All the needs of SaaS can not be separated from the business, more from the actual scene, and the needs of the business and from the user, so how to understand customer needs, into the user, is an important part of the e-commerce SaaS. This article will focus on Shopify versus SaaS. Check it out.
If there is Amazon, why is There Shopify?
That's a question that a lot of people ask me.
According to eMarketer, Amazon is the undisputed leader of the us e-commerce market, accounting for 38.7% of transactions.
By the second quarter of 2020, Shopify's GMV had overtaken ebay's, with a market share of about 6%. While that's still a long way from Amazon, Shopify is the most likely to become Amazon's main competitor. Because its revenue is growing so fast.
Shopify is growing at almost 110% a year. So, what kind of operation model, can have such a high growth rate?
On the surface, Shopify and Amazon have similar e-commerce business models, but in fact they are following very different paths.
Amazon is a third-party e-commerce platform; Shopify, on the other hand, is a standalone online store service, also known as an e-commerce standalone site, which is essentially an e-commerce SaaS.
What's the difference? Amazon, for example, is like a big supermarket, with the advantage of a concentration of buyers, hundreds of people coming in every day. But they're not specifically looking for your product, they're just passing by your stall.
The advantage of joining such a third-party platform is that its traffic can lead to significant sales opportunities.
The downside is that it doesn't matter how big your brand is or how good your marketing is; Just like other businesses, they struggled to attract customers in front of their stalls.
Shopify is a different story. It can build you a fancy independent store of your own.
So you don't have to be in a crowd of cookie-cutter booths, but you can do it your own way, using platform services.
As for the line and not, all depends on your management ability and method.
So Shopify and Amazon are two different kinds of companies.
Amazon is an e-commerce company through and through. In addition to providing a trading platform for outside merchants, Amazon also runs its own business on the platform.
Therefore, it is inevitable that they will treat themselves favourably, using data from other businesses to assist their own business decisions.
Shopify, on the other hand, is a pure e-commerce SaaS service that only provides tools and services, without its own business on the platform. Therefore, there is less conflict of interest with merchants.
At this point, it's possible to see a difference between Shopify's business model and Amazon's.
However, the purpose of this article is not to compare the merits of the two business models, but to explore how e-commerce SaaS can become as big as Shopify.
As of this writing, Shopify's market cap is $109.8 billion. Unlike most SaaS businesses, Shopify is profitable, with an ARR of over $4 billion and an NRR of around 110%.
In the SMB-dominated SaaS world, achieving this level of revenue is really not easy. So what is Shopify based on?
Why should Shopify compete with Amazon?
Some say Shopify has gotten to where it is today because of its better tools, while others say its low cost of setting up shop has helped it attract more merchants.
In fact, these statements can not stand scrutiny and disproof. It's like moving from a market to a single-family shopping mall. If you can't sell things, it doesn't matter how good the environment is and how low the property fees are.
Shopify has 1.7 million business merchants in 175 countries. They have generated more than $200 billion in sales using Shopify. So why on earth are merchants choosing Shopify?
As a SaaS provider, there is no other way to get ahead than to build on services.
Shopify's service apparently lured them in. But at the same time there are many e-commerce SaaS in the market, such as the current hot overseas e-commerce, their services, why is not so attractive?
In general, the value of SaaS services is mainly reflected in two dimensions: one is the depth of the service; The other is the scope of business covered by the service, which can be understood as the breadth of service.
The depth of the so-called service is the degree of refinement and depth of the service. Use automated tools to help merchants handle all the details. And the breadth of service, refers to the shop may experience all business links.
Shopify excels in both dimensions, so it's easy to see why merchants have flocked to Shopify.
In the early days of e-commerce, the slogan "make the world easy to do business" was very persuasive. But entering the era of full e-commerce, in fact, all business is more difficult to do.
Shopify is taking an unconventional approach (it can't actually compete head-on with Amazon), and its philosophy is to make things easier for customers.
In other words, Shopify's services take care of the rest, including the money.
If you are inexperienced in business and unfamiliar with tools and methods, there are Experts in various fields to help you. Of course, these services cost extra.
To attract a large number of merchants, there is a key problem to solve. That is, from e-commerce platforms to independent stores, the problem of customer source must be solved.
Accustomed to the operation mode of e-commerce platform, also formed the inherent flow thinking pattern. Now separated from the e-commerce platform, no traffic how to do?
By offering channels and Buy buttons, Shopify takes a completely different approach to proactively reaching customers.
This can not only make merchants closer to customers, but also manage customer relationship one to one, and solve the problem of customer loyalty caused by traffic.
It's like fishing: Amazon puts fish in front of thousands of anglers and makes them compete for the catch. In this way, in addition to the profit thinning caused by low-price competition, the key is the lack of customer loyalty, which makes it difficult to form re-purchase.
Shopify outfitted anglers with top-of-the-line gear, then boated them separately to fish areas, where everyone caught their own fish. This way without price competition, easy to maintain a number of high loyalty customers.
In the field of e-commerce, it is very difficult to challenge the hegemony of e-commerce platform directly in the form of platform vs platform. However, with the SaaS business model, it is possible to take a different path through services.
SaaS+FinTech: How Shopify makes money
Shopify's main customer base is SMBS, so it can't charge too much. In fact, Shopify's pricing is already very low in the SaaS industry, as shown in the figure below.
Because the pricing is not high, it is still quite difficult to achieve an ARR of $4 billion only relying on SaaS subscription revenue. But raising subscription fees could drive some SMBS away.
As the saying goes, talking about money hurts one's feelings. In fact, the most hurt feelings, is never a good talk about money. Shopify's revenue design is an innovation in the SaaS industry, providing customers with value for money while ensuring their own revenue.
Analysis of Shopify's revenue composition shows that its payments and merchant services revenues account for more than 60% of Shopify's revenue. Strictly speaking, these revenues do not count as ARR.
Therefore, Shopify is not a pure SaaS company, but SaaS+FinTech. Specifically, monetize financial services by leveraging the acquisition and retention model of SaaS.
So why are businesses willing to pay these fees? The answer is to run a business "without money" and use the proceeds of sales to repay loans.
It's not hard to see why Shopify is primarily in the SMB business.
Demand for financial services is not as strong as for SMBS, because large businesses have ample capital of their own or easy access to low-cost funding.
Although Shopify has also launched a Plus version for large companies, the share of large companies' revenue has never exceeded 30 percent and is even declining.
The ecological necessity of Shopify:
E-commerce SaaS also requires customer success. But Shopify, on its own, clearly can't serve millions of merchants around the world. The only solution is ecology.
Shopify Ecology has a large Partner Program with partners all over the world who are proficient in every field, and partners actually undertake the work of CSM.
Partners operate through two platforms: the App Store, a tools platform, and the Experts Marketplace.
There are 6,000 + apps in the App Store. The core apps are provided by Shopify itself, such as Shopify POS in brick-and-mortar stores.
Other apps are provided by third parties to meet merchants' individual needs, such as product selection and tax services for different countries and regions.
Online stores seem to save a lot of hiring costs for salespeople, but in fact, a good online store needs more professionals, such as store design, product selection analysis, marketing channels, data processing, etc., all of which are indispensable.
Opening an online shop employing a lot of employees is obviously unrealistic.
Finding the right expert on the Experts Marketplace is a low-cost way to solve a problem. Even for trivial questions like "don't know what to sell to make money," experts provide data analysis results.
In an ecosystem like Shopify, it's safe to say that any problem a merchant encounters will find a solution. So making it easier for customers is not really a slogan.
Conversely, Shopify could not have grown quickly without ecology. Knowing this, Shopify takes a relaxed approach to partnerships, rather than being too granular.
You can see this in its revenue streams: 20% of revenue came from partners in 2020, but only 8% in 2018.
Ecology is integral to Shopify's success.
The reference significance of e-Commerce SaaS
1. Think outside of traffic
In the early stage of e-commerce development, the platform e-commerce of Internet + merchants was the mainstream. This business model is built on the basis of traffic flow, such as Amazon and eBay abroad, Taobao and Padoduo in China.
With the emergence of vertical e-commerce platforms, the traffic is constantly shunted; With the rise of social e-commerce businesses such as FB, Douyin and Kuaishou, traffic is not only further diverted, but also continuously "cut off".
As the business of traffic becomes more and more difficult, independent stores +SaaS e-commerce services emerge, so merchants have another option.
The development of domestic e-commerce SaaS is slow, one of the important reasons is stuck in traffic thinking, and some people even regard e-commerce SaaS as the so-called private domain traffic.
In fact, private domain flow is a very pull marketing gimmick. You can't think of attracting customers to your booth and chatting with them as your private domain. Because they turn around and go to another stall to talk longer.
In fact, businesses to establish and management, is customer loyalty, which has little to do with private domain flow.
It can be seen that traffic is not the main factor for merchants to choose e-Commerce SaaS; Do not jump out of the flow of thinking, e-commerce SaaS is difficult to make.
Create your own service blueprint
Shopify's best part isn't bundling a bunch of tools together; But to create a complete description of its service system service blueprint, which is its core competitiveness.
Shopify's service blueprint has two features: deep service and full process coverage.
First, the need for deep service. The logic of e-commerce SaaS is to help merchants operate more efficiently by providing them with complete services. So depth of service is necessary. The capabilities of a SaaS service are largely determined by the depth, or atomicity, of the service.
Implementing deep services doesn't have to be done all by yourself. It can be provided in conjunction with other SaaS, or it can be done by the developer through an API.
In-depth service for merchants' experience means that they don't have to worry about the environment and facilities of online stores and focus on their own business.
And the need for full process coverage. If only one business link to provide in-depth services, it can not well meet the needs of online business.
Because an online transaction is an intense process. Therefore, the core part of the service blueprint is best completed by one e-commerce SaaS provider, rather than several SaaS cobbled together.
This is not only complicated to implement, but also can increase the integration cost of the business, and fluency can greatly affect the user experience.
So we see that Shopify's core apps are made by itself; Non-core, personalized applications can be provided by other SaaS.
Start ecological construction
The so-called ecosystem includes SaaS ecosystem and service ecosystem, such as Shopify's 6000+App, and numerous partner services.
Ecology is important for all SaaS; E-commerce SaaS, in particular, is indispensable.
The industry ecosystem of SaaS in China is still in its early stage, especially for e-commerce SaaS. All services are done by themselves, which is difficult to scale up.
Opportunity and Competition
The opportunity of domestic e-commerce platform is not big, but the space of e-Commerce SaaS is great, will become a new hot spot of SaaS. For example, Youzan has gone far in the direction of e-commerce SaaS.
With the end of the traffic era, it is believed that there will be more SaaS service providers entering the field, and there will be more industry ecosystem SaaS and service partners.
Another question I often get asked is: will the existing e-commerce platform giants move into e-commerce SaaS?
Frankly, it's not impossible. Amazon recently launched an internal Project called Project Santos that takes direct aim at Shopify.
However, I think e-commerce platform and e-commerce SaaS are not compatible with each other. For example, for a new merchant, should it go to e-commerce platform or e-commerce SaaS? There's no basis for it.
The situation is similar at home. However, for some e-commerce fields that do not depend on traffic (such as overseas e-commerce), e-commerce platform giants may layout and enter.
However, for e-commerce SaaS, this is not a worry. Because the two are different business models, the giants have no particular advantage.
