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(Disclaimer: I work in the e-commerce space.) I have to say I'm concerned about Shopify's growing dominance in the e-commerce market. They're selling a 'David

by donogh 6y ago

(Disclaimer: I work in the e-commerce space.) I have to say I'm concerned about Shopify's growing dominance in the e-commerce market. They're selling a 'David vs Goliath' story about taking on Amazon, while at the same time becoming a Goliath themselves. They are gradually building what seems to be an unassailable lead: preferential card processing rates with Stripe, hard-to-match discounts on shipping with the major logistics companies, warehousing to help retailers fulfil products, an anti-competitive app only for Shopify retailers, an exclusive arrangement with Facebook for Facebook Shops, and now a partnership with Walmart. They are rapidly becoming the next FAANG.

ramraj07 6y ago
Why is that a bad thing? The point of capitalism is that a company will grow if it can grow. We let Amazon do it why not this? Anyways it's better that Amazon has competition minimally, right?
- donogh 6y ago
  True that it’s good to see competition for Amazon. So long as they don’t have exclusivity with Walmart and Facebook Shops, I don’t see a problem.
goatherders 6y ago
WooCommerce still powers more eCom sites than Shopify. Shopify is definitely growing, but this is a place where OSS is and will continue to be a quality alternative that owns a lot of the market.
- donogh 6y ago
  That’s a fair point. It is still a healthy market. I hope Facebook and Walmart don’t preclude other platforms and non-Shopify retailers.
adventured 6y ago
> They are rapidly becoming the next FAANG. Shopify isn't remotely close to joining the big tech club, outside of their comically inflated bubble valuation (trading for 56 times sales). Let's compare, trailing four quarters. Amazon, $296b sales, $14b operating income Apple, $268b sales, $65b operating income Alphabet, $166b sales, $35b operating income Microsoft, $138b sales, $52b operating income Facebook, $73b sales, $26b operating income Netflix, $21b sales, $3b operating income Shopify, $1.7b sales, negative $178m operating income One of these is very much not like the others. Investors think they've found the next Amazon, it's not. It's a slightly better Etsy as a business, and if they're really lucky, in 10 years they might be an eBay. Amazon is only what it is today, thanks to the AWS margins and op profit (not because of its retail business, which has very low growth and terrible margins). There's no evidence of stellar margins hiding in Shopify's business. 14 years, zero profit, and a weak gross profit margin (eBay's gross profit margin is 2x that of Shopify, and was even better in years past; even Etsy has a far better gross profit margin). Compare Square to Shopify to further amplify the obviousness of the context: Square has $5.1b in sales (3x larger, trading for 8 times sales), an operating profit for 2019, still growing fast, and is worth about 2/5 what Shopify is. SHOP's valuation is obviously lunacy, which is quite common in this market at the moment (the Dave Portnoy market). See: Nikola or most any cloud company. It'll end in tears or a decade-long stagnation in the stock, there are no other possibilities. How long will it take SHOP to generate a $3b annual profit? That's the future stagnation clue, their market cap represents a decade or more of returns pulled forward (if everything goes right for them). The only thing qualifying SHOP for consideration among big tech, is their market cap. If we were going to spread the insanity around more evenly, ETSY, adjusting for its slower growth rate relative to SHOP, should have a $25-$30 billion market cap. Every investor generation thinks their bubble is the one that is different and is going to last.
- leviathant 6y ago
  Shopify is incredible at marketing themselves, and so far they've been able to churn their way out of the bubbles this creates, but it's going to catch up with them.
vgchh 6y ago
Serious question, What do you recommend that they do instead? Also, as for Facebook Shops, I don’t think that’s a good thing for Shopify. It’s a forced marriage, with a divorce planned for future.
byproxy 6y ago
Can you recommend some good alternatives to Shopify?
- mtnGoat 6y ago
  There are dozens, here are a few: BigCommerce, PrestaShop, Magento, OpenCart what are your needs?

by donogh 6y ago

ramraj07 6y ago

Why is that a bad thing? The point of capitalism is that a company will grow if it can grow. We let Amazon do it why not this? Anyways it's better that Amazon has competition minimally, right?

donogh 6y ago
True that it’s good to see competition for Amazon. So long as they don’t have exclusivity with Walmart and Facebook Shops, I don’t see a problem.

goatherders 6y ago

WooCommerce still powers more eCom sites than Shopify. Shopify is definitely growing, but this is a place where OSS is and will continue to be a quality alternative that owns a lot of the market.

donogh 6y ago
That’s a fair point. It is still a healthy market. I hope Facebook and Walmart don’t preclude other platforms and non-Shopify retailers.

adventured 6y ago

> They are rapidly becoming the next FAANG. Shopify isn't remotely close to joining the big tech club, outside of their comically inflated bubble valuation (trading for 56 times sales). Let's compare, trailing four quarters. Amazon, $296b sales, $14b operating income Apple, $268b sales, $65b operating income Alphabet, $166b sales, $35b operating income Microsoft, $138b sales, $52b operating income Facebook, $73b sales, $26b operating income Netflix, $21b sales, $3b operating income Shopify, $1.7b sales, negative $178m operating income One of these is very much not like the others. Investors think they've found the next Amazon, it's not. It's a slightly better Etsy as a business, and if they're really lucky, in 10 years they might be an eBay. Amazon is only what it is today, thanks to the AWS margins and op profit (not because of its retail business, which has very low growth and terrible margins). There's no evidence of stellar margins hiding in Shopify's business. 14 years, zero profit, and a weak gross profit margin (eBay's gross profit margin is 2x that of Shopify, and was even better in years past; even Etsy has a far better gross profit margin). Compare Square to Shopify to further amplify the obviousness of the context: Square has $5.1b in sales (3x larger, trading for 8 times sales), an operating profit for 2019, still growing fast, and is worth about 2/5 what Shopify is. SHOP's valuation is obviously lunacy, which is quite common in this market at the moment (the Dave Portnoy market). See: Nikola or most any cloud company. It'll end in tears or a decade-long stagnation in the stock, there are no other possibilities. How long will it take SHOP to generate a $3b annual profit? That's the future stagnation clue, their market cap represents a decade or more of returns pulled forward (if everything goes right for them). The only thing qualifying SHOP for consideration among big tech, is their market cap. If we were going to spread the insanity around more evenly, ETSY, adjusting for its slower growth rate relative to SHOP, should have a $25-$30 billion market cap. Every investor generation thinks their bubble is the one that is different and is going to last.

leviathant 6y ago
Shopify is incredible at marketing themselves, and so far they've been able to churn their way out of the bubbles this creates, but it's going to catch up with them.

vgchh 6y ago

Serious question, What do you recommend that they do instead? Also, as for Facebook Shops, I don’t think that’s a good thing for Shopify. It’s a forced marriage, with a divorce planned for future.

byproxy 6y ago

Can you recommend some good alternatives to Shopify?

mtnGoat 6y ago
There are dozens, here are a few: BigCommerce, PrestaShop, Magento, OpenCart what are your needs?