- 26 September 2024
- by Andrej Fedek
- Blog, Business
- 0 Comments
In the early 2000s, Shopify was just an idea waiting to be brought to life. Today, it’s a well-known platform for millions of online stores. How did Shopify start, and what were the secrets to its skyrocketing success? We try to answer these questions here.
History of Shopify
Shopify’s history started twenty years ago with Tobias Lütke’s idea about his dream store.
Who created Shopify
In 2004, Tobias Lütke – a German programmer – decided to start his snowboard store called Snowdevil. He tried to mix different systems to make the store to his taste but found them inconvenient for ecommerce needs and too expensive. So, he applied his programming skills to create a new system based on Ruby on Rails that would be more efficient. After the Snowdevil release, some merchants were impressed by how this software worked, while developers from the Ruby on Rails community asked for the license of Tobias’s code. This placed an idea in Tobias’ head about refocusing his efforts on software development instead of selling snowboards.
When was Shopify created? Journey from a set of tools to a powerful platform
So, in 2006, Tobias Lütke, Scott Lake, and Daniel Weinand launched Shopify as a toolset for merchants with access to customizable templates, inventory organization, order tracking, and payment processing. By the way, the Shopify name combines two words – “shopping” and “simplify,” which refers to the primary purpose of its creators – making shopping easier.
In 2009, Shopify became a unified platform after establishing its ecosystem – API and app store.
Further stages of platform development after the Shopify ecosystem release:
- Shopify Mobile [2010] – a free app for online store management via mobile.
- Shopify Experts [2011] – an online directory for sharing knowledge between experienced Shopify users and beginners.
- Shopify POS [2013] – in-store and online inventory management and card processing hardware.
- Shopify Payments [2013] – a feature for syncing online and offline payments.
- Shopify Plus [2014] – a pricing plan and toolset for enterprises.
- Omnichannel partnerships [2015] – integrations with Google, Facebook, Instagram, and more.
- Shopify Capital [2016] – program for getting funds for online stores.
- Shopify International – a cross-border management tool for setting up stores in international markets.
- Shopify Markets – a unified panel for selling internationally, both for retail and B2B.
- Shopify Audiences – a tool for generating custom audiences for ad campaigns.
This list is constantly expanding – every Shopify Edition presents new toolsets and features for Shopify developers and merchants.
Shopify growth
The Shopify company’s rapid growth and wealth are due to in-time decisions and brilliant marketing activities focused on expanding the number of sides involved. Which sides do we mean?
- Early customers: Tobias’s team created a waitlist of people interested in leveraging Shopify technology at its earliest stages.
- Web development agencies: The company decided not to attract individual entrepreneurs; instead, they created a referral program with a 20% commission of the lifetime revenue for web development agencies.
- Fast-growing companies: An experiment called “Build a Business” offered $100,000 to the team that would build the biggest business within six months. They launched this campaign in partnership with Tim Ferris, an influencer in the entrepreneur field. This competition brought Shopify 1,000 new customers and over $3 million in revenue from these new stores.
- Shopify Partners: Back in 2009, Shopify founders understood that every online business wanted to offer a unique user experience. However, too many complex features would hinder software usage. That’s why Shopify decided to let developers sell their apps in the Shopify App Store (with Shopify’s 20% commission). Until today, Shopify continues to expand its community of Partners – development companies – who work to ensure the uniqueness of each store by using Shopify API and vast customization tools. Any Shopify web development company can create and publish apps in the Shopify App Store and use Shopify infrastructure to build and customize merchants’ stores.
- Entrepreneurs: To generate more organic targeted traffic, Shopify released a set of free tools for entrepreneurs, such as a logo maker, purchase order template, and more, investing in content creation and SEO. As a result, they got more than 70K industry-related keywords and phrases in Google, boosting their website traffic and converting it to paying customers. In addition, they started a blog, issued e-books, guides, free business courses, and a podcast. On top of that, Shopify has a community that hosts forums and events.
These activities, along with Shopify software and ecosystem development, led to tremendous success, placing Shopify among the top five ecommerce platforms.
How much money does Shopify make today?
In 2023, Shopify generated $7.06 billion, an increase of roughly 26% compared to the previous year. Shopify’s net worth is above $90 billion.
How does the company generate its income?
Shopify has two main revenue streams:
- Subscription solutions revenue includes platform subscription and POS fees, as well as revenue from app, theme, and domain sales. In 2023, this stream brought the company $1.84 billion, which is roughly 26% of its total revenue.
- Merchant solutions revenue primarily consists of payment processing fees. It also includes advertising revenue, referral fees, and sales of POS hardware. In 2023, Shopify generated $5.22 billion in this segment, which is roughly 74% of Shopify’s total revenue.
How much does a Shopify average store make per month?
There are 4.61 million Shopify-based active websites—more than half of domains registered in the US. Roughly 50 thousands of live websites use Shopify Plus (pricing for the subscription starts from $2,000 per month).
Given that Shopify facilitated $235.91 billion worth of transactions (Gross Merchandise Volume) in 2023, we can estimate that an average Shopify store can generate $51,173 per year (gross), which is $4,264 per month.
What kind of business can you create with Shopify?
To inspire you to take your first steps toward success, we compiled a list of some business ideas you can use to create your Shopify-based business and start generating revenue.
- Dropshipping: This business type doesn’t require inventory management, packaging, and shipping since that’s all on a wholesaler. Your part in this is finding a product you want to sell and customers willing to purchase it.
- Online courses: It’s another low-investment online business. You can start with Shopify by creating and selling courses, apps, and materials for effective learning.
- Affiliate marketing: You can sell third-party companies’ products without risk by joining various affiliate programs, like the Amazon Associates Program, and getting a commission from purchases.
- Handmade goods: If you’re into crafting handmade soap, clay pots, or candles, you can try selling these products by creating your own Shopify store and promoting them with the platform’s marketing tools.
- Niche products: An excellent way to start an ecommerce business is to choose a narrow niche you know a lot about, like bird accessories, and expand your product line as your company grows.
Suppose you want to start your online store with Shopify or are looking for ways to scale your existing business. In that case, you will benefit from professional development assistance from one of Shopify Partners like DigitalSuits. They have access to the Shopify development environment and have gained expertise in developing stores and apps for different needs.
To sum up
Shopify has become a magnet for the ecommerce community, gathering newbie entrepreneurs, fast-growing companies and enterprises, individual web developers, and development agencies from all over the world. It’s a platform aligned with customers’ problems and needs and, at the same time, a company that isn’t afraid of experiments and hard work. This combination ensured Shopify’s rapid growth and success, which continues today, offering small, medium-sized, and large businesses vast opportunities for development and financial success and making dreams a reality.
Andrej Fedek is the creator and the one-person owner of two blogs: InterCool Studio and CareersMomentum. As an experienced marketer, he is driven by turning leads into customers with White Hat SEO techniques. Besides being a boss, he is a real team player with a great sense of equality.