Stuck in the Middle with your Shopify Partnership?
If Shopify indeed has middleware (outside of well, Shopify Flow), it is their App Store. Ultimately it commoditizes connectivity. In a world where it's free to connect to different channels, create a feed, etc., many apps whose core value is "connectivity" (or even anything inventory-related) need to be free or almost free to get the attention of merchants, or very high-end in a way that limits their adoption. That sweet middle is hard to find.
The formula at the lower end of the market works like this:
Shopify sends you a lot of leads. You build up in the category. Churn is high already because, well, it's eCommerce.
Many alternatives emerge. Your competition is one click away. Churn increases.
Your usage crosses 20% of new Shopify installs, and Shopify starts building functionality relating to whatever it is you do. This drops the bottom out of your business model, and you are forced to lay off a third of your company to adjust.
What happens then? Generally, some kind of exit that doesn't make your investors too happy.
At the higher-end of the Shopify (Plus, etc.) market, it’s a little different. People need service.
All of this is - by necessity - a generalization, but you get the idea.
Evan Klein had some thoughts on this. He said this “is why the valuation of Shopify must be challenged. Shopify is trading as if it can build a comparable ecosystem like Apple and Amazon (well, it's trading much higher). However, your insight here challenges that and it's not just on the app store side but also eCommerce itself. Shopify has not proven the thesis for why the valuation has skyrocketed, and it's unclear if they can.”
You could probably say most App Stores are like this, however. Lots of crap, and very competitive. Fart apps used to make a million dollars in the first year they launched! We are still early days in Shopify app store, and so they need to continue to control the quality. All this to say, they have the best-run ecosystem in eCommerce by far, and second place is nowhere close.
Evan continued, saying “If I were Shopify I would buy Zapier and focus on the middleware over the traditional app store. Maintaining quality on apps that are all built and operating on different technology platforms is hard because you can't manage what happens once you leave the boundaries of Shopify. Apple is able to manage quality because it's all running within the context of its operating system but now the cost of 'managing quality' and a 'consistent experience' has landed them in Congress and anti-trust territory.”
I think it’s more likely for a marketing company to buy Zapier. HubSpot bought Piesync for example - simpler and more focused than Zapier. Adobe or Salesforce are options. Even Intuit. This may be the kind of niche Shopify Flow will evolve into.
Jason Greenwood had some really interesting insights, which I’m sharing here in their entirety:
This is the exact same argument for why sellers consider Amazon a ‘frenemy’. You sell on their platform and you’re immediately at risk of them selling the same product against you or developing a home brand alternative at half the price. But for the same reasons people keep developing apps for Shopify and selling on Amazon: they have ready made markets. The size of these markets just happens to be inversely proportional to the value of them in these cases unfortunately. This is because others (including the platforms themselves) see a chance to exploit the same opportunities and the rest is all just standard supply and demand stuff. Shopify could create a better experience for app vendors and their customers by creating a standardized app development platform/framework and hosting environment - for a fee of course. 😉 They could also ‘rank’ apps in the same categories across various metrics to help merchants choose between them. As it is today merchants and/or their partners have to install many apps to test/vet them to assess whether they are fit for purpose or not and whether they play nice with all the other installed apps. Sure the Shopify App Store is good but there’s lots of room for improvement too imo!
What do you think?
