Why is Shopify giving away millions of $ in cashback?

How Shop Cash plays into the company’s master plan to own the future of commerce

You probably know Shopify as an e-commerce platform that powers millions of online stores, from Allbirds to Staples. Shopify, which was founded in 2006, has always been a B2B software company. It provides the “pipes” that brands and retailers use to sell their products to consumers, but operates in the background.

Over the five years, Shopify has been gradually inching towards a monumental change: becoming a consumer-facing shopping destination. In 2017, the company’s experimental “Garage” program launched a new app called Arrive, which helped consumers track packages across all merchants. The app took off, racking up 16M+ downloads before it was rebranded in 2020 as Shop.

With the rebrand came a new feature — shoppers would be able to discover and buy new products from brands they already purchased from (or followed in the app). Over the past two years, Shop has evolved significantly, and it’s now undeniably a product discovery platform. The app curates collections of products and makes customized recommendations of brands they think you’ll love based on your purchase history.

Last week, Shopify took it to the next level: shoppers now earn 1% cashback on eligible purchases made via Shop Pay (Shopify’s payment processing system), but this cash is only redeemable in the Shop app. Shopify is funding this cashback, which means that it’s essentially giving away millions of dollars to shoppers to spend on Shop. Why would the company want to do this?

It’s a bet on Shopify’s vision of a fully integrated commerce ecosystem. Merchants are more likely to adopt Shop Pay if shoppers want it (for the cashback) — and Shopify makes money processing these transactions. These shoppers then go to the Shop app to redeem the cashback, and spend this money (and more) at Shopify brands. Shopify takes a cut of these transactions as the hosting platform. It’s a virtuous cycle.

An added benefit: brands can “boost” the cashback offer within the Shop app to acquire new customers. Imagine you have $2 in cashback to spend on the app, and find a sweatshirt brand that’s offering to 10x this (a discount of $20 to you) on your first purchase. You’re much more likely to convert, and the brand gets a new customer. The $20 “CAC” is probably significantly lower than they’d pay to acquire you on a traditional digital channel like Facebook or Instagram.

It’s a win-win-win for you, the brand, and Shopify. We’re embarrassingly excited to watch this roll out on Shop over the coming months — keep an eye out for more here.

This piece originally appeared in Accelerated, a weekly newsletter featuring news, trends, and jobs in tech & VC. Subscribe here for early access to future pieces, and follow us on Twitter @venturetwins and @omooretweets.

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