The e-commerce SaaS market is brimming with competition, but Canadian provider Shopify has maintained a steady lead against its rivals, amassing more than 800,000 merchant customers and crossing the $1 billion revenue mark in fiscal 2018. The company now has its sights set on a broad international expansion -- and it's turning to developers as a way to reach customers in new markets.
Shopify's core service lets entrepreneurs design, launch and manage online stores across multiple sales channels. Parallel to this core business line is Shopify's app marketplace, an ecosystem of services built by developers and partners, who themselves generated over $800 million in revenue last year.
Shopify says its more than 20,000 app developers and agency partners offer tools for things like inventory management, order fulfillment, logistics, and accounting and tax compliance. Not only do these services augment the core features of the Shopify commerce platform, they also help Shopify cater to new and emerging markets.
"The farther out of our core market we go, internationally, we find our fastest growing markets have more people who rely on apps," said Brandon Chu, Shopify's VP of platform. "The reason for this is that, as we go to new markets, we may not know everything about local commerce or regulatory issues. Our partner ecosystem and platform lets us offer purpose built apps for those markets."
Shopify's developer platform is also a key business strategy. Just like Facebook, Google and Apple, Shopify pitches itself to developers as a means to build a profitable business. In return, Shopify must ensure that it has enough customers to support developers and their own entrepreneurial ambitions.
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"The growth of the platform starts with how many merchants we have, and Shopify is by far growing the fastest," said Chu. "That merchant base is always going to be the ultimate opportunity for the developer, so we know we have to keep growing to keep our developers happy."
Shopify takes 20 percent of all revenue generated through platform app sales, but the company also pays a referral fee to partners and developers when they help bring in new merchant customers. In terms of just app sales, Chu said the developer payouts have doubled every year for the last four years. In 2018, developers were paid over $100 million.
Beyond developer relationships, Shopify's platform approach also plays into the overall stickiness of its brand when it comes to merchants. Shopify's app and services ecosystem lets merchants add functionality when they need it and seamlessly augment the Shopify experience for their business needs. The more services and apps a merchant links into their online store, the less likely they'll be to abandon Shopify for another provider and disrupt their entire business.
"It's incredibly strategic to Shopify and comes down to our product philosophy," said Chu. "We build what merchants need most of the time. Platform is there to handle everything that we can't. It's also strategic in that it's at the forefront of how we grow in new markets, especially as we push to grow internationally."
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