David Rosenthal: prediction

Transcript context

…David, do you have a sense of what was powering growth for them at this point? Is it still this referral engine through dev shops or is it word of mouth? What is leading to just the flocks and flocks of merchants running to Shopify? It was around this year in 2013 when Tobi and Shopify really take the ambitions up to the next level. That’s like, “Okay, we’ve been this easy way for mostly small merchants to set up and run commerce businesses online, and we have some small merchants that have grown into large merchants like Tesla, we have some large merchants that have switched over from Magento or BigCommerce or CommerceOS and come to use us. Maybe there’s more we can do,” because if you become a big merchant, you don’t just want to sell on a website online, you want to sell in a lot of places. So in 2013, they launch Shopify Point of Sale for offline sales. They have devices that you can put in a physical storefront, use that to actually be your point of sale, but even more importantly, they’re now syncing your online inventory with your offline inventory. Back in 2013, that was probably G-Whiz, you think today about all of these D2C brands out there that now all of these, you can’t even call them D2C brands or internet brands anymore because they have physical stores in major metro areas around the world. It’s critical enabler for this. Of course, all of those brands were built on Shopify and starting to grow in the early days in 2013. The other thing that they do, the next year in 2014, is they officially launch Shopify Plus. What’s Shopify Plus? It’s basically an enterprise version of the core Shopify product. It was really interesting that they segmented this out as a completely different business segment in a different office. It’s based in Toronto not in Ottawa. The concept behind this—I think all coming from Tobi—is that the core ethos of Shopify are these small merchants, these entrepreneurs, these startups selling on the platform. But when they try and go out and they sell to Unilever, they sell the Google, they sell to Anheuser-Busch of which are big customers using the platform they want something different. They want account managers, they want hand-holding, they want SLAs, they want uptime, and all of these things. They start this whole other division that’s going to go out that purely attack those. Now, Shopify Plus and these big customers are over a quarter of the total revenue of the company. When I was asking that question about growth and you’re talking about engaging with these really big customers, it is expensive to go in and actually do the sales and marketing to get those accounts. So, to give you a sense for today, where they did about a billion dollars in revenue last year, they did spend $350 million on sales and marketing. This business has never quite been a, “Let’s throw up a website and people will just come to it and just service themselves.” It does actually require spending to go and get that business.…

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