- 2020 was a big year for Shopify and its online merchants.
- Shopify President Harley Finkelstein said that the company does not consider Amazon a competitor.
- That is because Amazon is a marketplace, while Shopify favors a direct-to-consumer model.
- See more stories on Insider’s business page.
2020 was a standout year for Shopify, the e-commerce company known for its tools that empower other businesses to build online stores.
It grew revenue by 86% year over year to reach $2.9 billion for 2020. At the same time, gross merchandise volume — or the total sales conducted on the platform — rose 96% in 2020 to reach $119.6 billion. Now the most valuable company in Canada, Shopify benefited from a demand for digital tools as many small businesses looked to sell their wares online for the first time due to the pandemic.
“We view our role as the global entrepreneurship company. We don’t only want to help existing entrepreneurs. We want to create new entrepreneurs,” Shopify President Harley Finkelstein said in a recent interview with Insider. He added that every 28 seconds, a new entrepreneur makes their first sale on Shopify.
Each year, Shopify commissions Deloitte to create a picture of the e-commerce platform’s global impact. In 2020, according to the report, Shopify’s merchants accounted for more than $307 billion in global economic activity, which takes into account individual merchants’ GMV, employment, GDP, and other impacts, both direct and indirect.
Finkelstein said that if Shopify were an online retailer, it would be the second-largest online retailer in the US, behind Amazon.
But, Shopify doesn’t consider itself an online retailer — or a direct competitor of Amazon.
While Amazon is great at getting essentials to consumers in a quick time frame, Finkelstein said, Shopify’s strength lies in helping businesses build strong brand experiences on their own websites. For example, Allbirds is one of Shopify’s earliest success stories, and its products can only be bought on Allbirds.com.
He thinks that it’s possible for both types of e-commerce models to coexist, as they serve different purposes.
“I think there will be a place for many of these big marketplaces, to buy commoditized products that you want to get within 24 hours,” he said.
“Those are very different types of buying behavior and also very different types of objectives: am I buying something that I want and I’m going to cherish and enjoy, or am I buying something that I need because I’m out of detergent?”
Finkelstein said that when it comes to the future of e-commerce, Shopify considers direct-to-consumer to be a far superior model to the curation you might see in a marketplace like Amazon or a more traditional department store. He said that is because merchants selling the products they create have more detailed information about how they work, and what else a consumer might like based on their past purchases.
Selling DTC typically allows brands to charge less for products, too, since it eliminates the middleman.
“That’s not to say that there is not going to be room for curators or department stores. But I do think that if curators and department stores want to exist in the future and stay relevant, they’re going to have to add a disproportionate amount of value beyond just distribution,” he said. “Having a physical store is not enough to justify it.”