In 2006, Tobias Lütke and Scott Lake had a problem to solve:
Finding a way to sell their snowboards.
After days of searching for solid ecommerce solutions available at the time, they ended up disappointed.
Their entrepreneurial mindset showed up shortly after, and they decided to build a platform that could help them with the problem.
Then, they developed their own ecommerce platform using Ruby on Rails.
This is how Shopify was born.
Since then, the platform has racked up some seismic growth, becoming the #1 choice for ecommerce and turning into the massive ecosystem that it is today.
Here, we’ll take a look at Shopify’s origins, along with:
along with many other valuable insights.
Let’s get started and discover more about the Shopify Partners Ecosystem.
The founders of the platform believed that you had to keep developing new features and fulfill more use cases.
Each feature built had to be developed, supported, and documented.
Following the introduction of the platform, they concluded that it wasn’t wise to do everything on their own since it was impossible.
So, they made another important decision:
Building an ecosystem to support the platform and increase its functionality and user-friendliness.
Shopify became one of the first companies to enable and support a partners ecosystem and grew with their partners.
Today, that ecosystem, Shopify Partners, includes app developers, theme builders, designers, experts, and even entire agencies.
This ecosystem has generated more than $12.5 billion in revenue, which is by far more than the revenue of Shopify’s own platform, along with 3.6 million+ jobs around the world.
The Shopify approach was to build a product that was strong enough to generate momentum and then create an app store alongside it.
In taking such an approach, a whole series of things start to happen:
Shopify understood that if you’re developing a product or service, then you have to keep developing new features to fulfill more use cases. Each feature you build then has to be developed, supported, and documented.
The entire future of the product is riding on your capability to develop it and that becomes harder as the need to develop new functionalities takes you further and further away from your competencies. So, there’s a point beyond the natural drive to develop new functionalities that can only make your product worse while all the time driving development costs and support costs.
The Shopify approach was to build a strong enough product to generate momentum and then create an app store alongside it. In taking such an approach, a whole series of things start to happen:
This is the creation of an ecosystem in action and what it can lead to is very exciting:
The more the app store grows, the more potential it has to grow as it is a solid signal that this is a place where app developers can be successful.
It also supports Shopify’s growth because it transforms Shopify into an environment that becomes ever more capable of supporting customer needs without Shopify having to develop functionalities themselves.
Third-party developers, who only need to develop and support their app, are also likely to develop their app faster than Shopify who’d have to consider that functionality in the context of their ecosystem.
This means that ecommerce stores are more likely to use Shopify because the ecosystem that’s been created is more likely to solve their problems.
This is why in 2021 Shopify ended its 20% ‘cut’ of app sales below $1 million.
This process of development has also let Shopify support new verticals.
For example, subscription functionality isn’t available in the core Shopify product. This allowed developers to add that through apps.
This generates revenue for the developers and value for Shopify because it extends the functionality of their product without requiring them to take on development burdens.
Instead, what Shopify needs to do in order to make this work effectively for them is increase the viability of the store.
Shopify has achieved this with a two-fold approach:
The first one means that the app store becomes more valuable because it ensures that people are more likely to find what they search for.
This is better for app developers because it means their product is more likely to generate revenue.
It’s better for merchants who are more likely to discover an app capable of providing the functionality that they need.
It’s better for Shopify because it makes their ecosystem more valuable.
The second one means that it becomes easier for app developers to function in the Shopify ecosystem.
They gain access to resources such as webinars, guides and social media communities. This, in turn, is likely to result in a lower support burden upon Shopify because aspects of it are either headed off by greater up-front support or handed off to the community.
Small wonder then that some app developers have become extremely successful in their own right.
At the end of 2020, the email marketing company Klaviyo was able to raise $200 million in funding and a year later they were valued at ~$4 billion.
App developers, theme builders, designers, experts, and agencies who work with Shopify merchants in different ways contribute to a thriving community.
Here are some stats and information that reflect the importance & impact of Shopify Partners:
As you can see, the Shopify partners ecosystem is a vital part of the Shopify platform and the global commerce landscape.
By providing innovative and diverse solutions to merchants, the partners are changing entrepreneurship and creating economic opportunities for themselves and others.
However, ecosystems tend to be more complex because there are more moving parts.
Shopify has said that the average customer uses six apps. The need to develop a store complete with a varying number of apps means that some people who are more focused on creating things to sell might be overwhelmed.
Shopify recognized this and started the Shopify Partners Program. This lets people sell their skills within the Shopify ecosystem.
One obvious example is that of developers who can support a business in creating their store from a technical perspective. Another is for designers to create a color scheme, logo, or other graphics. Others create themes, just as people have been doing with WordPress for many years.
As mentioned earlier, Shopify Partners is generating remarkable levels of revenue, which contributes to the value of the ecosystem for everyone who uses it.
Nothing is perfect enough to have no flaws or weaknesses.
It’s obviously great for Shopify for their ecosystem to become more valuable. However, if a market becomes overly dependent on a single ecosystem, then once the landscape changes, problems can arise.
If you’ve watched the movie The Big Short, which is about the 2008 financial collapse, then you’ll probably remember a scene in a restaurant where one of the characters discovers that the market for insuring mortgages is about 20 times bigger than the mortgage market itself.
This meant that for every dollar tied up in mortgage-backed securities, there were another twenty dollars tied up in related financial speculation on the mortgage-backed securities.
This led to the mortgage market carrying far too much weight. So, when the mortgage market collapsed, everything built on top of it tumbled down as well.
Therefore, it would be wise to say that any system or ecosystem can continue to function perfectly right up until underlying conditions change.
Yes, it can be extremely valuable to build in the Shopify ecosystem, but it’s important to have a backup plan because of some of the changes that we’ve seen take place recently:
Examples such as these show how quickly tectonic changes are happening today. Perhaps the most significant could be the instigation of state digital currencies because it will transform what we understand money to be.
Pair that with the desire to economically isolate people or entire nations and we can quickly see how ecosystems could be undermined or destroyed.
Put simply, if your business is dependent on Shopify, then have a fallback position so that, if Shopify experiences difficulties, you don’t lose the capability to operate.
Put even more simply, don’t put all your eggs in one basket.
Perhaps the greatest lesson provided by Shopify is the power of ecosystems done right.
Yes, you could look at the Shopify ecosystem and see an opportunity there to be a piece in that puzzle, especially if you’re just starting out.
But ask yourself: Do you want to own a piece of the puzzle in the ecosystem, or the ecosystem itself?
Real success comes from owning the ecosystem, from owning the pitch on which all the other teams have to play.
However, this requires you to develop an initial product that outcompetes everything else on the market. That’s no small feat, especially if you go up against established players. You don’t have to get there in one jump, of course. Learn from everything else on the market.
When Eric Bischoff took charge of WCW, he knew he couldn’t go head-to-head with WWE because they were too well-established, and too powerful in certain spaces. Instead, he offered what they wouldn’t, he took WCW where WWE wouldn’t go.
Learn where your competition is strong and where it’s weak. Understand the value of what they’re leaving on the table. Then, consider how you can develop a minimum viable product that will offer unique capabilities.
If you’re just starting out, then it can be valuable to operate in another company’s ecosystem to build knowledge or to try to get revenue ticking over on a small, easy-to-support product. Once you’re up and running, then perhaps you can see what opportunities there are to build further.