I’m feeling flush.
I got an email last Saturday from Shop that I had $43.40 in my Shop wallet to spend on the app. This was news to me, since I never knew I had one.
But now I have one that Shop created for me as part of their Shop Cash program, which they launched in June. Each time I use Shop Pay to check out on various merchant sites, I automatically get 1% cash back deposited into that wallet.
I admit to seeing emails from Shop over the past several months letting me know that I had earned $1 or $2 after checking out with Shop Pay, but I ignored them. The email declaring my $43.40 windfall got my attention, so off I went to the App store to download the Shop app.
I learned a few things, and they provide some insights into the do’s and don’ts of platform ignition.
First, I can only spend Shop Cash at the merchants on the Shop app. That was initially a bummer, since what I really wanted was to transfer my $43.40 to my checking account. The promotion is funded by Shopify and intended to drive sales back to participating Shop merchants to keep them sticky. It’s also designed to drive more consumers to download the app, shop there and — importantly — show preference for using Shop Pay anywhere they shop.
And here I was hoping to pay for takeout at my local Thai place.
Second, my newfound wealth is spendable on the platform in two ways. I can use it as a straight-up credit at checkout on purchases made in the app. I can also use it with merchants who have opted to turbocharge that cash if I buy something from them. For those who may be unfamiliar, Shopify merchants have the equivalent of a mobile storefront on the app, featuring their full product catalogue. For what it’s worth, none of the Shopify merchants I shop offered any turbocharged deals.
| The big question is whether $43.40 is enough to turn me and many others with Shop Cash into regular Shop app users. |
Third, once I downloaded the app, I found that my Shop Pay credentials — card, shipping address, etc. — were already pre-populated. Redeeming Shop Cash is a radio-button option on the checkout page and is easy.
I have resisted downloading the Shop app ever since it launched in 2020, even though I got a reminder to do so every time I checked out with a Shopify merchant or used Shop Pay. I didn’t see the need to clutter my SMS feed with another unnecessary notification about order details. Carriers and merchants have upped their game when it comes to keeping customers in the loop about shipment and delivery, so getting a third push notification on my home screen seemed intrusive and redundant.
But the email letting me know that I had money to burn was enough to fan the flames of my curiosity. The net-net: I now have a bunch of idle cash in a wallet that I would never have created myself — nor asked Shop to establish on my behalf — available to spend at merchants on the Shop platform.
The big question is whether $43.40 is enough to turn me and many others with Shop Cash into regular Shop app users.
Over the last 17 years, Shopify has created and scaled a commerce platform that helps small merchants open and operate branded virtual storefronts and accept digital payments. The company does that by making it easy for third parties with value-added services to connect to its platform and merchants to add new capabilities for their shoppers. According to Shopify, today there are millions of merchants across 175 countries on the Shopify platform. Shopify also allows its digital merchants to go omnichannel and open physical storefronts and helps Main Street merchants to extend their presence online.
In 2017, Shopify launched Shop Pay as an alternative “buy button” to move off platform and onto enterprise merchant checkout pages, decoupling payments from its commerce platform and expanding its total addressable market to include larger retailers with more volume. Its online checkout experience is by many accounts best-in-class.
On Shopify’s Q3 2023 earnings call, the company reported converting better than 15% of buy buttons on the internet and 35% better than “its competitor.” Shop Pay Installments, powered by Affirm, allows qualifying consumers using Shop Pay to check out to divide purchases into equal monthly payments over time.
| Shopify has not made it much of a secret that it views Amazon as its biggest competitor. |
Shopify has not made it much of a secret that it views Amazon as its biggest competitor, even as the relationship between the two seems best described as “frenemy.” It is worth noting that 40% of Shopify sellers also sell on Amazon, and the Shopify APIs make it easy for Shopify sellers to manage multiple ecommerce endpoints (including Amazon) and synch inventory between them. Shopify announced on its Q3 2023 earnings call that it will enable Shopify merchants to more easily integrate and support Buy with Prime on their storefronts. Their deal with Faire gives them a wholesale, B2B opportunity as well by giving merchants a way to shop for inventory inside the Shopify ecosystem.
On the retail front, Shopify is tapping into Amazon’s playbook to build a critical mass of consumers to ignite its two-sided network, one it hopes will become a destination for shoppers and the brands hoping to reach them.
To, in effect, out-Amazon Amazon.
The Shop app was launched in 2020 at the height of the COVID-fueled eCommerce wave. The app was designed to track order status on items purchased using Shop Pay or with a Shopify merchant so that consumers always knew when to expect delivery of their purchase.
Before we get into the data weeds here, fair warning: It is nearly impossible to get good data on Shop user engagement, or Shopify merchants generally. Third-party sites report numbers that are all over the place, inconsistent and implausible — my favorite is the one that pegs the number of online merchants using Shopify at 4.4 billion.
Shopify is vague as well, and especially so when it comes to the performance of the Shop app. On the Q3 2023 earnings call, the company declined to provide specific metrics on Shop app. “We’re not talking about those metrics, we’re not disclosing just yet, but the Shop app is becoming much more popular,” said Harley Finkelstein, Shopify’s president, when asked.
| It is nearly impossible to get good data on Shop user engagement, or Shopify merchants generally. |
So, here is what we think we know: Statista reports that after a two-year peak in December 2020, the number of downloads of the Shop app seems to have decreased — and by a lot. They report that the Shop app has 11 million active monthly users down from 19 million in 2020.
It’s perhaps not surprising. As the pandemic waned, I suspect merchants and carriers got better about notifying customers about their order and delivery status, and downloads waned as well — according to the Statista data.
Shop’s efforts to build out a consumer/merchant marketplace also came at the same time the online marketplace landscape was expanding and intensifying. Pureplay BNPL FinTechs have their own marketplaces as a destination for consumers who wish to shop merchants that accepted that form of payment. New platforms enable creators to operate their own branded storefronts with curated merchandise promoted by influencers on social platforms and inside of those marketplaces.
Amazon has made it easier to open branded storefronts on its platform to capture sales from the 197 million consumers who show up every month to shop there.
Shop Cash launched in June of 2023 — on Shopify’s 17th anniversary — as a strategy Shopify hopes will incentivize consumers to show preference for Shop Pay off Shopify, to shop more at Shopify merchants, and then to start their shopping journey with those brands on the app.
It’s not a crazy idea. It even got me, who resisted downloading the app for years, to poke around the app and contemplate how to redeem my found money.
That said — and it’s still early days — it’s hard to know whether it has delivered its intended impact, or if it will. Shopify’s not talking, which could be a clue. Usually when results are grand slam home runs, companies are not bashful about dropping hints.
| The Shop Cash balance is not creating any additional incentive to shop the app — at least, not yet. |
People I’ve spoken with who have the app say they use it only to track order status but don’t shop using it. Those with the app and a Shop Cash balance say it’s not creating any additional incentive to shop the app — at least, not yet.
If you do the math, though, you might guess that most customers haven’t gotten close to $44.30.
A 1% cash back on a $24 purchase of lip gloss is $0.24; on a $75 sweater it’s $0.75. It takes many hundred-dollar purchases to get into the single — much less double — digits to make spending Shop Cash interesting. The rewards aren’t material, and the turbocharged offers may not be compelling enough to get a consumer to stop shopping directly with their favorite merchants on their own apps or websites and shop them on the Shop app instead.
Especially when the Amazon Prime Chase card delivers 5% cash back on purchases made on Amazon, including groceries, and sometimes even more on participating purchases. Affirm also powers buy now, pay later on the Amazon site, as does Chase.
One thought is that real competition for Shopify isn’t Amazon, but the merchants consumers visit directly when they have something they want to buy.
Many of them are the same Shopify merchants that are in the Shop App. And a very small number of them are other merchants that have become customers’ favorites for most of the items they buy.
There are a lot of places for consumers to shop in the physical and digital worlds. At last count there are roughly 33 million retail establishments in the U.S. Some estimates report as many as 24 million online storefronts globally.
Almost three quarters, 71%, of consumers made their most recent retail purchase at one of the top 20 physical or online retail merchants. More than two thirds made a purchase at one of the top ten. It’s a behavior that has been consistent for the last two years.
Consumers have habituated on a small set of merchants because it is easy and convenient. There’s a certainty that comes along with shopping at their “go-tos”. They know the store, the merchandise, the checkout experience — and they trust them.
There is that long tail, where roughly 30 percent of shoppers say they occasionally make a variety of retail purchases. Many of those merchants are part of the Shopify landscape: the small retailers and direct-to-consumer brands who use Shopify as well as Woo Commerce, Big Commerce, Squarespace, Wix and others to build and operate their digital storefronts.
These are also the merchants for which purchases are largely discretionary. The clothing and beauty and home furnishings boutiques that are the nice-to-have but not essential. The subscription brands that, unless they are essentials, will be paused or canceled when consumers feel squeezed by higher prices and static paychecks.
Shopify raised its guidance for the rest of the year, anticipating more volume on and off the platform. Analysts report that holiday sales are expected to rise for the 2023 season, as consumers say they’ll tighten the purse strings elsewhere but not on gifts for family and friends. We know, however, from our most recent PYMNTS Intelligence data, that 69% of consumers have already cut back on retail purchases, including 66% of high earners. And that 58% of them are trading down or looking for other places to buy those items.
With Shop Cash, Shopify is betting that it — and the Shop app — can be a tailwind for merchants, providing the extra financial incentive of free cash when shopping with them or other merchants that accept Shop Pay. It’s also betting that consumers will show more preference for these merchants. And that their first stop will be the Shop App, since they have balances to spend at their favorite merchants and others they might discover while there.
The latter very much depends on the former.
In many ways Shopify has adopted a sound strategy for trying to ignite the Shopify network of merchants and take on Amazon, even at the edges. It has the prospect of getting more consumers to try the app and shop at the merchants there.
It may be worth the 1% Shopify is giving away. At a minimum, the ROI might be better than other things it could have tried — but it’s hard to know without seeing the financials.
Can this incentive change behavior and really move the needle? It seems doubtful on its own. It would need to be combined with other strategies that could drive substantially more engagement between consumers and Shopify merchants through the Shop App.
It’s unlikely that Amazon is losing sleep over it.
As for me, I have yet to spend my $43.40. Which is now $38.30 because I returned something.