Shopify has received a lot of press as it attempts to move into a more enterprise level eCommerce provider. It’s fully cloud based with a lot of widgets/apps to add functionality. It offers ease of set up, payment options, shipping options for drop ship, and a nice web interface for small businesses. The model is similar to Wix or Squarespace’s web content management systems. A quick back of the napkin calculation shows their SMB (small and midsize business) customer base averages $74k per year in transactions. In short, Shopify has done a great job getting into the small business market because it is easy to understand, cheap, and has faced little competition.
Shopify believes distributed development by independents with freedom of choice and configuration is the way to win the market. Our point of view is that this will result in customer confusion. Benefiting from an ecosystem of developers building widgets/apps for the platform is a solid idea and keeps Shopify’s development costs lower. However, based upon the small size of most of the companies developing for Shopify it will be an uphill battle to get the mid-market or enterprise CIO comfortable in dealing with a larger number of small vendors rather than one or two total vendors. Therefore, the author’s comparison to the Android market model is a bit flawed. What works for the consumer does not necessarily work for the enterprise.
There is also the issue of how Shopify would handle B2B or its integration with ERP systems. Given the one-size fits all model, the question becomes if enterprise or mid-market customers would trade functionality for the ease of set-up. Our functional reviews and vendor selections have shown enterprise customers are extremely unwilling to remove current functionality for a new platform selection. The fastest growing segment of eCommerce is now B2B. Hybris, Magento, and Demandware have recognized that and are quickly building their platforms to handle it.
While we see the market moving to cloud based eCommerce, we don’t necessarily see Shopify as the enterprise winner. There are multiple cloud based offerings already in the enterprise space and mid-market space. CloudCraze (Salesforce’s eCommerce for B2B) and Episerver (strong B2C and B2B with excellent content management) are two offerings already available. Demandware is the dominant player, but faces a challenge as it does not support B2B despite Salesforce’s claims and is getting more expensive (pricing itself out of the mid-market) as it competes with SAP’s Hybris. Insite eCommerce for B2B now offers a cloud option as well. On top of that there are a multitude of small vendors like Handshake with cloud offerings for specific industries. There will be winners and losers as always – climbing the enterprise ladder is difficult and any number of issues can prevent Shopify from gaining long-term traction. In considering if Shopify is the right choice for any company, it will come down to the same cost/trade-off model for any business looking to move to eCommerce or replace a platform:
- What platform are they on today – package or custom?
- How unique are their business requirements and need for customization vs. standard package offerings?
- What is the ease and cost of migration?
- What is the pricing for the platform vs. current spend?
Shopify is a great choice for small businesses or for those piloting direct-to-consumer eCommerce, but overall there could be better options depending on your portfolio needs. As with all technology, the devil is in the details.