these can be seismic opportunities. Changing technology is a big one that often make things much cheaper for you, and can open you up to far more customers (i.e 5G, cost of VR headsets, etc).
Be a resource and asset for your customers as best you can. Your product isn’t just the software you give them. Think of the whole product experience, and make it a core value that when they succeed, you succeed.
Be very in sync with your customers’ problems and keep an eye out for what points of friction exist in their lives outside of your product. It’s essential your product solves a core job well, but if you zoom out, you’ll likely find people have lots of other problems they’re trying to solve outside of your product. What tools do they use, and why? Where else do they do business, why? Sometimes these are distractions, but sometimes, there are interesting opportunities to try integrate into. The more problems you solve in a journey, the more of a necessity you become.
Don’t overthink your sales model. What you start with can evolve as you grow, and probably should as the types of customers you want to go after over changes.

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