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A year after Shopify reported explosive growth amid the COVID-19 pandemic, the e-commerce giant is plotting its next moves — and taking on new competition in the process.
Shopify’s core storefront-builder product benefited from lockdowns that forced many small and medium-size businesses to sell online for the first time. The e-commerce platform is now growing at a more normalized rate after it grew revenues 86% in 2020 and nearly doubled the sales transacted on its platform.
In recent earnings calls, Shopify has emphasized the strength of its services that help its merchants blend their online and offline offerings, including its revamped point-of-sale system, as many shoppers have grown more comfortable returning to stores.
Last year, Shopify also rolled out a social-commerce integration with TikTok, made key updates to its Shop app, and launched Shopify Markets, a services hub that makes it easier for its merchants to sell their products internationally.
These product updates and the shift in strategy to promote its omnichannel services put Shopify in more direct competition with payments companies like Square and Lightspeed, as well as open-platform players like BigCommerce.
Other companies that have previously focused solely on website building, like Squarespace and Wix, are leaning more into creating transactional tools as the opportunity for e-commerce continues to grow.
But analysts told Insider they were still largely optimistic that Shopify would continue to dominate the field.
Our view is that Shopify’s laser focus is what’s really differentiating for them,” Samad Samana, a Jefferies analyst, told Insider. “They’re methodically looking at all of the pain points that a merchant has, and they’re trying to solve for them.”
Here are the companies that analysts say could be Shopify’s biggest challengers across e-commerce, payments, and website building, from legacy tech companies to upstarts:
BigCommerce provides e-commerce software for all kinds of online businesses. Like Shopify, it offers customers a variety of services from online-storefront building to omnichannel selling.
BigCommerce’s biggest differentiator is its emphasis on an open platform that allows merchants to combine services using application programming interfaces.
While Shopify’s ambitions are to appeal to merchants of all sizes, BigCommerce’s clients tend to be midsize or enterprise businesses, like Ben & Jerry’s and Skullcandy, whose businesses are more likely to be complex enough to benefit from a more flexible tech approach.
BigCommerce raised $216 billion in its August 2020 initial public offering.
“Now they have resources to invest in a go-to-market, invest in their product,” Ken Wong, a Guggenheim Securities analyst, told Insider.
Adobe acquired Magento, an open-source commerce platform, for $1.68 billion in 2018. Wong said Adobe was one of a handful of legacy players that remained significant Shopify competitors.
Like Shopify, Magento has tools for brands to build websites, manage inventory, and sell through business-to-business, business-to-consumer, and direct-to-consumer channels.
While Shopify is known for being popular with fledgling businesses, Magento caters more to larger, established brands like TiVo and Rossignol.
In another similarity to Shopify, Magento has a robust app store with thousands of extensions that sellers can install.
Salesforce acquired the cloud-based e-commerce-software provider Demandware for $2.8 billion in 2016, which marked its entrance into online commerce. The acquisition led to the creation of a business unit the company calls Commerce Cloud.
Like Shopify, Commerce Cloud provides services for online merchants, including tools for business-to-business and business-to-consumer selling, as well as for order management and headless commerce.
Commerce Cloud also has a marketplace for integrations that sellers can use, though it’s not as robust as Shopify’s app store.
Lightspeed serves retail stores, restaurants, and golf courses with a set of commerce tools. Its cloud-based point-of-sale system is the centerpiece of its offerings.
In addition to payments, Lightspeed offers native loyalty, accounting, and analytics products. Shopify does give its merchants access to analytics and many other services, but it also outsources some functions like loyalty programs to third-party apps in its store.
Relative to Shopify, Lightspeed is a smaller player — it has about 156,000 customers in 100 countries, while Shopify has about 1.7 million merchants in 175 countries on its platform.
Like Lightspeed, Square originally focused on payments but has since branched out into more aspects of e-commerce. In 2018, it acquired Weebly, a website-building company, for $365 million and then integrated those tools into its own platform.
“What they wanted was for their existing customers to be able to use it. But also as potential new customers signed up, they would then also use Square as their payment processor,” Samana of Jefferies said.
Square now offers sellers products for building an online store, monitoring their business bank accounts, and managing payroll and employee benefits.
Square’s tools are geared toward sellers both big and small, from SoFi Stadium in Los Angeles to local food trucks.
Previously known primarily as a website builder, Squarespace has been leaning into e-commerce more over the past year.
In September, it launched a brand vision called “Everything to Sell Anything,” emphasizing the launch of a video app that allows sellers to show off products, plus tools for social selling and marketplaces and refreshed design features.
In its last reported quarter, which ended September 30, commerce accounted for $59.8 million of Squarespace’s total $210 million in revenue.
Similar to Squarespace, Wix was known for its website-building tools but has been moving into e-commerce more significantly.
Its business services include online stores, appointment booking, and restaurant-ordering products.
“They’re starting to look like what Shopify was five, six years ago,” Wong said, referring to both Squarespace and Wix. “You’ll probably see them tackle the kind of micromerchant that was the starting place for Shopify.”
While more of an adjacent competitor, in that it sells via a marketplace, Amazon’s dominance of the e-commerce world means it’s constantly top of mind for Shopify.
In February, Amazon acquired Selz, an Australian startup that builds e-commerce sites and payments tools. This acquisition came just a few years after Amazon sold its own website-building service, Webstore, to Shopify for a reported $1 million.
The two companies will likely continue to compete for sellers’ attention with services like fulfillment, shipping, and payments.
“Shopify is arguably the biggest threat to Amazon, and I would argue it’s kind of the same way on the receiving end,” Wong said.