Case 1 Analysis: Google; Case 2 Analysis: Shopify
had dropped out of high school at the age of 17 to work as a programming apprentice at Siemens-decided to build his own e-commerce platform from scratch. He came up with something much simpler, faster. and more visually pleasing than anything from existing web design vendors.
Snowdevil.com’s sales were meager at best. But Lutke and Lake quickly realized that the most valuable entity they possessed
was the platform beneath Snowdevil. So in 2006 they launched Shopify as a platform for creating online stores. The going was slow at first, but as they continued to improve the platform with innovative tools, the client base grew steadily. Shopify also de veloped a corporate culture based on authenticity, free thinking, and what the company calls the “trust battery”-a perceptual gauge of an individual’s potential based less on what they’ve already done and more on what they might do in the future.
The Anti-Amazon Building the Shopify e-commerce platform required carefully defining what that platform is. But key to Shopify’s strategy is also to define what the platform is not. In short, Shopify is not a marketplace. Although Shopify sets up and runs e-commerce operations for DTC companies, it operates in the shadows, siiently and invisibly. So when customers visit Leesa.com to buy a mattress. every interaction take place with Leesa, the company and brand. Customers browsing for temporary tattoos at Tattly. com know only that they are experiencing a selection of creative, high-quality temporary tattoos exclusive to Tattly. When OTC brands sell on Amazon-whether fulfilled by Amazon or by the third-party vendors-customers are buying from Amazon, and the brands themselves gain little by way of brand equity. But visitors to the e-commerce stores powered by Shopify typically have no idea that Shopify even exists, let alone that it’s the com pany behind the engine that drives their interactions. The DTC brand itself stands out, not the platform.
Shopify thinks of itself as the anti-Amazon, not because t is against the e-commerce giant but because it offers OTC companies a path to selling their goods that is so different in concept and outcome. Although Amazon takes care of ev erything down to operations and fulfillment, vendors don’t so much build their own brands as they do Amazon’s. As Amazon has grown, more sellers have complained openly that they have little control over their sales, customer rela tions, and the data generated from shopping. In many cases, controlling those assets has allowed Amazon to develop private-label brands that compete directly against its sellers’ brands. With Shopify, the merchant, not the marketplace, owns access to the end user.
Being a non-marketplace e-commerce platform gives Shopify a unique competitive advantage: Shopify is neutral. It interfaces with and even plugs into numerous existing marketplaces but doesn’t favor any. And short of monitoring to prevent illegal activity on the part of vendors, Shopify does not interfere in their busi nesses. This neutrality has allowed Shopify to easily interface with the likes of Pinterest, lnstagram, Facebook, Amazon, and numer ous other companies that feature their own marketplaces. Thus, Shopify clients have access to any and all partner marketplaces.
A Big Boost from Lipstick Since going public, Shopify’s growth has accelerated. The com pany got its biggest publicity lift in August 2018, when the cover of Forbes featured Kylie Jenner in a black business suit with the headline “America’s Women Billionaires.” The cover story
described how Jenner would become the youngest-ever self made billionaire at age 21 by leveraging her fame into a cosmetics empire. More important, the article noted that Jenner’s online store, kyliecosmet1cs.com, was powered by Shopify. Less than one year after joining Shopify, Kylie Cosmetics had gone from selling its signature lip kits to selling a full line of more than 50 different cosmetics products generating more than $300 million in annual sales. Paying tribute to the power of Jenner’s fame as a factor in the young brand’s success, Forbes also pointed out that Shopify was the e-commerce platform behind online stores for Drake, Justin Bieber, and Jenner’s own half-sister Kim Kardashian West.
More recently, Shopify has taken things to an entirely new lever,feleasing a range of new tools that let small and medium sized businesses better compete with e-commerce giants. These include Shopify Ping-a powerful customer service tool that lets merchants interact with customers over Facebook Messenger – and Dynamic Checkout-a checkout system that eliminates roadblocks that lead customers to abandon their carts. Although small businesses and startups are still the backbone of Shopify, the company now offers Shopify Plus-an e-commerce platform and services for companies with revenues of $1 million or more each year.
Today, just four years after the company went public, Shopify hosts more than 800,000 active client stores that have sold more than $100 billion worth of merchandise. During that same period, its stock price has increased by 600 percent, giving the company a value of more than 822 billion. For its efforts, Shopify’s cut of client store sales came to more than $1 billion last year, making it the youngest software-as-a-service company ever to reach the billion-dollar revenue mark. “The 21st-century brand is the direct-to-consumer brand,” says Shopify’s chief marketing officer. “We run the gamut of a retail operating system,” he says, indicating that the company intends to be a major force in powering DTC companies for a long time to come.
Despite its momentum, Shopify faces plenty of challenges ahead. For starters, Amazon recently launched its own Shopify fighter, Amazon Storefronts. Billed as “a new way for small and medium-sized businesses to sell products directly through Amazon,” Storefronts highlights small businesses and their collections of unique products in a separate section. And although Shopify has a clear lead in the end-to-end e-commerce platform business, some analysts speculate that its model would be easy to replicate. In fact, many of the companies that Shopify partners with to provide process pieces for its e-commerce platform – such as PayPal and MailChimp-already possess data that could allow them to expand the e-commerce services they provide to their own OTC clients. Forgoing short-term profits, Shopify continues to invest heavily in Shopify Plus, international expansion, and e-commerce
it believes provider.
will continue to make it the leading
Questions for Discussion:
Compare and contrast the nature of the business market structure and demand relative to consumer market structure and demand for Shopify’s services. Discuss how a potential client for Shopify might go through the business buyer decision. How does the concept of the buying center apply to Shopify? How much of a threat does competition pose in Shopify’s future?