Shopify was emerging as a leading supplier of e-commerce services but there were still so many more growth opportunities. Shopify’s dazzling track record and the resources at its disposal bestowed the confidence to go after them. Toward the end of the 2010s, Shopify looked to: 1) go upmarket and add more enterprise companies to its roll, 2) spread out more into international markets and 3) tap into new industries such as cryptocurrencies and cannabis. It also decided to pursue a conventional marketing campaign and begin building a fulfillment network to ship products for merchants.
Shopify Plus was originally set up to give merchants a reason to stay on Shopify as they grew in size and needed more services. After the win with Red Bull, Shopify Plus switched to actively seeking new customers among the strata of large companies ($20 million to $125 million in annual sales) and enterprise companies (greater than $125 million in annual sales).
The Shopify platform already had a number of features that could appeal to these whales. One, in particular, was the ability to handle high volume sales. “The platform is built for flash sales. This is actually one of the main reasons why established brands switch over to us!” Lütke posted in an online forum.1
But Shopify was not content to rely on just the existing features of its platform to attract new customers from the high-end niche. Additional salespeople were hired for Shopify Plus, trade shows were added to the schedule, and a team of Technology Partners was drafted to handle customizations more complex than what could be addressed by existing and new apps on the API. The Shopify Global ERP Program also enabled Shopify’s merchants to be integrated into the Enterprise Resource Planning solutions offered by Microsoft, Oracle and other companies.
To further address the needs of the whales, new features and tools were added to the platform. They included: Shopify Flow (automation of repetitive processes such as ordering inventory), Scripts (for customizing checkouts), Launchpad (for automating flash sales, product launches, etc.) and Augmented Reality (rotating and placement of 3D images).
When Shopify Plus got an assignment from a client, it often was for only part of their operations. These small assignments were viewed by Shopify as “land and expand opportunities,” chances to demonstrate what it could do and hopefully win more business. Still, some prospective clients had to be turned away because even with the Technology Partners team, the job would be too challenging or protracted. These cases tended to have legacy systems that posed severe integration challenges and made it difficult to improve performance. “Oftentimes, they do come back to us and say, okay, well, we actually have rethought this, and we’re not going to bring all these integrations with us,” Finkelstein disclosed.2
By the time Padelford left Shopify Plus in the summer of 2021, it had expanded to 1,500 employees and signed up 14,000 subscribers. The client list was a varied one. Even Amazon had a website on Shopify Plus — for its Whole Foods subsidiary. There were traditional consumer-packaged-goods (CPG) companies (such as Hasbro, Unilever, Procter & Gamble, Levi’s, Lysol, Clearasil and Frito-Lay); industrial and commercial products companies (such as Muffler Express, Cummins Engine and Ford); brands that had grown large on Shopify (such as Allbirds, Soylent and Gymshark); and various other brands (including Polaroid, Visa, Jones New York, Canadian Tire, New York Times, De Beers, Netflix and Budweiser).
There were plenty of celebrities who were Shopify Plus clients too, including: Kim Kardashian, Adele, Lady Gaga, Victoria Beckham, David Beckham, Taylor Swift, Cristiano Ronaldo, Tom Brady, Arnold Schwarzenegger, LeBron James, Drake, Ellen DeGeneres, Justin Timberlake, Beyoncé and Justin Bieber. “The celebrity brand vertical is really heating up,” Finkelstein remarked during Shopify’s earnings call for the fourth quarter of 2018. A clever move by Finkelstein was to interview several of the celebrity merchants and post the clips on YouTube and other social media. Their celebrity status would attract a good number of viewers and help promote both the celeb’s business and Shopify’s platform.
Towards the end of the 2010s, Shopify directed more attention toward international expansion. It had merchants based in dozens of countries but in most cases, it was not a huge presence outside of English-speaking countries. Shopify had held back from international expansion because it wanted to make sure it was doing well in the United States first. Nonetheless, in the first quarter earnings call of 2018, Finkelstein declared that Shopify was “embarking on a multiyear journey towards making Shopify as simple and effective globally as it is in our core geographies.” One of the first steps in this journey was to transition to a global cloud service provider (Google Cloud). Next, steps were taken to make Shopify’s platform multilingual and tailor features such as payments, shipping and capital lending to other countries’ customs.
For the first round of international expansion, priority was given to Germany, France, Japan and Singapore. Shopify felt they would be the easiest countries to achieve some early successes in since its platform had the closest product fit in those places. Germany was of particular interest to Lütke because his parents and other relatives “keep telling me about how poorly Shopify works every time I’m in Germany,” he quipped at a Bloomberg Live event in 2019.1 Still, it was not going to be a simple matter of translating the platform into another language and adding a multi-currency capability. A good understanding of the cultural differences in how people shop in those countries would be needed in order to adapt payment methods and other features of the platform.
In the second quarter of 2018, Shopify Payments was launched in Germany after it was “localized” to allow features unique to German credit cards. By the end of 2018, the Shopify platform had been translated into seven languages, and multi-currency status was added. Along with additions to the global partner ecosystem, these undertakings helped raise the portion of international business from 21% in 2017 to 24% of total merchants in 2018.
A leap forward came in September of 2021 with the release of Shopify Markets, “a centralized hub with all the tools needed for engaging in global commerce all from a single Shopify store.”2 A partnership was announced in January 2022 with the Chinese online marketplace JD.com (its GMV was just behind Amazon in world rankings) to enable U.S. Shopify merchants to sell into China. To further accelerate and simplify international expansion, this was followed by the launch, in September 2022, of Shopify Translate & Adapt and Shopify Markets Pro (powered by Shopify’s partnership with Global-e).
While Shopify was looking to expand internationally, e-commerce firms from other countries were looking to expand into North America. Two from China, Shein and Temu, were enjoying a fair amount of success. Shein had become America’s largest fast-fashion seller while Temu was thriving by selling a diverse assortment of products. Sometimes the quality was not the greatest, but the pair offered the lowest prices on many products, with generous refund policies. Shein and Temu shaved costs by shipping directly from China to U.S. customers, thus avoiding import duties on orders less than $800 and deleting the cost of maintaining large inventories in U.S. warehouses.3 They may also have sold items at a loss in order to gain market share. Their deliveries could take more than a week but American consumers were still happy to purchase from them due to the low prices.
Technological advances and legislative changes in the 2010s created new industries and products. Since Shopify’s mission was to make commerce better for everyone, it added tools that entrepreneurs could use in the new sectors.
The rise of cryptocurrencies in the 2010s was significant. Cryptocurrencies use blockchains that record financial transactions on decentralized, peer-to-peer computer networks, enabling people to transact outside of government-sanctioned financial systems. On February 14, 2018, Shopify partnered with the leading North American cryptocurrency exchange, Coinbase Global, to add its payment gateway, Coinbase Commerce, to the Shopify platform. This enabled merchants to accept payment in several cryptocurrencies, such as Bitcoin, Ethereum and Litecoin. There were other partnerships on a smaller scale, including the installation in 2022 of Crypto.com (which accepted 20 kinds of cryptocurrencies, including Ether, Dogecoin, Litecoin and stablecoins). Shopify first integrated crypto payments into its platform in 2013 via the BitPay gateway for accepting Bitcoin.
Cryptocurrencies are a controversial topic. There are many critics; there are many supporters. The critics, such as Berkshire Hathaway chairperson Warren Buffett, have said cryptocurrencies fluctuate in value too much to be useful as a medium of exchange and encourage speculative behaviour; they are also said to facilitate money laundering, tax evasion and the financing of terrorist activities.1 Supporters, such as venture capitalist Marc Andreessen, believe the bad actors can still be traced by authorities despite the popular view that Bitcoin and other cryptocurrencies permit anonymous transactions. In addition, they can displace credit card payments and thus eliminate credit card fees for online transactions (and end credit card fraud), allow the unbanked to perform transactions and permit micropayments as small as a fraction of a cent so gaming, media and other businesses can replace subscription- and advertising-based revenue models with pay-per-item or pay-per-article models.2
A concern for Shopify was that its merchants could lose sales if consumers switched to other e-commerce platforms that accepted crypto payments. Shopify’s commitment to its merchants was paramount, so it added cryptocurrency gateways. As Finkelstein explained: “Our job as the retail operating system for brands all over the world is no matter what a merchant wants to do on Shopify, we have to make that available.”3 By mid-2022, companies like Microsoft, Whole Foods, Starbucks, Twitch and Home Depot were accepting digital currencies.4
Shopify embraced crypto even though its potential to replace credit card payments threatened one of Shopify’s major sources of revenue. But eliminating such payment fees would be in the interests of merchants and promote higher levels of e-commerce, so Shopify needed to get in front of the disruption and prepare its transition, if and when required. Early adoption on its part could give Shopify an edge in processing cryptocurrency transactions and set it up as a go-to destination for shoppers if digital currencies became more mainstream. To further recoup any loss of revenues from the transition to crypto, Shopify could also develop other services for merchants; an example would be a rewards and loyalty program for the merchants’ customers.5
In 2021, Shopify gave its merchants the ability to sell non-fungible tokens, or NFTs (digital content that cannot be accessed without permission of the creator). An example of an application was the artist who wanted to restrict access to their digital art so it could be sold and owned exclusively by the buyer. For example, lifestyle guru Martha Stewart converted some of her favourite photographs to NFTs and put them up for sale on one of her websites; once someone purchased one of her photos, it could be enjoyed or re-sold only by them. In June of 2022, Shopify introduced a “tokengated” feature that merchants could use to reward loyal customers by allowing them to connect their crypto wallets to the merchant’s store and deploy NFTs to unlock benefits, such as early access to product drops and limited-edition merchandise.
Another new industry emerged when recreational use of cannabis was legalized in Canada on October 17, 2018. Shopify had already been the preferred platform for licensed producers of medical cannabis for many years, so it was not too much of a transition to enter the recreational segment. Shopify became the place to buy recreational cannabis online in Canada, winning supply contracts with the retail outlets of the larger provincial governments and becoming the point-of-sale channel for some of the largest licensed producers, including Canopy Growth, Aurora Cannabis and Hexo.
Cannabis sales on the opening day had a clean launch on the Shopify platform. The Ontario Cannabis Store alone attracted 1.3 million unique visits in the first 24 hours. In Shopify’s earnings call for the fourth quarter of 2018, Finkelstein pointed out: “The provinces that didn’t use Shopify, did have some problems and the ones that did use Shopify had no problems whatsoever, so we’re quite proud of that.” Shopify didn’t always toot its horn so overtly but its push into recreational cannabis was not just about gaining a foothold in the Canadian market but also about letting other countries know that it could handle recreational cannabis sales if and when they legalized it.
While funds may have been scarce in the early days for Shopify to pursue a conventional marketing campaign, there was now several billion dollars sitting on the balance sheet. After Miller left the CMO position in 2018, Shopify found a new CMO, Jeff Weiser, to lead a more conventional approach to marketing and branding.
The first stage was initiated under the “Let’s Make You a Business” banner, and consisted of TV, video, billboard, radio and social advertising in a dozen key markets within North America. By doing so, Shopify was hoping to make people more aware of the entrepreneur option, and to become the name that came to mind when thoughts turned to starting a business. “Our brand is all about using commerce to help people pursue independence,” Weiser told Strategy Online. “There’s a lot of people caught in a corporate wheel, but when they start a business with Shopify and act on their dreams it’s a freeing experience for them.”1
The TV spot featured real Shopify merchants in settings furnished entirely with items from Shopify merchants — all tagged with the names of their shops to create an impressive visual display of the immense variety of businesses on Shopify. The digital-video component featured an impassioned plea from Finkelstein to join the entrepreneurial tribe at Shopify.2
The billboard segment let people know that Shopify was available to help entrepreneurs build their businesses. With a hat tip to Finkelstein’s T-shirt business from his younger days, one proclaimed: “No partner will take your funny T-shirt more seriously.” Not to leave Lütke’s sock side hustle out, another proclaimed: “That sock business you’re thinking about could be a sock empire. Let’s make you an empire.” Other slogans included: “Let’s make what you do for fun, what you do for a living” and “Let’s make your mom’s ‘famous’ recipe actually famous.”
Another initiative was to launch Shopify Studios and produce TV, film and digital content about entrepreneurs.3 In 2019, the studio released four dozen short videos on YouTube under the “My Shopify Business Story” heading, dealing with “the highs and lows of the entrepreneurship journey as told by Shopify business owners around the world.”4
A company report concluded that Shopify’s first branding campaign had produced “a marked increase in the number of small- and mid-sized businesses saying they will definitely try Shopify.” Yet Weiser was let go in February of 2020. It seemed there were some internal issues: BetaKit reported “that operations may not have been running smoothly within the marketing division, with issues around culture. . . . The division has reportedly faced some recent turnover with its senior [staff].”5
With the CMO’s exit, the marketing function was restructured again. Part of it was merged back into the product division to resume product tweaks that would expand the size of market by removing more friction. The other part, made up of branding, communications, creative work and Shopify Studios, went to Finkelstein’s division, where it was assigned to Amy Hufft, who had joined the marketing team in 2018 after spending 15 years marketing brands in the fashion industries and some time prior getting an MBA from Columbia University.
The campaigns of the year before were continued. For example, Shopify Studios produced a network TV series called I Quit, about people leaving their day jobs to follow their entrepreneurial ambitions. It premiered on the Discovery Channel in August of 2020. Another production was a documentary that came out March 12, 2021, on Disney Plus under the title Own the Room. It followed five students competing in the Global Student Entrepreneur Awards in Macau, China.
Hufft and others on the marketing team had been challenged to take risks and hack traditional branding methods to come up with innovative approaches, like an entrepreneur would. She remembers Lütke saying: “You don’t get in trouble for taking risks at Shopify. You get in trouble for not taking risks.”6 One risky move she took was to hire the three funniest people in Shopify to go on company social channels and try as hard as they could to get fired (only constraint was to check the legal and financial implications with her first). One of the posts featured a person giving a big wink of the eye under the caption “Amazon: I won’t make a knock-off of your product.”
“It was ridiculous stuff and the executives would ask the next morning, ‘What’s happening with our social media team?’ But it was making people laugh and reminding them not to take things so seriously,” remarked Hufft in her presentation for The Gathering forum.7 A lot of the readers got “what Shopify was trying to do and some became brand ambassadors, reposting the off-the-wall stuff to their followers. Once we let go of the concept of strategy and got truly bold, we saw a massive engagement,” Hufft added. Indeed, the analytics showed that traffic to Shopify’s X account more than tripled after the change in approach in early 2021. Hufft was to be involved in several other unconventional branding exercises after that, but then left Shopify in June of 2022 to take a job with Zoom as Head of Brand and Communications.
No doubt, Lütke’s successful track record during the 2010s had left him more seasoned and confident not only in his skill set but also his company’s capacity to execute. Why not go after bigger game? There was indeed bigger game: the giant pain point for merchants of shipping orders. Building a new fulfillment network could take care of that.
The launch, which took place at the Shopify Unite conference in Toronto on June 24, 2019, was recorded and posted on YouTube.1 The video begins with a cheerful woman walking onto the stage, her shoulder-length black hair glistening under the ceiling lights. Reaching the center of the stage, she turned her gaze to the dimly lit auditorium filled with programmers and website designers. Smiling, she spoke a few introductory words. Then she introduced the featured speaker: “Many of you know him and he’s been absolutely pivotal in the development of Shopify and the retail operating system. Please join me in giving a very warm welcome to our Chief Product Officer, Craig Miller!”
Loud applause broke out, strobe lights spun and upbeat music played as the tall, lean frame of Miller climbed the stairs onto the stage. He began talking about the problems Shopify merchants faced when shipping products to their customers, like delays and high costs. “Merchants then go looking for third-party logistics providers and what they discover terrifies them.” As he spoke, Miller paced leisurely back and forth across the broad stage, bare of any object except for stage lights and a ceiling-to-floor screen on the wall behind him.
About 20 minutes in, he turned and faced the audience squarely, to proclaim: “Today I’m excited to announce the Shopify Fulfillment Network!” Loud cheering and clapping erupted; the huge dark screen behind Miller turned a bright emerald green as if clouds had parted. Emblazoned on it were the words: Shopify Fulfillment Network.
As the CPO at Shopify, the job of introducing the Shopify Fulfillment Network (SFN) fell to Miller. On the screen, it was shown as a network of mostly third-party warehouses and shippers stretching across the United States to ensure faster and more reliable deliveries. The projected cost would be $1 billion over five years. “Once enabled, a merchant on SFN doesn’t need to think about picking, packing, shipping or fulfillment ever again,” said Miller with a grin. Again, the loud applause.
Shopify was not pitching the SFN as a challenge to Amazon’s fulfillment network. It was simply following its mission to make commerce better by taking the pain points out of logistics for its merchants. The latter would be able to click on an icon and have Shopify do fulfillment with a pledge to their customers — called Shop Promise — to deliver within two days to 90% of the U.S. population. While it was no match for the one-day promise offered by Amazon Prime, Shopify’s delivery commitment would still boost sales for merchants, its studies showed.
What tied the SFN together was a Shopify software system that connected warehouses and other nodes in the fulfillment network for the purpose of tracking and directing shipments. The incentive for partner warehouses and transportation services to sign up and adhere to service standards was the huge amount of steady business they would enjoy as a result of having hundreds of thousands of Shopify merchants sent their way.
In September, four months after Miller’s presentation, Shopify acquired 6 River Systems for $450 million. Its trolley-like Chuck robots roamed warehouse floors to help workers pick and retrieve shipments. The company was co-founded in 2015 by two former executives of Kiva Systems, a warehouse pioneer that Amazon acquired in 2012 to get its fulfillment network going.
Shopify was also approaching logistics and transportation firms to add them into the SFN. With the ability to send massive shipments their way, Shopify was able to negotiate deep discounts to pass along to its merchants. Programmers at Shopify and 6 River Systems also got to work on the software that would knit the SFN together. An R&D center was opened in Ottawa to test new robotics and fulfillment technologies.
A lot more work was to come. It was going to be a big job. But Shopify itself was now a big company. Indeed, it had recently joined the big leagues of North American e-commerce.