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How Shopify is leading the online resistance to Amazon

The e-commerce logistics startup behind Kylie Cosmetics, Allbirds, Rothy’s, and others is building a retail network to compete with Amazon.

How Shopify is leading the online resistance to Amazon
[Illustration: Aaron the Illustrator]
THE WORLD’S 50 MOST INNOVATIVE COMPANIES
07 Shopify

When Kylie Jenner sold a controlling stake in her four-year-old makeup startup to French beauty conglomerate Coty in November for $600 million at a $1.2 billion valuation, the 22-year-old CEO emerged a billionaire. The sale of Kylie Cosmetics was an extraordinary achievement for the reality star turned entrepreneur, one that’s even more notable for the fact that her company has just 12 full- and part-time employees. To build a hyper-efficient online brand, it helps to have the Kardashian-Jenner influencer juggernaut in your corner, of course. But perhaps just as important is Shopify, the Canadian e-commerce logistics startup that powers everything from Jenner’s website to the payment systems used in all of her pop-up shops.

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Kylie Cosmetics’ rise is exceptional, but far from unique: Shopify works with some of the most successful direct-to-consumer startups, including Allbirds, Bombas, Brooklinen, Outdoor Voices, and Rothy’s (No. 33). It also powers stores from legacy companies, including Budweiser, The New York Times, and Nestlé. Shopify signed its millionth merchant in 2019—it has sellers in 175 countries—and generated nearly $1.6 billion in annual revenue, up from $1.1 billion in 2018. (The company makes money from monthly subscriptions, as well as additional fees for premium features.) Deloitte estimates that between 2016 and 2018, companies on Shopify enabled $183 billion in transactions and created full-time jobs for 1.4 million people. In the four days from Black Friday through Cyber Monday last year alone, Shopify merchants sold more than $2.9 billion worth of goods to 25.5 million people, up from $1.8 billion the year before.

Tobias Lütke, cofounder and CEO, who began building Shopify in 2004 to make it easy for entrepreneurs to design e-commerce sites without hiring professional developers, still has a long way to go to catch up to Amazon, which controls half of all e-commerce sales in the United States and was responsible for an estimated $300 billion in transactions last year. (Shopify did approximately $60 billion in gross merchandise volume in 2019.) But Lütke’s company has emerged as a powerful alternative for merchants across the globe who view Amazon with growing suspicion. While the e-commerce giant pushes brands to lower prices, put up with counterfeits (and Amazon-branded knockoffs), and spend heavily on Amazon’s ad and warehousing services to stay relevant in the site’s search results, Shopify remains focused on empowering merchants. “We are arming the rebels,” says Harley Finkelstein, Shopify’s chief operating officer.

As brands have grown on Shopify, the company has launched tools to help them scale. It has added an array of payment and logistics solutions (including premium subscriptions for larger merchants) that work across digital and brick-and-mortar stores. Shopify Capital, which it launched in 2016 to offer small- and medium-size businesses loans with the option to repay from future sales, has already doled out more than $760 million. In January, the company extended the service to entrepreneurs with no credit or payment history or collateral by offering them $200 starter loans, allowing the most nascent of enterprises to join its e-commerce ecosystem. While Shopify continues to introduce new features to its platform—such as a chat function, launched last year, that allows merchants to have real-time conversations with customers— the company also has a marketplace with more than 3,000 third-party apps that assist sellers with everything from accounting to hosting raffles. Shopify even has an analytics arm to help merchants identify which social media sites are fueling sales and assess where to spend their ad dollars. “Shopify is no longer just an e-commerce platform,” says Finkelstein. He prefers to refer to the company as “the world’s first retail operating system.”

Shopify is now rolling out its most ambitious project yet: a fulfillment network that’s poised to offer sellers two-day shipping. The company has knit together seven distribution centers in such states as California, Georgia, and Ohio, and plans to invest $1 billion to increase their capabilities over the next five years. It spent $450 million last September to acquire the robotic logistics startup 6 River Systems, created by some of the same team who developed the automated warehouse system Amazon bought in 2012. Shopify has already started to offer two-day shipping to select merchants, with more to come.

In creating this network, the company is harnessing its greatest untapped resource. “When you aggregate our stores, you end up with one of the largest retailers in the world,” Finkelstein says. “Instead of keeping these economies for ourselves, we are focused on distributing them to small businesses.”

[Illustration: Aaron the Illustrator]

Retail stories

How Shopify helps brands move their goods

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Allbirds
The shoe startup has used Shopify’s website translation and currency conversion services to handle transactions as it has expanded internationally.

Brooklinen
The bedding startup’s founders credit Shopify with helping create a sleek online store that highlights the brand’s lifestyle credentials.

Budweiser
AB InBev tapped Shopify to power its Budweiser gift shop, allowing it to sell socks, Christmas ornaments, belt buckles, and barstools to beer lovers.

LeSportsac
After the accessories brand started using Shopify’s AI tools to target customers with personalized recommendations, it saw a 7% rise in conversions.

Read more about Fast Company’s Most Innovative Companies:

A version of this article appeared in the March/April 2020 issue of Fast Company magazine.

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About the author

Elizabeth Segran, Ph.D., is a staff writer at Fast Company. She lives in Cambridge, Massachusetts

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