Shopify: Channel analysis for shipping & fulfilment developers
Published in
5 min readOct 30, 2019
Channel Overview
- It has a large market size (16.47%) and share (10.03% — combined with Shopify Plus), with good coverage across all market segments. Has the highest year on year growth in the eCommerce platform industry by a significant margin (73% in 2017 — combined with Shopify) — with a lot of Magento 1 customers moving to Shopify
- Soptify has strong competition in the Shipping space, In built shipping functionality for US carriers, along with many shipping extensions on the marketplace, and a Technology Partner in Shipping in ShipHero.
- In-built Shopify Shipping functionality with key US carriers already quite rich, with both negotiated and discount in-cart rates available, shipping label generation, and a number of features such as ETAs and tracking all in-built.
- Shopify takes a 20% revenue share for app providers and handles payments and processing (for a 2.9% fee for base Shopify customers — or app providers can use their own payment provider from 0.5%) — while providing some basic support for this fee
- Has strong incentives for its SI network, giving them revenue share (source)
- App developers are bound to use the Shopify Billing API (Part C.2) as their payment gateway, unless agreed in writing with Shopify.
- Limited onboarding and technical support options for customers.
- Shopify invoices recurring price plans on its own cycles. It has its own Shopify Payments mechanism (0% transaction fee) which handles payments for app providers. If we use their functionality here, we can avoid building our own payment tools — but at a cost.
Market Assessment
Shopify
- 16% of the global eCommerce market, only behind WooCommerce (32%) in overall market size
- High YOY growth with 73% growth in 2017 for Shopify/Shopify Plus combined
- Strong coverage across all segments — in the top 5 channels in every segment, and top channels all the way up to ENT.
- Focused only on B2C
- Shopify has most of its customers in US and Canada (49%), followed by UK (8%), AU (5%) then the RoW (38%).
Shopify Plus
- 0.03% of the global eCommerce market, focused on the mid/enterprise space
- High YOY growth with 73% growth in 2017 for Shopify/Shopify Plus combined
- Represented across all segments, but a very low number of customers in each segment — failing to hit top 5 channels in any segment
- Supports both B2C and B2B — B2B offering included for free.
- Shopify Plus has most of its customers in US and Canada (48%), followed by UK (8%), AU (5%) then the RoW (39%).
Shipping & Fulfilment Competition
- Shopify has also launched their own Shopify Fulfillment network, competing with the comparable Amazon network, and posing a high threat to shipping aggregators like us — and taking on fulfilment, packaging, and shipping capabilities.
- In-built Shopify Shipping solution providing USPS, DHL Express, FedEx UPS, or Canada Post — using both live or brokered rates, which receive discounts based on the plan.
- Large number of other TMS extensions (ShipStation, Shippo, ShippingEasy) and direct carrier extensions (DHL Express, Royal Mail, Aus Post etc)
- ShipHero have already established themselves as the only Shipping based Technology Partner with Shopify since 2017 — accessing a different revenue share model, and some marketing improvements within the app. ShipHero’s pricing model aims at the mid market and above.
- Access to the Shopify Plus Partner Program is by invite only and provides access to a different partnership level, expected to be in the form of an adjusted revenue share — ShipHero is currently the only shipping competitor in this program.
- Large number of other TMS extensions (ShipStation, Shippo, ShippingEasy) and direct carrier extensions (DHL Express, Royal Mal, Aus Post etc)
Technical Compatibility
- Customers will require the $299 Advanced Plan to allow our installed App to access the API required for in cart shipping methods. This would limit shipping providers from providing in-cart manipulation to Shopify customers not on the Advanced Plan or above.
- Embedded application using the Shopify App Bridge (Node module available), which is their new version of the Embedded App SDK used for embedding your app directly inside Shopify.
- Other available tools include Embedded App SDK, POS App SDK and the Spotify API. They also have components for embedding via Polaris. Tooling predominantly written in ES6, Typescript & Redux
- Auth via Oauth 2.0
- Webhooks are available for subscribing to updates from Shopify.
- The API is rate-limited on a per store (customer) basis. Risk of contention/slowness when running multiple apps.
Commercial Analysis
- 20% revenue share to Shopify for recurring revenue through their app store — less for premium partners
- Integrators need to provide all sales & support capabilities to their customers
- In-built payment gateway incurs up to 2.9% +30c USD fee per payment deducted from subscription fee — 0.5% if our own payment gateway is used
- Partner revenue share incentivising SI partners
- Only commercially (and technically) viable for in-cart manipulation for base Shopify customers on the $299/month Advanced plan, or for Shopify Plus customers who’s plans are from $2k/month and up.
Legal & Commercial Analysis
- CA based company and terms — no obvious legal concerns in either the App Store Terms, API Terms , or the Partner Terms
- Compliance with GDPR
- App developers are bound to use the Shopify Billing API (Part C.2) as their payment gateway, unless agreed in writing with Shopify.
Support Analysis
- Support and marketing is entirely the responsibility of the developer — see 6.1.2 of the API terms
- While no support is provided to App developers, Shopify Partner’s get access to 24/7 phone support, training materials, and account management to support those partners in developing and managing their App.
