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Shopify Shifts Strategy to Attract Large Retailers With New Products

  • Shopify is branching out beyond small and midsize businesses, its core customer base.
  • With its latest product launch, it’s appealing to the biggest of the big retailers.
  • Shopify has been laying the groundwork for an identity shift for several years.

Shopify’s recent launch of tech geared toward large enterprises is the latest sign that its identity as a champion of owners of small and midsize businesses is evolving. 

On January 3, it announced the launch of Commerce Components, an offering that allows merchants to integrate parts of Shopify’s software — like checkout and product cataloging — into their existing tech stack. 

Shopify has historically targeted owners of small and midsize businesses. Earlier in the pandemic, its business soared as it catered to these entrepreneurs, many of whom were venturing into e-commerce for the first time amid lockdowns.

With a new, customizable e-commerce platform, Shopify could appeal to large enterprises that use a different software suite to run their businesses but may want to try alternative e-commerce features. The move to cater to large-scale retailers is an evolution of Shopify’s identity. 

Shopify may see more opportunity as larger businesses look for software that offers good value amid an uncertain economic climate, Rick Watson, the CEO and founder of RMW Commerce Consulting, said. In a way, Shopify is hedging its bets.

“Most startups go out of business, and if you’re only serving startups and small businesses, then your business model could suffer in some ways,” Watson said.

The typical Shopify merchant makes about $35,000 in sales a year, Ken Wong, the managing director of e-commerce-software research at Oppenheimer, said. And the typical merchant using Shopify Plus, a more-advanced version of Shopify used by brands like Allbirds and Brooklinen, generates an estimated $7 million in sales a year. 

With Commerce Components, Shopify could target merchants with sales that closer to the $500 million range, Wong said. For that service, Shopify has already partnered with Mattel, which generated nearly $5.5 billion in sales in 2021. 

Shopify takes on legacy software companies

Shopify’s flagship product offers a more all-in-one experience. For a subscription fee, Shopify merchants get access to tools to build an online store, ship out products, and process payments. By contrast, Commerce Components breaks the product down into components, which could improve Shopify’s ability to lure merchants away from other software companies. 

Many large retailers use their own proprietary software or rely on legacy software providers like Adobe or Salesforce, which have e-commerce products. Salesforce bought Demandware for $2.8 billion in 2016 and Adobe bought Magento for $1.68 billion in 2018 to bring the biggest retailers into their commerce offerings. 

To persuade large retailers to use its product, Shopify must show them it has an edge over legacy software platforms. Already, Shopify frequently touts how its payments tech — especially its one-click checkout, Shop Pay — positively influences merchants’ conversion rates.

“That’s what I view as the Trojan horse for them: Get a piece of the ecosystem into an enterprise, prove that you can deliver good technology that delivers on ROI, and then, over time, hopefully kind of jam in the rest of it to become the de-facto platform for these enterprises,” Wong said.

Laying the groundwork for large businesses

Shopify has been laying the groundwork for a move further upmarket for several years. It launched Hydrogen, a framework for building custom Shopify storefronts, in 2021 and 2022. Then, it started working with consultancies like Deloitte, EY, and KPMG to boost adoption. 

Still, analysts say winning over large merchants will likely cost Shopify more in sales and marketing. 

“It’s very different to sell into a large company through partners like consultancies than to just have a button on a website that someone could sign up for,” Watson said.

A move upmarket does not mean that Shopify is abandoning its core mission of serving entrepreneurs. It has launched other products, like its brand-creator-matchmaking service Collabs, that are geared toward upstart brands. 

At the same time, it has launched products, like the advertising product Shopify Audiences, that are available only to larger merchants using Shopify Plus.  

“At some point, are they going to have certain capabilities that could be useful to everyone but segment it off to just a slice of their customer base?” Wong said. “That worry is definitely lingering out there. And I think it’s hard for them to have this kind of product segmentation without very explicitly carving off features from their lowest-end customer.”


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