SMS & Vacuums
In commerce, you either die the hero or live long enough to be a villain in the battle for consumer data.
No week, it seems, has ever illustrated this as much as this week, where both Shopify and Amazon made significant announcements related to collecting data: On Friday, Amazon announced plans to acquire iRobot, the maker of Roomba. On Wednesday, Attentive, Klaviyo and Postscript all announced text-to-buy capabilities—powered by Shop Pay.
Though the latter was announced by channel providers, it was very much Shopify’s news. And it’s more akin to buying a robot vacuum that collects consumer data by mapping houses than increasing conversion rates from SMS.
For Shopify, this is a departure.
Historically, Shopify has embraced the Bill Gates definition of platforms:
“A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it's a platform.”
Shopify’s approach, though, was predicated on the assumption that consumer data would continue to flow freely: Brands could spin up online stores, add apps from Shopify’s ecosystem, use Facebook to find customers, and Shopify could process the transactions.
Though Shopify would take less value than the rest of the ecosystem (hence the Bill Gates line above), its success would be tied to the continuously growing GMV of commerce generally and DTC specifically.
That assumption, it turns out, was wrong. (We don’t need to rehash the details of why.)
Given the new, semi-walled garden approach to data, aggregators—like Amazon—have a leg up on Shopify and its brands. And they continue to accelerate that advantage (see Friday’s announcement).
But Shopify does have the opportunity to pivot its platform approach to an aggregator approach (or at least a hybrid approach where it uses both) to help its brands better compete. And this week’s news is that.
While text-to-buy is a value for brands and channel providers like Attentive, Klaviyo and Postscript, it’s more valuable for Shopify. Shopify, for one of the first times, is poised to collect more value from text-to-buy than anyone else.
Since text-to-buy is powered by Shop Pay, all consumers who “reply Y to buy” with a brand on Shopify will need to have a Shop Pay account. And since consumers with Shop Pay accounts are logged in across all Shopify sites, Shop Pay is Shopify’s key to collecting, analyzing and making use of consumer data.
The obvious by-product of this is filling the gap that now exists in Facebook targeting, but the value here, as it relates to use cases, is significantly deeper and wider. Suffice to say, though, the opportunity in front of Shopify is one to reignite GMV growth so it can continue to grow without needing to extract more value from the platform.
The only challenge is accelerating adoption in light of the significant changes to exchanging consumer data.
Text-to-buy helps do this. It requires non-Shop Pay customers to create an account at the point of transaction, giving Shopify the ability to quickly accelerate Shop Pay adoption by forcing it into the consumer experience.
Brands—perhaps obviously, perhaps not—will benefit more from Shopify’s collection of data and subsequent product offerings that rely on the collection of it—than they will from text-to-buy. Not to dismiss the potential impact of a more frictionless transaction, but that will end up being a nice by-product.
And, so, Shopify’s news is not that unlike Amazon’s (even if the reception is different): Consumer data isn’t a competitive advantage anymore; it’s a pre-requisite.
It’s just how it gets collected may look different.