Word-of-Mouth and Referral Marketing Blog

The Future Of Retail, According to Shopify CEO @Tobi

shopify-tobi-lutke

In late 2013, in This Week In Startups, Jason Calacanis interviewed Shopify CEO Tobias Lutke.

Our takeaways: Distribution keeps getting more ubiquitous, so people will pay primarily for experiences.

1: There are many different kinds of innovation– not just in software.

Innovation was a common thread throughout the conversation– Tobi and Jason talked about how it was innovative to even sell cloud-based solutions to people online, and how simply having pricing on the page was an innovation as well.

Going further back into history, Tobi described how departmental stores did well initially because they were innovative with regards to distribution. Shopify believes that they’ll be a “dead branch of the history of retail” because distribution is so ubiquitous and accessible now. (See; Amazon.)

2: The future of retail is experiential: “It’s not about the product. It’s about what’s being represented.”

Tobi brought this up when talking about how Lululemon was converting its store locations to yoga studios. Products are increasingly commoditized– people can get all sorts of products at dirt-cheap prices, shipped to them almost instantly. The distinguishing factor becomes experience, which departmental stores aren’t optimized for.

3: Best Buy is probably going to die.

Jason candidly asked Tobi what he would do if he had to take charge of Best Buy, and Tobi conceded that they would probably die, or get carved up somehow. If it is to persist, it will have to adapt and evolve into something very different from what it has been so far.

4: There’s definitely demand for more innovative pop-up stores, but it’s going to be an uphill legal battle.

Both Jason and Tobi talked about how nice it would be if you could have interesting experiences with creators right in your local area, that didn’t require the stores to buy a year’s lease. Tobi described how there are no options for a retailer in the middle ground between having products and signing a year’s lease. (Crossing The Chasm, anybody?) They talk about how businesses don’t typically get allowed by cities to stay in locations for a month or less.

It’s interesting to think about this in relation to the progress of things like Airbnb and Uber– microrentals are slowly becoming more widespread. Might “Airbnb for Businesses” be a legitimate business in itself? It seems like the bulk of the innovation required for that would be in policy, laws, etc.

5: Kickstarter’s success has very little to do with crowdfunding.

Rather, Tobi notes, it has to do with the fact that makers are forced to make videos explaining to people why a product matters, why it ought to exist, and all the loving attention to detail that goes into it. That contributes tremendously to the experience of the product.

Beyond discussing the future of retail, Jason and Tobi also cover a lot about Shopify itself, and the challenges and opportunities the company faces ahead. There a lot of interesting nuggets worth mining, from Tobi discussing Shopify’s initial misstep with their pricing strategy, to the aggressive (and cheeky) recruiting tactic they used to acquire laid-off IBM employees.

You can check out the video here:

Full Transcript:

JC: “The big company in Ottawa is Shopify. Shopify is a huge company that has over 60,000 customers. The company provides shopping services to say it simply, is that correct?”

TL: That’s right. We do online stores, software-as-a-service. You go to the website, you sign up, we help you with your inventory system, you put your products in, you get a wonderful website. You can change your design, you can work with designers, you can use our themes– at the end of the day you get a really nice store on your own domain, you control everything about it we do the running, the scaling. We allow you to take that from nothing to the tens of millions of dollars.

JC: So, when did this company start?

TL: It started, as so often, the history is kind of, you know, we tried to do something, and then something else entirely.

In 2004 I cofounded a business. Initially we tried to do an online store ourselves, selling snowboards online.

We were using Yahoo stores. Paul Graham’s Viaweb, they sold it to Yahoo, Yahoo rewrote it a couple of times and then it became Yahoo Stores. We used that.

The idea was– my background is I’m a programmer, I apprenticed as a programmer which is something you can do in Germany. I wanted to get out of that, a bit– I wanted to start a retail business– something I was always really interested in. Worked with some manufacturers and get some snowboards.

We wanted to sell them, we wanted to use something off-the-shelf, we realised there was no freaking way we could build a business with– there was no off-the-shelf software in 2004. First season of sales. 2004 was right at the time when Ruby on Rails came out, it was fun to play around with, got involved in the RoR community.

JC: David Heinemeier Hanson, 37 Signals…

TL: Huge inspiration to us. David is from Denmark, he moved to Chicago. That was good fun. We had a lot of fun building the technology. It reinvigorated my interest in programming.

If you want to go into the full story there– there was a lot of interest in the RoR community, people were following what I was doing– I was part of the core team at RoR. People were saying it’s really cool that you have Snowdevil, this snowboard store, but would you license the software?

Then we realised that maybe helping other people go through this and building their stores might be a better business than selling snowboards.

In 2006 we launched Shopify, sort of taking lessons from Basecamp. Again– in 2006 software-as-a-service wasn’t a term yet.

JC: Right. People were not charging for software with the exception of Basecamp… I’m trying to think of who else– Dropbox hadn’t launched yet. The idea of offering a service instead of downloading software to a server– didn’t really exist yet. Salesforce.

TL: Calling people. If you wanted software, you had to talk to salespeople, and there would be no prices on the website. Even putting your price on the page was innovative in 2004 even though that sounds crazy now.

That screen where you’d have “here are your three options and That was a true innovation y 37signals.

Hard to remember that at this point. But it was so clear that that was the way software should be on the Internet, and we wanted to do that for online stores.

JC: And so you launched the product at 20/30 bucks a month to have a store?

TL: Yeah– we had a period for about a year we tried some really different things. We had read things a bit wrong, wanted to go to freemium before everyone else– So we said no money up front, only % free. It was simply naive– it meant it cost nothing for people who didn’t have any sales and way too much for people who did have sales. Took a while for us to get it right.

What we settled on was $29, $24 dollars… now it’s down $15 or $9 depending on which A/B test you’re a part of. That’s all you need to start up.

JC: I’ve heard from people you charge too little. $10, $20 a month to do all your ecommerce on a dedicated site– it’s absurd, it’s insane, people would pay a lot more– if you asked your clients, if Shopify didn’t exist, how much would it cost you, $5,000 or $10,000 to hire somebody to set up a competing service what do you say to that?

TL: I usually just tell them they’re bad at pricing. That’s the truth of it. I regularly talk with people who convert from not just $5,000– people are paying $50,000/month. That’s a fairly regular price in our industry– you’ve got 3rd parties who are building the systems and hosting for you, and your being charged for all that. Converting from that to $170 plan, and the service is much better…

The nice thing about our business is– we really want to make it a lot simpler for people to start this kind of business. Because it’s hard.

When we started there was so much to learn. How do you deal with the manufacturers, supply chain. How do you get the vert out? There was a lot of complexity around technology, too. To get approved for the credit card gateway, back then, we had to post $10,000 bond/downpayment with the banks to do this kind of stuff.

Needed to engage for many many thousands of dollars a year, company doing PCI scanning for your site– which meant that the site had to be up, but then you couldn’t get access to the gateway credentials before you had the test, huge chicken-egg problem doing development for us… it was just hard. There’s a lot of this problems we wanna make go away.

So our business is focused on, hey, let’s make it so that everyone with products to serve, people with interesting stuff, there’s just nothing in their way to get their products in the hands of people.

That’s what we care about.

For us there’s opportunities to monetise, to ask people to pay money for this. There are also opportunities for us to go to the payment gateways, shipping. Economies of scale matter in this business. We can talk to Fedex and say hey, 60,000 people want to ship with you. That means we can get better rates for everyone, and somewhere in that process we can make money.

JC: I wanna hear about you guys setting up a booth outside of IBM to recruit the laid off IBM workers in Ottawa. Very aggressive recruiting strategy.

TL: Right. So we are in Ottawa, Canada. The city has a great history of technology, a lot of people working in technology. The dotcom bust was brutal here. Lots of telecom companies, great chip companies. You use Blackberry– QNix was here. Lots of things going on. But what’s left are the larger companies, right.

So, what we think is one of the things that Shopify became really really good at is making secondary markets work– that is, every city except NYC and Sillicon Valley.

How are great, big impactful, meaningful companies being made? If n every geographical region that somehow realises that there’s just one company that all the best people go to and spend a couple of really exciting years of their career together, and then disperse to do many other things. We would like to be this company. To us, the most important thing is– we want people to think of us when they’re plan their career. If they are signing up lots of interesting work, willing to work really hard, with a lot of caring and passion, then hopefully you come to us.

And it turns out there are a lot of these kinds of people around in this city, but they were at Cognos, which then got sold to IBM.

It’s funny– when you speak to someone from IBM, you might speak to someone who’s 30 or so and they’ll tell you yeah it’s great, and there’s really great pension. Why do you care about pension, you’re 32?

JC: “I didn’t know they even had pensions anymore. What are you, a bus driver?”

TL: Somehow they manage to get in your head. People just build themselves a fun life outside IBM. But it shouldn’t be that way. Great people should accomplish great things. So it’s important to remind people, if they really care, there’s better ways to have impact.

We got this news that IBM was doing big layoffs in the city. We were thinking, well, we wanna hire lots of people, we’re growing really quickly, Shopify is doing extremely well right now, so why don’t we send some people out to the office and put a recruiting booth up?

It was a bit cheeky, but it was well received. If you poll 10 high-performing people about their career, 3-5 of them willl tell you “oh I got fired once”. They’re never like, a meteoric rise. I think Sheryl Sandberg in her book called it a jungle gym? Much better metaphor for what a career looks look like.

Sometimes this is the stuff that has to happen. I was working at Siemens, I got a letter telling me that my performance wasn’t up to par. I was terribly shocked, because I thought of myself as a really good programmer. But then I realised, I probably hadn’t slept in an entire week, because I was playing video games at night, or programming. Probably my performance wasn’t that great, and so I made some changes. These become really beneficial things. I think that’s worth reminding people of.

JC: Did the police come to shut you down?

TL: People were out pretty quickly moving us away the IBM-owned property, but the government owned sidewalk nearby, so that was convenient.

JC: 200 people right now, you’ve raised some venture capital, tell us about the size of the company.

We launched the product in 2006, Initially as a sort of ifestyle business as what some call it. Essentially, and Chamath said the same thing in your interview– fundraising is really really tough in many parts of Canada. We tried a bit, but– luckily we’ve been charging for our product from day 1, and we reach profitability. We figured the best way to grow would be– every time we get another $5000 we hire another person. We became really good at this.

We grew and grew and grew– At some point in 2009 we had this realisation that this ecommerce market is amazing. It’s just– we’re on the cusp of so much new stuff coming up.

I read this letter by you that where you actually outlined very well exactly what’s going to happen– same-day delivery, malls are going to be empty. Such fertile grounds for companies that can move quickly to build meaningful business.

JC: Commerce is going to change significantly.

TL: It’s going to be nothing like right now. I bet you, probably in this decade, you’re going to walk into a store, you’re gonna buy a product, and they are gonna give you a product and you’re going to be annoyed at them, because now you have to carry it home. Same day delivery alone is going to change everything.

It’s so crazy right now from a historical context– 30 years from now my kids are going to ask, why did you have mailboxes? Why not package boxes? Everything seems slightly based on history–

JC: In the future we’re going to have package boxes?

TL: Someone smart is going to figure this out– it seems crazy that our houses have dedicated places to put mail– I don’t even get mail anymore. If I get mail it’s advertising. Everything important comes on the web, or in a package– if it needs to be delivered.

So time is trending towards next day, and eventually same day, within the hour or the next two hours. In Silicon Valley this is a reality right now. That’s what you’re going to expect, that’s what you’re going to expect in your shopping spree when you’re walking downtown. There’s no difference. There’s an online data base you have of your product, different manifestations of these products in different contexts. There’s a website, there’s Going into stores to try thing… but really the backend looks mucht the same.

JC: So If I’m buying a jambox from Jawbone– and I see it at an airport, or on a store, if I see it in my mobile phone… it’s all the same.Does that mean you’re going to build a point-of-sales system and then people use you in retail?

TL: Maybe. The question is…

JC: Wait, you say maybe and I see you smile a little bit– When is Shopify POS going to happen? (It happened on 12th August 2013, just six days after Jason published the interview.)

TL: The question is, is POS even a thing? The reason why you ask about this us because currently– the POS industry is a couple of billion dollars large, but why is that an industry? There’s nothing to it. There’s a terminal in front of you, but it’s simply another context in which products are exchanged. Right now Shopify has a context attached to it– an online store– but the value of the thing of it is the product database. If we intergrate the entire rest of the business– the inventory, the finance system…

Shopify is a platform, foremost we just launched Shopify 2– our rewrite of the front end. In terms of bus terms, it’s all Javascript, rich client, single-page applications, all this stuff.

The cool thing about it is, this is the thing our merchants spend the time on– some of them spend 8 hours a day looking at the Shopify app interface. That’s why it needs to be really fast. The cool thing is that our interface uses the same API that we document, and our platform is exposed. Everyone is sitting on the same platform.

JC: So building a POS will be no big deal?

TL: No. It’s simply another canvas that’s going to be used to make…

JC: When you saw Square’s massive success doing point-of-sale, did you think “God, how did I miss that? I should’ve got to that quicker?”

TL: *smiles*, No, they are a really, really impressive company. Would love to have done it quicker, absolutely.

JC: You guys don’t have POS yet.

TL: It might change.

JC: Absolutely. When you go to a farmer’s market, people have Square. It’s incredible. Let’s recap here. You have same day delivery. Mailboxes changing to package boxes. You even have people like Amazon putting these– what do they call those Amazon centers? It’s not your box, but your stuff is in one of the boxes–

TL: Yes, like those 7-11s. Google Waterloo company called Bufferbox doing the same thing that got bought by Google. You know what’s funny? These package boxes were around in Germany 10 years ago. The future is already here but not evenly distributed.

JC: Yeah, William Gibson. (source)

TL: Every bus stop has those. It’s a great idea. Everyday we go past one of those places and pick it up there. Why do we wait, why do we have someone go up in the tower… it’s just a great idea.

JC: What do you think happens to retail? We have a massive implosion of malls in the United States?

TL: It’s going to be a problem– it’s a problem for the people who own the malls. The big failing of the– the malls exploded on the backs of the department store.

Department stores started in the 1860s under John Wanamaker. We at Shopify operate under the assumption that the department store is a dead branch of the larger history of retail. It’s never going to go away, it’s going to be the right form factor for some thing, especially perishables.

But department stores became really really big based on solving for distribution. Right? Essentially, there’s customer experience, there’s distribution and there’s value. Those are the three things you can optimise, you pick two. Department stores are really good at value and distribution. Previously, the first time a departmental store comes into city is the first time you’re able to get a product, so it was a really big deal. People bought these products and dept stores got really big.

Now the Internet completely takes this out of the equation. Distribution is a commodity, everybody has it automatically, because package delivery got so good– same day delvery is going to do more of that.

JC: So having the access means nothing.

TL: Exactly. All the department stores can do with each other is compete on value, because they have zero history of competing on experience. JC Penney tried the experiment, but unfortunately people got cold feet and fired the CEO.

JC: Experience + retail: We do see the Apple Store, Disney Store, Nespresso Store. People go there not just to shop, but to experience stuff. I want to see where you think that trend is heading. Apple store– Probably 3 out of 4 people who go there don’t buy stuff. Disney store– Nespresso store– it’s a cafe, and in the basement you can buy pods, the machines are everywhere– it’s an artistic endeavour. Microsoft stores, maybe Google stores at some point. What do you think of the experiential retail concept? You mentioned JC Penney tried and failed.

TL: Because it’s hard to change. Such a large shift.

ZC: It didn’t work for JC Penney, but it will work for others.

TL: Out of necessity. I think it’s the only thing that’ll service. Nespresso store is probably the best example. It’s a cafe, and you just happen to buy the stuff.

There’s a great Canadian chain called Lululemon– they’re changing their locations to yoga studios. It’s not about the product. It’s about what’s being represented. And I think we roughly knew this– people just didn’t take it to it’s logical conclusion. People want to experience something when they go to these places. You can’t just optimise for one thing– value– that just destroys value for everyone. There needs to be something special.

Every retailer should want to be more like the Apple store. It’s clearly a better idea, extremely innovative. I think this is where retail is going. You have to figure out what is it that you truly add to the equation? This is going to be a hard question to ask yourself, for a lot of folks who are selling right now.

JC: What would you do if you were BestBuy?

TL: *deep breath* I have no idea what to do with BestBuy. Giving–

JC: The CEO of Shopify– and you’ve been studying ecommerce for a decade– you have no idea how to solve that problem. You think they’re going to die.

TL: I think so. I think they’re going to die. I give chances to companies that are actively experimenting. And BestBuy is actively experimenting– like handing over a little part of their showcase to Apple and Microsoft for ownership– in a way maybe BestBuy segments out a grid in their store, and starts parcelling out to different brands, that might work– but honestly I don’t know.

JC: But why would Apple want to be in the same space as Microsoft and Samsung?

TL: Right. And so it goes back to distribution. If you ever go to the Apple corner in Best Buy store, the Apple table is the nicest table in the store– but the light above it is still a BestBuy light so nothing looks as good as it does in an Apple store.

JC: Who’s doing a good job? Have you seen anybody and gone “Wow, that’s how it should be?” You mentioned LuluLemon.

TL: I think Lululemon is absolutely on the right path. There’s a lot of people. And then you get the crazy experiments. Boxpark in London. It’s a mall in the middle of London which is completely made out of shipping containers, put it together in an interesting way– Tell Puma to come and own one and turn it into whatever. I think that’s cool. It might not last very long, but–

JC: So pop-up stores are the future?

TL: Or the logical conclusion of popup stores. Might be great. Shopify significantly simplifies the process of getting your business started. We are successful when our customers are successful, so there’s a lot of value in helping people along.

So, say you have a great iPad case and you want to build a business surrounding that. You get noticed, your store blows up, you learn about things you need to do like AdWords and these kind of things. You build an online business. But that’s a silo, right? You want to do offline things. The problem is that there’s nothing between having these products and signing a year’s lease. That’s how retail works.

JC: So what should there be? So if Shopify were to have 10 retails locations in 10 cities, what would you do? Would you allow people to rent them by the day, do special events? Why doesn’t that exist?

TL: I have nothing prepared for this, but I think that would be a cool idea. The year-long lease is clearly not right. So that’s need to be disrupted somehow. One easy way to do it is larger entities taking a lot of space giving out for terms to other people– kind of industrialising, in a way, the pop-up store concept.

JC: Why hasn’t anybody done that? It’s such a great idea! It’s just untenable to anybody who has a smaller business.

TL: This is a company which is best started with a hacker with a crazy disregard for status quo, and a lawyer. Because you’re going to fight by-laws everywhere. Most cities don’t allow any business to come in for a month or a quarter. So this is one of those businesses that is really just messy if you want to get into it.

Maybe this is the future of Best Buy, again. I think it should be done. I would love for someone to do it.

JC: I would love to be able to meet the people who created this product on the first Monday of every month– they take over the store for 18 hours, from 7am to 11pm– they’re going to do an experience. You meet the CEO and the product manager, and they go through the 5 new man-bags and murses and satchels.

TL: That’s such a good point. I mean, why is Kickstarter successful?

JC: Intimate, personal, innovative? The experience?

I don’t think it has anything to do with crowdfunding. I think it’s a complete misattribution of the success. The reason that Kickstarter is successful is that it forces the actual person who made the product to make a video about it. Completely accidental and everyone forgets about this.

But– If the people who create the product– the people who know more than anyone else in the world about something– tell you not just what the product does, and all the platitudes the marketing industry has focused on for the last 100 years, but rather the reason why they went there, why they did this, why this a product that needs to exist– it’s a much more powerful thing.

The problem is– when you have someone like Best Buy, they will not tell you this story. The channel between the people who create the things– creators, curators, crafts people– there’s a layer between them and consumers that’s simply a construct of history that’s related to how distribution was owned previously. I that can be shattered, that would be extremely powerful.

Because, like you, when I go to buy something I would like the person who came up with this explain what to me it’s used for why it’s useful. And I think there is a way to build an infrastructure to make stuff happen, to disintermediate this whole process and make it a lot more interesting.

if you have products that have barcodes. Amazon is going to be best in the world to sell these things. And there’s nothing you can do. Amazon is the logical end conclusion of this branch of retail that is the department store. No department stores will be able to survive against them once they realise that and actually build department stores, or they’ll just buy all the Best Buys or whatever. That’s going to happen. Which is– what’s left? The products that don’t have barcodes. The things created by products, creators, people who add a lot of value to things– like the Snowboards we used to sell.

JC: Not commodities.

TL: Exactly. But it’s interesting stuff. It’s stuff we want.

JC: There’s stuff we need, like deodorant or coffee beans or whatever, but we really desire the satchel that’s handcrafted, the iPhone case with 3 extra features.

TL: If you buy a guitar– the guitar industry is really really great. There are very small businesses– usually 50 people per company, somewhere in the US, selling these things to guitar stores and Guitar Center, but also through their own website, and they tell their own stories and do a really great job. It’s a much better experience .You can tour the factory. That’s what we need again. Intimate relationships with things.

JC: Artisanal, like the movement in food, right? So– what’s the average size of a shop on Shopify? Active stores? Are most of them $100k per year? $1m per year?

TL: I mean, average– As in any fast growing company, a very large percentage of people signed up last month, and more than last month, so average is just one thing.

The time it takes for people– if they have something that the market wants– to get above $100k sales– at this point you can say this is validated, I got something, I’m going to start hiring people. It’s much much higher than the usual “1 in 10 companies survive”. Online retail is a fairly high success–

JC: Most of them succeed?

TL: Not most… maybe 50%. Our job is to make it cool. And, you know– everyone wants to start their company right now. Everyone used to want to be in a rock band, now everyone wants to be an entrepreneur. What we try to accomplish at Shopify is make it so that retail and selling your products becomes as cool as starting a tech company– and frankly it makes a lot more sense given those success rates.

JC: You’re in about 100 countries now. That takes a lot of your time I expect. Is it just doing the language, the payments?

TL: It’s worse than that. It’s the laws. In Germany, the lawmakers decided that they know best how to design an online store. They passed a series of laws– the button gazettes– that describe exactly at each page of a checkout, what needs to be shown, what the label of every button– it’s interesting, that probably sounds absolutely horrific to the people in the United States–

JC: They’re trying to protect the consumers, I guess, so they understand when they’re purchasing something, how many units they’ve purchased, what they’re taxes are? That seems ridiculous… because if a company did it wrong they would just be sued–

TL: There’s one thing about saying protecting customers and don’t be obtuse, and there’s another thing about politicians getting involved in web design, which is where this particular law– This is just one example of many many many, and we’re in the middle of this– ecommerce is extremely difficult.

JC: How do you decide between going global and adding killer fun features?

TL: … *laughs*

JC: You have a hard time, apparently!

TL: Absolutely. All of us do. Frankly, we are a very small company given the size of the problem. We have about 216 people at last count.

JC: It’s a very small number of people– when you got 60,000 people paying you $30/month. You’ve got at least $25-$50 million in revenue a year.

TL: Sure.

JC: That’s a ballpark, right?

TL: Yeah.

JC: You do that all with 200 people?

TL: Yeah, I mean, last month we added about 40–

JC: You added 40 people in a month?!

TL: Yeah, so–

JC: That’s more than– that’s 2 per business day!

TL: I give a monthly newbie session. I have to move it into the park because it was nice weather– summer doesn’t last doesn’t last very long here, so we had to put it to good use.

We’re expanding rapidly, we’re extremely ambitious. We love this market. We love the position here– We’ve all had such advantageous because we’ve been very very conscious of how to build this business. Our position within the businesses that we’re in is powerful. There’s a lot of Shopify get-togethers. I recently went to one in NYC and there were 100 people there.

JC: They talk about how to hack the product, evolve it? Templates?

TL: Yeah, It’s just part of your business. People talk, exchanging ideas about how to take their products to the next level, finding new marketing channels. It’s powerful. You go around and you ask “Where were you when you got your first order?”, and everybody knows the answer. It’s a seminar, a live event. First order…

JC: You have an app. You get a push notification. Someone showed me their Shopify notifications and they were watching sales coming in all day long. They were absolutely raving about it. People are addicted to the metrics, huh?

TL: *laugh* Well it’s a metric business, right? It’s actually a challenge too, because metrics do not replace– we think about this all the time, this may be slightly off topic– the thing that that sucks about online business is that you can’t yet watch a person walk through your store looking at the various products and taking a path through your store and leaving without buying. There’s so much information in this. Online business (?)– travel surfacing, those are our challenges. If you can figure out what that equivalent is for online… then we’d do a massive job of educating merchants.

JC: Eye tracking, mouse tracking, what images they’ve swiped on…

TL: Then try doing tha while being in 100 countries, dealing with the privacy concerns of various different continents and so on.

JC: The hardest part of the job?

TL: *deep breath*

Is it the regulation?

TL: No, it’s not. There’s no book for how to build a company that fundamentally needs to– while following a very ambitious roadmap, at the same time the core competency of our business needs to be how to thrive in chaos while reacting quicker than anybody else. And we’re competing on this ground with companies that are very good at this sort of thing, like Amazon, so–

JC: Amazon. That is the big competitor?

TL: Well, yeah, really.

JC: So if I have 10,000 iPad cases, why should I put them on Shopify instead of selling them to Amazon and see what happens? People have to make that decision, right?

TL: It’s not really a decision– usually the way it works out is– if people need to have an online shop to capture all the margins/value. Amazon Marketplaces is one of the channels. So from your Shopify store you federate out to Ebay, Amazon, all these other channels. Just integrate Shopify.(?)

So we’re not really competing on that. But– if you scale up the business, what Shopify’s trying to do is fundamentally make commerce better. Trying to disinter mediate further. You know– Amazon has a monopoly on all the products that have barcodes. We’d like to have a monopoly on all products that are actually interesting. People who actually care about these things come to us. We’d like to disintermediate further and get them directly in front of people.

JC: So you’re aggregating audience for the stuff. Do you see Shopify as a portal at some point? For interesting products, like Fab, Kickster?

TL: It was like this already in 2008, but we realised we needed to check in with profitablity.

JC: So now you’re profitable and you’re starting to think about how people… (?)

TL: So often in business you’re right about what needs to be done but your timing is off. Fundamentally again, the mechanism for building a business that’s good at thriving in a chaotic environment is to experiment a lot, try a lot of stuff. That’s what we do.

JC: Etsy is a competitor, in a way. Who’s a bigger competitor – Amazon, Etsy, or Kickstarter?

TL: They’re all facets of the same market, having slightly different approaches. For Shopping carts specifically, our competitor is maybe BigCommerce which does something similar.

But again, fundamentally, Shopify is trying to climb a bigger mountain than the others. Yes, there are similarities in this, but this is… Shopify’s market is making websites that make more money than they cost, what’s the market size for that? This is a big place, there need to be lots of different approaches.

JC: There’s a theory that all products absorb the features around them. So Kickstarter could start doing fulfilment for products post-them raising money, which they don’t currently do. But you could have Kickstarter as a feature of Shopify, have you launched that, is there plugins for that? Have you considered it? It must come up.

TL: It absolutely comes up. We sort settled for a middle ground there. Almost every success story on Kickstarter becomes a Shopify stores afterwards. This is an extremely well-worn path.

So one thing we did is– again, I talked about the platform being extremely customisable from a design front– we have a free theme called Kickstand which continues the design of the Kickstarter campaign into a retail operation. You start with just one product which is sort of a subset of what most–

So you can do demand…? (?)

And you caught on this theme of this campaign– There is so much value you can get from being on Kickstarter– you should go for that.

Cause it’s a market place– but you do see people who already have their mailing list. Kickstarter seems to not want to do the 3rd or 4th face of products for a company. So if you do

The first phase on Kickstarter and you get a 100,000 emails, and you want to do 2.0. Kickstarter. And not give 5% to Kickstarter– Shopify, monthly flat fee. Of almost nothing. The first one on Kickstarter captures the audience.

If you have a market, Kickstarter is incredible for this. Once you’re ready to start and grow, come to us– there’s a lot of incentive for us to help you along, and from there you branch your product into all various challenge.

JC: This is a company that’s worth $500m-$1b. Has that sunk in yet, that you’ve built that much value in this short period of time?

TL: It sounds really really scary when you say it like this. I spent very, very, very, little time thinking about this sort of thing. In school I always sold whatever product was currently a fad, sold it to my classmates. Retail, I love it. And I love computers, I love programming. I spent my saturday nights doing hacking, sometimes even on our own product if my CTO allows me. And this is the perfect company– I could not– perfect time, perfect team.

JC: This is your last job.

TL: Absolutely. I would love that to be true. Everything is fine, this company is not for sale. This company is here to try to become extremely meaningful and hopefully something that people will remember 50 years from now.

JC: And you’re going to stay here in Ottawa.

Yeah. It’s great. It’s a wonderful place for me.

Visakan Veerasamy

Visa is ReferralCandy's Blog Editor. He also co-founded Statement.sg, a fashion ecommerce label selling witty t-shirts. He's been thrice named a Top Writer on Quora. He hopes to enjoy a glass of whiskey onboard a commercial space flight someday.

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