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Shopify (NASDAQ: SHOP) is a Canadian company that offers an online store building platform for merchants. With a full spectrum of product offerings, retailers that use Shopify gain access to applications that can be used for website building, payment processing, marketing, and customer engagement. The highly customizable platform offered by Shopify is used by millions of online retailers around the world. Clients of Shopify benefit from an easy-to-use platform that allows them to help run and grow their businesses. The company has continued to innovate, partnering with developers around the world to grow its e-commerce ecosystem and bring new features to the platform.
What is Shopify (SHOP)?
Shopify was founded in 2004 by Tobias Lütke and Scott Lake. While trying to open an online store to sell snowboarding equipment, the pair were dissatisfied with the existing website building tools on the market and decided to start their own company to meet growing demand. As software developers by training, the pair developed a new set of tools to build their website Snowdevil. Using the lessons learnt through building their own website, the pair perfected their product and launched it as Shopify in 2006. To fuel growth, Shopify launched its application programming interface (API) platform in 2009. Through this API, outside developers were able to create applications within Shopify that became part of the customization options for merchant’s websites. These applications added vital features such as website themes and streamlined refund processes, making Shopify one of the most customizable e-commerce platforms in the world. The company grew rapidly over the next several years before eventually IPOing in 2016.
Headquartered in Ottawa, Canada, Shopify is now relied upon by over 1 million retailers worldwide, from small businesses to some of the largest companies in the world, to manage their e-commerce shops. Well-known corporations that utilize Shopify include Google and Tesla. The company is an important part of Canada’s tech ecosystem and is the largest publically traded company by market cap in Canada. Shopify employs around 7,000 employees around the world and prides itself in having a dedicated and innovative workforce. In May 2020, the company made headlines when they announced just two months into the pandemic that they would become “digital by default”, allowing employees to work remotely on a permanent basis. Through decisions like this, the company has shown that they are able to attract top talent, which has allowed the company to continually come up with new and innovative ideas for products and services.
Why does Shopify (SHOP) Matter?
One thing that sets Shopify apart from its competition is its integration with other marketplace-based platforms. This started in 2017 when the company worked with Amazon to allow Shopify merchants to sell on Amazon directly. By integrating Shopify into Amazon’s marketplace, merchants gain access to a huge user base and additional sales channels. Merchants also are able to benefit from having inventory synced across the platforms, allowing for easier tracking of orders and order fulfillment. Shopify is also fully integrated with Facebook through the Facebook Shop feature. Through this channel, Shopify products can be directly displayed on a merchant’s Facebook page, allowing for direct purchases off of the social media platform. Other platforms boasting similar integration features include Pinterest, Snapchat, and Slack.
Beyond this, back-end integration with several other payment processing technologies has allowed for mutually beneficial partnerships to be developed over time. For example, Shopify partnered with Alipay in late 2020, allowing for purchases on Shopify-built websites using the massively popular Chinese payment processing application. This partnership made purchases easier for Alipay’s 1 billion uses, allowing merchants to gain access to a large and lucrative overseas marketplace.
Shopify (SHOP) Prospects
Shopify has continually innovated and listened to feedback from merchants to improve their services. Recently, the company has begun to look into offering products and services in the fintech space, and several promising product announcements have been made. A major one was Shopify Balance, a digital solution for small businesses to better manage their finances. Shopify Balance consists of either a physical or virtual debit card as well as a full suite of backend financial tools including cash flow analysis, bill payments, and expense tracking. The card also offers cashback rewards costs associated with marketing or shipping. The main selling point for Shopify Balance is allowing merchants to separate their business finances from their personal ones without needing to work with traditional banking institutions to set up complex business accounts. The launch of this product is expected to occur sometime in 2021, with initial phases targeted towards merchants in the United States.
Another new service that will benefit both merchants and customers is upcoming changes to the Shopify Pay feature. Through a partnership with Affirm, Shopify is implementing a buy now, pay later option onto stores in the United States later in 2021. The integration is important for both companies, as it allows them to target the younger online population who may benefit from these payment plan options. As part of this deal, Affirm had gained exclusive rights to provide point-of-sale financing for Shopify in return for an equity investment in Affirm. Shopify has already benefited greatly from the partnership, netting $2 billion when Affirm IPOed just six months after the deal was signed. This partnership is a great example of Shopify’s ability to seek out mutually beneficial relationships and spot the potential in new products and services.
Where to Buy Shopify (SHOP)?
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Shopify has opened the doors for millions of small businesses, providing them with the ability to quickly and easily set up their online presence. Throughout the years, the addition of new features has made the platform a one-stop shop for the needs of merchants. With the addition of new features like Shopify Balance and Shopify Pay, the company has shown that they have the ability to respond to customer feedback and create products and services to meet ever-changing needs.
Baggio has been an investor in the technology space for over half a decade. He uses the perspectives gained from his work experience in the private, public, and non-profit sectors to guide his investment strategy, with a specific interest in the potential of emerging disruptive technologies.