The pandemic-fueled rush to e-commerce might have tripped up Shopify — which ramped up for continued gains and had to pull back — but it didn’t dent Harley Finkelstein’s belief in shopping’s connected future.
Finkelstein, who is president of the Canadian e-commerce platform, told WWD editorial director James Fallon that there were 5.4 million new business registrations in the U.S. in 2021, the most since 2004.
“A lot of these businesses are still building their companies, their retail operations, their products,” Finkelstein said. “I am more bullish now on entrepreneurship and these businesses getting bigger than I ever was pre-pandemic.”
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That has the market playing right into the sweet spot for Shopify.
New businesses today start off in with a very different place than they would have even a decade ago, tapping into a la carte technologies and services from Shopify — and others — from fulfillment to financing to marketing to selling in store and online.
“These brands that are setting up on Shopify today, almost immediately they are global by default,” Finkelstein said. “They’re immediately hitting launch and they’re selling across 12 geographies on
Day One.”
Additionally, he said brands that were founded over the past five or 10 years have a “slight advantage” over their more established competitors in that it is easier for them to be truly channel agnostic when it comes to making the sale online or in stores.
That’s because established companies have often dedicated resources to building out capabilities in one particular channel and then feel committed.
But Finkelstein said that’s going to have to change.
“Don’t necessarily think about these individual channels as separate businesses,” Finkelstein advised. “Rather, think about what your customer wants. If your customer wants to buy on TikTok or Instagram, you need to sell there. If they want to buy online or at a farmers’ market, that’s where you should sell. If they want to buy on a marketplace like Walmart or Amazon, which we integrate with as well, that’s where you should sell.
“This idea of creating these separate businesses, also known as channels, we think is absolutely ridiculous,” he said. “Instead, focus on every surface area that exists, that’s where you should sell and tie it all back to one centralized operating system where you can view the entirety of your business.”
Having a holistic approach certainly paid off during the pandemic, but the magnitude of the commerce shift was still jarring.
“Every physical retailer shut down, those that had online stores pivoted online, those that didn’t, for the most part, rushed to Shopify,” Finkelstein said.
While there’s some hyperbole there, maybe not too much given that Shopify accounts for 10 percent of all e-commerce, facilitating sales from buzzy brands like Allbirds to complete newbie start-ups across fashion and other categories.
When the pandemic first hit, Finkelstein said Shopify — over the course of five days — decided to cut back on some new planned features to move quickly, ramping up services like curbside pick-up that were in high demand.
That was a moment that saw e-commerce penetration spike, but that moment has now passed and Finkelstein argued that its statistical retelling is widely misunderstood.
While e-commerce did spike as a percentage of total retail, jumping from about 12 percent to more than 16 percent in the U.S. during 2020 e-commerce, online sales snapped back to their historical trendline relatively quickly.
Finkelstein said it wasn’t that the e-commerce business fell, it was that the physical retail business came back after many stores were forced to go dark — e-commerce penetration went back down even while the e-commerce business was up.
“It looked like e-commerce was going back to pre-pandemic levels, that’s not actually true,” he said. “What ended up happening was the growth rate went back to pre-pandemic levels, but on a much larger base of total e-commerce.”
But all of that might soon be a distinction without a difference as Finkelstein said that by 2023 and 2024, great merchants will be multichannel by default.
“We think you’ll see far more omnichannel commerce happen,” he said. “Smaller brands are getting bigger at a pace we’ve never seen before.”
And they’re not going to fit the old business models anymore.
Finkelstein pointed to Hodinkee, which spent 11 years building a prominent website for watch enthusiasts the world over before it moved to layer in e-commerce this year.
Compared with the watch e-commerce players that started with sales and have a blog, he said the Hodinkee approach would lead to bigger successes.
“The companies that are doing it really well, you have to almost be confused — is this a retailer or is this a media company?” he said. “If you’re confused, than they’re doing it well.”
Certainly, Shopify helps businesses focus on what the product and marketing while picking up other functions and throwing around its scale (and it has some scale to play with as all together the business it facilitates would rank it as the second only to Amazon in U.S. e-commerce).
“We went to Atlanta two weeks ago to meet UPS,” Finkelstein said. “We negotiated rates with UPS on behalf of the millions of merchants on Shopify as if we were the second-largest retailer, that type of economy of scale was not possible before.”
But it hasn’t been an easy road.
Shopify cut 10 percent of its workforce in July.
“Layoffs suck,” he acknowledged. “We miscalculated the rate of growth, we knew that e-commerce was going to be much bigger post pandemic than pre-pandemic — and it was. [But] we assumed that the rate of growth would be closer to what we saw between 2020 and 2021. It turns out it’s now growing at basically the same rate that it was in 2019, it’s still massive, but it’s on a higher base.”