Shopify is a Canadian ECommerce Store provider that is traded on the stock exchange (NYSE: SHOP). People who want to open an ECommerce Store to sell products online can go to Shopify to create an online store, load products for sale into the store, and market that store on the internet.
There are many companies like Shopify out there. From Wix to GoDaddy to Volusion, 3DCart, Magento and more, this is not a new concept by any means. The value in a platform like this is that all of the components of the Ecommerce Store are integrated into a single platform; primarily meaning both web site and shopping cart, but in most cases also including ‘related products’ functions, ‘search’ functions, ‘merchant’ (accepting credit cards) functions, ‘sort by’ functions and more.
An integrated platform like Shopify means that aspiring EBiz owners don’t have to go to all the trouble of writing the site code themselves, building the site by hand, and then finding and integrating all those extra functions themselves. Again, this is certainly not a new concept. There are many platforms like Shopify out there, and all of them have their Pros and Cons.
Unfortunately they all have more Cons than Pros, and Shopify is no exception. You need to be very aware of what the exact Pros and Cons are, because if you plan to run an online business you’re going to be spending a good deal of money and a great deal of time trying to make it work. Your financial and time investment needs to be directed in the right way, or your business fails, as do most home-based ECommerce startups.
The failure of the vast majority (more than 90% in our considered opinion) of home-based ECommerce businesses are almost exclusively due to the lack of honest information with regard to understanding online sales and marketing. With all these platforms (including Shopify), the Pros are usually related to the actual ECommerce Storefront platform software itself. The Cons are always related to the expectations for and understanding of actually marketing products online.
We have actually used the Shopify platform for about 2 years. We’ve built a site, used their Tech Support, used their Customer Service options and have carefully gone through their Marketing information. So let’s take a look at the Pros and Cons of Shopify from a first-hand point of view.
PRO: The Shopify Site Code.
A web site is made up of varieties of programming code (HTML, CSS, PHP, Java, etc.) that an internet browser assembles on your computer screen to show you the actual pages of the site. Store platforms like Shopify and others often assemble that code in proprietary “engines” that run the web sites they provide. Most of the time this is done for two reasons:
1. To allow the site’s components to integrate and operate better.
2. To keep people from ‘stealing’ the way their site platforms are built.
Both of these are legitimate reasons to build the “engines” that drive their platforms in a proprietary way. Some of these “engines” (collections of proprietary code) work better than others. Shopify runs on what it calls it’s “Liquid Engine”.
There are three important things that make Shopify stand out above the rest when it comes to their actual site platform and the way it’s coded.
Second, they allow nearly complete access to the actual site code for the site owner. Most platforms only do that in a very limited fashion. That means that Shopify site owners can make the (very necessary) modifications to their sites that allow them to present their products properly and market their businesses properly.
Third, their code is built extremely well. An ECommerce web site depends on Search Engines to get out there across the internet, rank naturally in a Search Engine, and be found easily by consumers. Natural ranking in a Search Engine is far more important and far less expensive than paid advertising, which is largely a waste of money for a home-based ECommerce business. Search Engines (especially Google, the largest and most important Search Engine) don’t like “sloppy” or “wordy” code.
They like the code on a web site to be slick and streamlined for several reasons, one of which being that a site built with streamlined code loads faster in a browser and takes less resources from the Search Engine. Shopify’s Liquid Engine code is very slick and highly streamlined.
HOWEVER, it’s important to note that streamlined code by itself does NOT mean that a site will automatically rank well in a search engine. That is a function of marketing. Streamlined code will simply give you a little extra boost as long as your marketing is done properly.
PRO: Shopify Tech and Customer Support.
Both Shopify’s Technical Support and Customer Support services are excellent.
On the Tech Support side, there are knowledgeable Techs who are willing to take the time to actually work with a site owner to solve problems. They’ll help a site owner work with bits of code as well, which in our long experience in this business is fairly rare, so Shopify gets an “A” grade on Tech Support.
On the Customer Service side, the same is true. Their Customer Service staff is quick to respond, has long hours, and is friendly and knowledgeable. “A” grade here too.
CON: Shopify heavily promotes the “Fantasyland” (Get Rich Quick) mentality.
The most important thing for an ECommerce business owner to understand is that making money in this business is NOT quick, and it’s NOT easy. Just as in the physical world, there are a wide variety of things that need to be learned and executed properly in order to market a business online successfully. Getting exposure across the internet is a GRADUAL process that requires hard work and careful, correct marketing practices.
Shopify, like virtually all of the other site platforms out there, seems to completely ignore this stark reality in favor of promoting a “Fantasyland” approach to making money online. This mentality, if you buy into it, is a surefire way to insure that your business will fail.
Unfortunately, Shopify promotes the Fantasyland mentality in several ways:
The 14 Day Free Trial. Shopify knows, as does every other experienced company that understand the realities of internet marketing, that a 14 Day Free Trial is useless. There are months’ worth of careful preparation, research, content creation, graphic design work and much more to be done before you even THINK about actually creating a web site. However, Shopify touts this 14 Day Free Trial as if it will actually amount to something truly successful on its own. It won’t, as undoubtedly scores of Shopify users have discovered. Just the fact that they are willing to, in our opinion, mislead people in this way is a serious problem.
“No design skills needed”. As of this writing, Shopify’s home page makes this claim. They’re saying that you can choose from a wide variety of pre-built templates, meaning you don’t have to create anything original of your own. This is purely fiction, as any successful marketer will tell you. It isn’t enough to grab a “store-in-a-box” template, slap some products on it, and expect money to come rolling in. A properly designed web site that actually converts visits to sales is customized with a detailed understanding of not only the product and how it should be presented, but also with a clear understanding of the demographic group that buys that product the most, and what they expect to experience when they’re thinking about buying.
Inferred Money Claims. Many of the worst scams on the internet claim that you’ll make a certain amount of money in a given time period as long as you spend a certain amount of money with the scammers. While Shopify does not specifically do this, they seem, in our opinion, to infer it in a roundabout way. They claim on the home page of their site that there are 500,000 Shopify sites out there with a total of 1 million users that together have made a total of $46 Billion dollars in sales. We don’t doubt that claim.
However, just for fun, let’s make the assumption that all of those web sites shared equally in that $46 Billion dollars. $46 Billion divided by 500,000 web sites = $92,000 per web site. Factor in the fact that this would be gross sales, and in reality the average net profit [after Cost of Goods and Expenses] for sites that all did fairly well might be around 35%. That means that average number of $92,000 per site drops to $32,200 per site.
Factor in the fact that Shopify’s claim is a TOTAL of $46 Billion dollars, meaning over all the time that Shopify has been offering sites, which is about 12 years (since 2006). Now divide that $32,200 per-site average by 12 years and you have an average of $2,683 per site per year over the time period that Shopify makes that $46 Billion dollar claim.
Not so impressive after all.
Now OF COURSE there are lots of ways to interpret the math. We understand that example we just used isn’t realistic in all of it’s assumptions. There would have been far fewer sites in the earlier years and far more in the later years, etc., etc, which would mean that there are Shopify sites out there that actually DO make a good deal of money. However, naturally a large proportion of those 500,000 sites would be owned by very large companies that have lots of money already and that do a lot of expensive advertising in the physical world as well as online. Their revenue would very likely account for the vast majority of the total $46 Billion dollar gross sales figure over a 12 year period.
It’s not hard, then, to come to the very likely conclusion that there are a smaller number of large companies making lots of money, and a larger number of small business owners making only a little money. It’s also absolutely true that the vast majority of home-based business owners that follow the Fantasyland mentality don’t make any money at all. This is inherently true of any ECommerce site platform that promotes Fantasyland mentalities, and virtually all of them do. So that $46 Billion dollar figure, in our opinion, is misleading to the home-based business owner.
CON: Shopify pushes “Apps”.
One thing that you learn after spending years in the ECommerce business is that “Apps” don’t work. There are Apps for Keyword Research. Apps for SEO. Apps for Marketing. Apps for this, Apps for that.
Retail marketing research and execution is a skill that cannot be programmed into an App. Many of these Apps seem to work but simply don’t produce results. There is absolutely no substitute for a real understanding of how retail marketing works. The fact that Shopify explodes your email inbox with so many exhortations to buy App after App after App leads us to the opinion that they know most home-based business owners do not have the skill sets required to successfully market retail products online. It also leads us to the opinion that they don’t particularly care. A company that cared would tell it’s users that they need to learn marketing skills, not dump good money after bad buying Apps that only prolong the suffering that a home-based business owner goes through when nothing works.
CON: Shopify pushes “Shopify Experts”.
It seems clear that Shopify does recognize the fact that most home-based business owners have no idea what the realities of retail marketing are, because they push “Shopify Experts” at their customers incessantly. In other words, what they’re telling you is to pay other people to build and market your site for you. What they should be telling you is that you need to learn retail marketing properly before you even consider opening a web site, but of course that doesn’t make them any money off of the huge number of people who don’t yet know any better.
Shopify has a ‘Partners’ page on their web site where they work to attract “Shopify Experts” into their Partner program, so they can recommend those “Experts” to you and the “Experts” can charge you build your site for you, do your marketing for you and so on, when all else fails.
On that page, they state that there are “Shopify Experts” in 50 countries, and that the “average Shopify project” pays those “Experts” $10,000. That means that on average, if you use one of their “Experts”, YOU are very likely to pay $10,000 to actually get that site designed or marketed, etc. If you’re really lucky, this “Expert” might actually know what they’re doing, but in our general experience across the internet “Experts” are simply looking to grab the cash and get out as easily as they can with minimal work. But let’s say by some chance you do get lucky and connect with a Shopify Expert that actually does a decent job on your site. That leaves you with 2 things to consider:
1. YOU DIDN’T LEARN ANYTHING. Somebody else remodeled your site template, and you don’t know how to make any future changes yourself, so you have to go back and pay that person again and again and again every time to want to make even the most basic changes to your site, which is something you’ll do a LOT.
2. On average, you just spent $10,000 in the hope that you now have a reasonably working site, and will spend a lot more money on “Experts” in the future because you didn’t learn anything. That’s what you get led into in the Fantasyland process. How does that 14 Day Free Trial look now?
CON: Shopify buries you in distracting and often useless ‘marketing tips’.
When you have a Shopify account, as we do, you’ll get at least one email from Shopify almost every day; often you’ll get more than one a day. These emails range from “rah-rah” sessions claiming that everybody else is doing really well and you should be too, to some of the most ridiculous marketing tips we’ve ever seen.
Here’s an example: We got a ‘marketing tip’; email from Shopify last year that told us to increase our sales by printing paper fliers of our products and going to a shopping mall and putting those fliers on car windshields.
In our opinion, the marketing tips and rah-rah emails you get from Shopify are simply regurgitated Fantasyland blog blurbs that have little basis in the actual marketing challenges a home-based business owner faces when getting started online. Shopify is certainly not the only company that does this. When companies do this, we’re of the highly considered opinion that these companies are simply trying to tell you that you should be doing well because Fantasyland is so easy and quick, so you should keep paying them for your site because what’s going wrong is not their fault, it’s yours, and eventually you’ll catch up to the smart kids if you read enough regurgitated blog blurbs from their marketing team.
CON: Shopify pushes Oberlo
Oberlo is something that we’re going to get into a much more detailed review on at a later date. Suffice it to say that this is nothing more than a connection to AliExpress that automatically loads products from Chinese drop shippers on your Shopify site.
The reasons why this is such a bad idea are so many and varied that we do have to write an entire review on it. Let’s just say at this point that in our seriously considered opinion, you should not touch Oberlo with someone ELSE’S ten foot pole no matter how hard Shopify tries to push you into it.
CON: Some Investment Experts aren’t happy with Shopify.
We’ll let you draw your own conclusions from this excerpt of an article published on October 4, 2017 on The Motley Fool financial web site. You can read the entire article here on their site.
Shares of Shopify Inc. (NYSE: SHOP) fell 11.6% on Wednesday after short-seller Citron Research released a new report describing the e-commerce platform specialist as a “get-rich-quick” scheme that runs afoul of Federal Trade Commission regulations.
With the caveat that Shopify’s platform is arguably “the best build-your own e-commerce software on the market,” Citron founder Andrew Left likened Shopify and its affiliate program to Herbalife, which last year was required to pay a $200 million settlement with the Federal Trade Commission for misrepresenting the earnings potential of its own distributors.
Left urged the FTC to more closely examine Shopify’s claims that its merchants can become millionaires and quit their jobs, and further accused Shopify of paying its over 13,000 “partners” — or people who promote the platform and refer merchants to Shopify — without requiring or enforcing appropriate disclosures of that compensation.
Left also argued that Shopify doesn’t deserve its lofty valuation trading at nearly 17 times sales just prior to the report, but rather should be valued closer to 8.5 times sales similar to other leading SaaS companies like Square or Wix. Thus, he suggested the stock should sit 45% lower than it stood yesterday, before warning that’s “before the company is caught by the FTC.”
In our opinion, if you’re going to use Shopify, use ONLY the site platform technology itself, and do that ONLY after you’ve actually learned how to market properly online. If you do use them, don’t listen to ANY of their marketing hype or use ANY of their “Experts”.
Again in our considered opinion, The Tech side is good. The Marketing side is terrible.
And Fantasyland does NOT exist.