Shop Day
For a few years, a growing chorus of Shopify fans have implored the company to compete—head-on—with Amazon: aggregate the brands selling on Shopify and build a marketplace.
The arguments for it have fallen mostly into two buckets: people don’t like Amazon and there are too many low-quality sellers.
Shopify’s Shop app is, sort of, an answer to this. Maybe it’s a MVP, maybe it’s something different. It’s hard to tell.
But, yesterday, Shopify held what it’s calling “Shop Day”—a birthday party of sorts that will look to compete with Prime Day. As part of the inaugural “party,” Shopify also announced Shop Cash—a rewards program for using Shop Pay on purchases (1% cash back for future Shop Pay purchases). Those rewards are only redeemable through the Shop app.
So, here we go.
The brands have been aggregated into a single app, and the customers are being forced into the funnel.
From a Modern Retail article covering Shop Day:
“This sort of feels like a bit of a coming-of-age moment for the Shop app because we’re combining the conversion power of Shop Pay with this incredible discovery platform that is Shop — and the goal is really to help brands find new customers and retain those existing ones,” said Harley Finkelstein, president of Shopify, in an interview with Modern Retail.
Finkelstein added that merchants selling with Shop Cash discounts or offers are using it as a means to acquire a customer. “We think it’s a better model because you only give the discount when a transaction takes place. A lot of merchants are spending money today, they’re putting up ads and billboards everywhere hoping that those convert, we think this is a better model,” he said.
This move comes about 10 months after Shopify—through technology partners—announced that text to buy would be available to brands… but only if they used Shop Pay.
The moves, it seems, shows the bifurcation at play in Shopify’s business: the software business will grow as Shopify moves up market to land more mid-market and enterprise brands, and the fintech business will grow by trying to lift the historical core customer base by aggregating an audience, subsidizing their purchases, and driving more frictionless payments.
This is worth paying attention to.
Shopify, in a sense, is saying it can no longer grow its fintech business (which is the majority of its revenue) at the rate it wants to unless it gets involved in helping brands grow.
On its face, this is a positive for brands.
If Shopify pulls this off by remaining brand-first, it’ll lift everyone. That said, the temptation to put the fintech business first will grow. And Shopify, by choosing to get more directly involved with the growth of brands using its payments solutions, will find itself in a natural tension between what’s good for its business and what’s good for the brands.