Shopify has been on a tear lately as its stock price has risen nearly 40-fold in the last five years. They are one of those growth stories that is the envy of not only all of its competitors, but also many other businesses in other industries as well. Simply put, Shopify is expanding rapidly and offering more services and products to its consumers than ever before. At the moment, they are attracting a lot of attention for a product that they call Shopify Plus. This product is targeted toward larger companies that are seeking to expand their direct to customer sales. Clearly, this is a popular product as it accounted for 24% of Shopify's revenue back in 2018, and it has only continued to grow since that time.
Democratizing Online Sales
Ask any small business owner, and they will tell you that what they do to keep the business afloat and growing is no easy task. They not only have to worry about making sure their company is operating to its potential, but they also need to be aware of and respond to an ever-present threat of competing against larger companies that have greater resources. This concern was larger still when small businesses did not have the equal footing that they now have with low cost marketing and e-commerce tools. The Internet has helped to level the playing field to make it a bit easier for even a small company to start selling to their customers directly.
Small businesses have seen Shopify as their way to avoid some additional overhead costs that come with selling through distributors. Imagine a brand that has finally gotten a foothold in its market but is still not quite big enough to be a completely standalone operation. That brand would likely have struck up deals with third-party distributors in the past to help push their product out to popular retail chains and other places where their customers might interact with the brand. The brand had to pay those distributors or give them a cut of the sales of course, but that was the way the system worked for a very long time. However, this is no longer the only way to do things. Shopify has made it much simpler to sell directly to customers.
Large Companies Want To Share In This Commerce Revolution
Nothing as exciting as the Shopify platform can remain in the domain of only one sector of the economy indefinitely. It didn’t take a long time before larger companies started to take note of what Shopify was doing to help smaller firms. They wanted to leverage this platform to grow their business as well, and they have latched on to what Shopify has to offer. Consider the following facts from digiday.com:
Currently, Shopify counts brands like Victoria Beckham, Rachel Roy, K-Swiss, Tommy John, Briers Home Furnishing as Plus clients, as well as a list of brands owned by conglomerates like Unilever, Pepsico, and Nestlé, like Lays and Oreo.
"The direct-to-consumer movement is not a fad. It will be steady for a long time. Brands from CPG companies that never before sold direct are re-evaluating their partners," said Shopify COO Harvey Finkelstein on a call with investors during the company's third-quarter earnings report for 2018. "They want to be more nimble. We're the best partner for large-scale merchants that need both flexibility and robustness.
What this means is that even household name brands such as Oreo are now looking at Shopify as yet another channel to distribute their marketing message and products. We know that a brand like Oreo (which is owned by PepsiCo) has plenty of revenue and profits to use any distribution chain they want, but why reduce margins more than they have to if they are able to acquire at least some of their customers through direct online sales? That is what the leaders at these enterprise level, consumer good companies must be thinking to themselves as they subscribe to the Shopify Plus system.
How Shopify Intends To Win Additional Business Away From Well-Established Rivals
If you have read to this point you might be asking yourself why a brand would choose to use Shopify for direct to consumer sales when there are already established channels for larger retailers to sell products such as:
- Amazon
- eBay
- Etsy
- Facebook Marketplace
If you have read to this point you might be asking yourself why a brand would choose to use Shopify for direct to consumer sales when there are already established channels for larger retailers to sell products such as:
Large brands want to know what their customers are clicking on, buying, and how much time they spend looking at various products. Shopify gathers all of that information, and makes it available to their customers. This obviously benefits the large companies as they get some granular level details about their customers that they might not otherwise have, but it helps consumers receive more accurately targeted customizations and product suggestions they might actually like to purchase as well. It is expected that the value of big data such as the kind described here will only increase in the future.
There are plenty of upsides for large companies that want to use Shopify to expand their business. Perhaps the most valuable is the fact that they can make their operations more agile and adaptable to an ever-changing market. That is extraordinarily important at this time as we face labor shortages, supply chain disruptions, and other almost unprecedented situations in the broader economic landscape. Companies that act now to secure their position as a consumer-first enterprise will realize the benefits for years to come.
