Shopify's Ultimate Victory in Enterprise Commerce Needs Incentive Alignment
With the dominance of Google (GCP), Amazon (AWS), and Microsoft (Azure), most enterprises (by that I mean companies above $1B in enterprise value) are tied to one of these solutions indefinitely. If anything, a fourth player has just been minted with OpenAI -- further cementing Microsoft's growth trajectory ahead of AWS (it's only a matter of when not if AWS gets passed).
Sure, could Shopify swap places with Salesforce? Yeah it's possible. (Salesforce is currently 2x Shopify market cap)
Could Shopify take out a number of custom Enterprise retail installs? Yes also possible, but in limited ways. Most enterprise architecture contains ERP, PLM, PIM, POS, OMS, CMS, Inventory, Supply Chain, Checkout, WMS, MDM, a CDP (off-the-shelf or custom). Did I mention a mobile app? And this is just for B2C. B2B adds much more complexity.
But what does Shopify replace? Likely the CMS and the Checkout at best currently. One day, POS. The rest of the stack primarily stays in place if you were considering a "replatform".
Which plays just fine for Shopify's current business model - % of GMV. Frankly, replacing the checkout might be enough for it given Shopify's economic engine primarily being powered by Merchant Services.
Yet as much as Shopify innovates, they have always seemed focused on one metric above all: conversion. The challenge? Not all software domains and enterprise goals flow from conversion.
Let's take the software which helps brands manufacture new products: product lifecycle management, or PLM. A critical part of any brand's journey -- handles everything upstream of minting that "real SKU" in your ERP.
Would Shopify ever tackle a domain like this? Not likely. But why? Couldn't it do so? Well, of course. It's not an innovation problem, though.
Instead, the problem is a different one. What is Shopify's INCENTIVE to innovate here?
After all, if you show me incentives, I will show you outcomes. And until Shopify innovates on its core business model drivers along a number of new dimensions not tied to GMV, it may not have the impact in Enterprise commerce it wants to have.
Unless Shopify is actually just using eCommerce to bootstrap itself as a global payments provider (which is what it currently seems to be doing with Shop Pay). Which, to be clear, is a fine vision; it's just not an expansive Enterprise Commerce vision.
Unless it decides to pick one of these lanes to innovate towards
* Data
* Advertising
* Payments (mostly today)
* Customer Engagement (a little here)
* Customer Service
* Supply Chain
Shopify has repeatedly shown not much interest in advertising. I predict Data will be the next lane that Shopify tackles. After all, it needs it for its AI future anyway. And would incentivize partners + brands to bring more data to Shopify. Because that would be its new incentive.
