Carl Lewis: Welcome to the Connected Enterprise podcast, where our guests share how they stay connected in their business lives.
Carl Lewis: I'm your host, Carl Lewis from Vision33, and my guest is Jordan Knapp from Shopify. Jordan, please tell us about yourself, Shopify, and your role there.
Jordan Knapp: Thank you, Carl. I've been in ecommerce almost my whole adult life. In college, I was building ecommerce applications from scratch. Back then, ecommerce implementations were expensive, but as they became more commoditized, people started rolling out true ecommerce platforms.
Jordan Knapp: I joined ATG Commerce, which was one of the first ecommerce platforms back in 2005-2006. I worked there for seven years. But back then, an ecommerce site cost a million dollars to build and a million dollars to manage/maintain, and the market was looking for more consumable options. Especially entrepreneurs without a million dollars!
Jordan Knapp: Magento came up and changed the world by knocking down barriers to entry. It was the first open-source ecommerce platform, but there was still custom application development and security patches. Also, you were responsible for managing/maintaining security and hosting.
Jordan Knapp: I was looking for the first viable SaaS-based offering in the market. I built a site for a friend on Shopify in early 2012 and immediately started cold-calling Shopify to get into the organization.
Jordan Knapp: I was hired at Shopify Plus to build out their Plus partnerships' organization and solutions engineering team. Today, I have a group we call market development, which looks at creating new channels/industries to provide value to new and existing merchants.
Jordan Knapp: For those unfamiliar with Shopify, we're one of two, maybe three, SaaS options on the market. We have over 850,000 clients. Shopify was founded in 2006 by Tobi, who wanted to create a direct-to-consumer snowboarding shop. That's back when I was at ATG and ecommerce sites cost a million bucks. But he had a vision of a true consumable model that was agnostic. The presentation was just as flexible as on-premise but could remove a lot of the barriers to entry.
Jordan Knapp: Today, Shopify Plus has been a significant disruptor in the market. Our focus is on driving the ecommerce multichannel capabilities for merchants doing one million to over billions online.
Carl Lewis: Interesting. I hadn't thought of it, but ecommerce is a young business.
Jordan Knapp: It was like a big high school 10 years ago. There was talk about getting ecommerce and ecommerce technology outside the supermarket places – like Amazon or an eBay – but it was a stagnant culture, innovation-wise. Existing platforms came out of the dot-com era with some updates and revisions. Except maybe Magento.
Jordan Knapp: A solution like Shopify took the market by storm. Ecommerce has transformed more in the past three or four years than it ever did during the dot-com era.
Carl Lewis: And that's why we're talking today – I want to hear about ecommerce from your perspective. What are significant trends in the industry, especially in automation? What are the trends potential customers should be investigating? What's at the top of everyone's mind?
Jordan Knapp: Automation and consumability are two words we use. Channel proliferation is a challenge for any retailer. Your consumers want to transact where they're interacting with your brand, whether that's Instagram, Facebook, eBay, Amazon, etc. They're looking for a tighter in-store experience.
Jordan Knapp: When two-day shipping becomes more commoditized, you’ll see a wave of new marketplaces that merchants and brands will need to sell through. That will make all those integrations with third-party systems difficult to manage. Our focus has been on 1) ensuring we can automate the integrations with those third-party marketplaces, social media platforms, and technologies, and 2) that we can do so in a consumable fashion.
Jordan Knapp: Our research found many ecommerce organizations had large merchandising teams doing repetitive tasks, so we designed a solution called Shopify Flow. Flow is events, actions, and conditions; it’s designed to create workflows or processes that remove the manual effort of managing an ecommerce store.
Jordan Knapp: For most of our innovations, we think, “How do we remove the dependency on developing, architects, and worrying about scalability?” Automation and consumability are two of the bigger industry trends because brands move fast. If you want to stay competitive, it's difficult if you have two-month turnaround times just to roll out new functionality.
Carl Lewis: Can you expand on the thought of consumability?
Jordan Knapp: One part of it is being SaaS. In a CRM world, we assume Salesforce is Salesforce, and no one's arguing that an on-premise CRM solution is a more consumable model than a salesforce.com. But SaaS in the Shopify world, especially for the enterprise, and merchants doing tens, or millions, or hundreds of millions of dollars, is a new phenomenon within the past few years.
Jordan Knapp: Those organizations move slowly because it takes a village – developers, architecture, deployment specialists. You had to worry about hosting and infrastructure. Our goal is to remove nearly all those requirements.
Jordan Knapp: Shopify's a true versionless platform, and our focus is allowing businesses to focus on marketing. If your expertise is building beer koozies, we want you focusing on product innovation, marketing, branding, and email marketing. We don’t want you to spend time, money, and energy on managing and maintaining an ecommerce experience.
Carl Lewis: We work with a lot of small and medium businesses. I'm sure that's your experience, as enterprise-type folks.
Jordan Knapp: Yeah.
Carl Lewis: What are the biggest challenges for typical SMB companies using these technologies every day and deploying new ecommerce solutions?
Jordan Knapp: The ecommerce technology has become commoditized to the point that there's a whole new class of challenges for entrepreneurs. You can sign up for a Shopify plan for as low as $29/month on shopify.com. You can have an ecommerce site up and running in a day. You can deploy products on a marketplace with no technical expertise.
Jordan Knapp: That's created more competition. A few years ago, drop shippers figured out how to use paid search online to sell products direct to consumer. They made a boatload of money because they beat the others to market. It's creating a level playing field, which is challenging for the larger brands. They have to consider how they 1) create an even more compelling customer journey and 2) drive brand loyalty.
Jordan Knapp: If you're an entrepreneur, it also means that as pay-per-click advertising, such as on Facebook, costs go up, you need to get more creative. Standing out becomes much more about the technology than managing the technology.
Jordan Knapp: Your marketing and brand strategies have never been more critical, which feeds into the trend of influencer marketing. As technology becomes more consumable and advertising costs rise, it creates this weird paradigm where the influencer has more power. And it appears to be a trend that won’t be waning anytime soon.
Carl Lewis: That's interesting. The challenges are no longer straight technology challenges. They're about brand, marketing, advertising, and understanding the emerging marketplaces you want to extend that brand to.
Jordan Knapp: It becomes a monetizing influence. And if you're a brand entrepreneur, how do you cost-effectively leverage the influence of others to create brand exposure and unique campaigns?
Jordan Knapp: Much of a VP of ecommerce's job, three or four years ago, was keeping the lights on. It was a nightmare to manage a Black Friday promotion – nerve-wracking. You had to do months and months of load testing. You had code freezes for long periods, and during code freezes, there may have been vast changes in your market to change your Black Friday strategy.
Jordan Knapp: Now everyone has this level playing field. It's created an exciting environment where the artists, creatives, influencers, and marketers have more power than the technologists had historically.
Carl Lewis: That's very true, from my perspective. It also seems that smaller businesses can deploy the technology much more quickly. It's harder for larger companies to make changes and keep up with the technology.
Jordan Knapp: Yeah.
Carl Lewis: Everyone has an ecommerce site, right?
Jordan Knapp: If you're a legacy brand and have an on-premise solution, no CTO says, “I want to give up 90% of my budget this year.”
Carl Lewis: Right.
Jordan Knapp: I'll pick on WebSphere. Say you have 30 folks maintaining a WebSphere Commerce implementation. If it takes six weeks to do a project, you can’t take advantage of the trends that might happen in those six weeks.
Carl Lewis: Right.
Jordan Knapp: And the world moves so fast. The most disruptive brands are focused on speed of deployment – pivoting marketing strategies on demand.
Jordan Knapp: And there's a crazy stat that we put out publicly around the growth of the average Shopify Plus merchant. I forget the exact numbers, but it was something like the average Plus merchant grew over 200% last year. And there are still opportunities for disruption within retail, manufacturing, and manufacturers going direct to consumer.
Jordan Knapp: You see a lot of mattress-in-the-box concepts, often originating on Shopify, but also through new marketplace channels that potentially pose alternatives to Shopify.
Carl Lewis: What's the next big thing?
Jordan Knapp: We recently had our developer conference, Unite, in Toronto. It's our chance to communicate with the development and partner community, but also more broadly to our merchants about what new capabilities we’ve provided our customers.
Jordan Knapp: We announced we’ll be entering the fulfillment space. I admit it. I have an Amazon Prime addiction. That's not something I'm supposed to admit, but I have a box coming from Amazon Prime probably every other day. I try to shop on Amazon stores when I get the opportunity, but for staples and commoditized goods like paper towels, it's too easy.
Jordan Knapp: Making a robotic warehouse hasn't been possible, but the warehouse technology will leap in the next few years. And that's going to make two-day, fast, and free shipping more affordable to retailers of all sizes. Today, some retailers have a hard time finding a 3PL or warehouse, and for some, their only alternative is fulfillment by Amazon.
Jordan Knapp: The other big thing is a tighter in-store experience. Ship from store, in-store pickup, etc. How do I drive loyalty programs online to encourage in-store traffic? How do I measure in-store traffic? Your conversion rate online might be atrocious, but you could be driving significant sales physically, on-premises.
Jordan Knapp: Say you're selling lawn mowers. How many people buy a lawn mower online? Probably not that many, but they likely do their research online first, so I think connecting that in-store and online experience will be a big focus.
Carl Lewis: Home Depot is a good example – I do a lot of shopping before I buy my next tool, but I always go to the store to get it.
Carl Lewis: I want to focus on the personal level a little bit. A lot of changes have happened in the last 10 years, with all the new technology. How do you do most of your business communication?
Jordan Knapp: It's different for partners, merchants, and consumers. One of the reasons we've succeeded is our transparency on our documentation – thorough API documentation to ensure we're catering well to the development community. Because if the development community feels unsupported, then the merchants, even though they might not see it, will feel unsupported.
Jordan Knapp: Especially at Shopify Plus, we try to have a direct relationship with the merchant. I was working for sales organizations for many years, selling licensed on-premise. A sales rep gets a contract signed, but then kind of sneaks away. Then another group takes over, or a partner that steps in, and the software vendor isn’t even involved.
Jordan Knapp: Shopify Plus tries to have a lot of skin in the game by providing merchants with resources like launch engineers engaged in the implementation process and merchant success managers. We try to have more of a human component – a direct one-on-one relationship with our customers.
Jordan Knapp: I think the organizations that will succeed in the future are those that can communicate effectively. They’ll provide thorough documentation and training and be able to create turnkey experiences without having to fly in a training team.
Carl Lewis: I feel the same way. It seems like messages are broadcast to a larger group, even if a large part of the group doesn't need that message. Maybe we'll be able to do more specific segmenting in the future, so the message is highly relative to the audience.
Jordan Knapp: Yeah.
Carl Lewis: What are some challenges of collaborating with critical third parties outside your direct companies?
Jordan Knapp: There are a lot of stakeholders. With any ecommerce implementation, you might have developers that work for the brand and a third-party digital agency. Maybe you're outsourcing integration to some back-office ERP solution. Then, if you have a stakeholder or representative from Shopify, their goal is to bring all those third parties together to create cohesive communication.
Jordan Knapp: Setting up an ecommerce site – if you know what you want, have a small team, and have a single order management solution or ERP – is simple. For any project, it becomes about managing the stakeholders. Since you could have five apps, Shopify, internal resources, IT, and third parties, there are bound to be conflicts.
Jordan Knapp: Despite the consumability of the platform, project management skills have never been more important, whether those resources exist within the retail brand or are brought in from a third-party agency or integrator.
Carl Lewis: Has Shopify been thinking about ways to automate relationships with the stakeholders involved?
Jordan Knapp: Back to the automation and consumability theme: we have the concept of an App Store, and with the App Store, it's like apps on your iOS phone. We don't allow apps into our app ecosystem unless they're consumable and turnkey.
Jordan Knapp: For things like integration to NetSuite – and I apologize for mentioning a third-party ERP – but let’s say SAP Business One. We have a great relationship with Vision33 focused on, “How can we create a much more consumable, more packaged integration?” It doesn't mean you don't have customizations, but we want to simplify as much of the process as possible. And I think simplifying the effort simplifies the amount of coordination and project management that goes with it.
Carl Lewis: So the standards in regards to how things are integrated. It’s a “turn it on, turn it off” process versus a long, drawn-out process.
Jordan Knapp: It puts the emphasis back on the business user requirements and the focus on process and strategy. It doesn't mean there's not going to be customization or implementation work. It means the customization or implementation work aren’t driving the requirements. It becomes more about configuring the strategy versus having to focus on the heavy aspects of development.
Carl Lewis: With the growth Shopify has experienced, it sounds like that strategy is working.
Jordan Knapp: Yeah. The job of a VP of ecommerce used to be very challenging. If you had an on-premise solution you were hosting yourself, and you had Black Friday or Christmas promotions, you wouldn't see your family. It was a difficult job. Our emphasis is on helping brands grow revenue and adapt in a changing environment.
Jordan Knapp: But if you bring it back to a human level, the job of the VP of ecommerce used to be very stressful. I think Shopify and the changes in the industry have made the lives of merchants and entrepreneurs easier. The consumer, when they think of changes in retail and buying behavior, they think of Amazon because that's what they see.
Jordan Knapp: What they don’t think about is the thousands or hundreds of thousands of new brands that couldn’t have existed in 2009. This disruption we're seeing across consumer products, from fashion and apparel to beauty, is enabled by the more consumable, affordable technology Shopify represents.
Carl Lewis: You mentioned your Amazon Prime addiction – we have one of those at my house, too. And what's amazing is that concept of brand loyalty. We may shop other places, but we go back to Amazon to purchase because of the service level they execute. That’s their aim, of course, and they do a good job with it.
Carl Lewis: These things come into play together, and the philosophies Shopify follows, do you measure/track it? Do you try to automate that data collection through analytics? Can you give us insight?
Jordan Knapp: The beauty of Shopify is that anyone can go to shopify.com and sign up for a trial account and play with the reporting. When you log into the Shopify admin, beyond the thorough reporting and analytics, we try to be predictive and prescriptive about the changes you should make to your site.
Jordan Knapp: Another great example: we acquired a company in San Francisco that has enabled us to create bot technology for the entrepreneur. It notifies you with a Facebook message that says, “This product is trending. You might want to think about a promotion.”
Jordan Knapp: We’re trying to remove as many physical steps as possible and allow the ecommerce store to react. You don't want us to make changes on your behalf, but to notify you of recommendations. In the future, it's not enough to be able to drill into the data at a super granular level. They must be prescriptive in helping the entrepreneur, retailer, and/or brand make decisions, sometimes on the fly.
Carl Lewis: That's very good. It sounds like there's a little bit of machine learning going on in the background to make these recommendations.
Jordan Knapp: Absolutely.
Carl Lewis: Jordan, this has been enlightening. We rarely get to talk to people who’ve been in the industry as long as you and are as engaging as you. Thank you for joining us. I'm sure many listeners will find this information helpful as they think about changes to their own ecommerce platforms in the days ahead.
Carl Lewis: It's too easy to make these things go long, so I like keeping them short. Until next time, I hope everyone stays connected.