Who Owns Shopify? - FourWeekMBA

The founder and CEO of Shopify, Tobias Lütke, owned or controlled 7,891,852 Class B multiple voting shares and 5,250 Class A subordinate voting shares, representing approximately 33.8% of the aggregate voting power attached to all of the Company’s outstanding voting shares. Another key stakeholder is John H. Phillips, an angel investor who placed an early bet on Shopify.

Aspect	Description	Analysis	Examples
Products and Services	Shopify is an e-commerce platform that offers a suite of products and services to businesses and entrepreneurs looking to start, manage, and grow online stores. The core offering is the Shopify platform, which includes website and store creation, customizable templates, shopping cart functionality, payment processing, inventory management, and order fulfillment tools. Shopify also provides additional services like Shopify Payments, Shopify Shipping, and Shopify Capital to support businesses in various aspects of e-commerce.	Shopify’s primary product is the e-commerce platform, which caters to businesses of all sizes. The platform’s user-friendly interface and customizable features appeal to a broad range of entrepreneurs. Additional services enhance the overall e-commerce experience and revenue streams.	Shopify e-commerce platform, customizable templates, shopping cart functionality, payment processing (Shopify Payments), inventory management, order fulfillment tools, additional services (Shopify Shipping, Shopify Capital), third-party app marketplace (Shopify App Store).
Revenue Streams	Shopify generates revenue primarily through subscription fees paid by merchants who use its platform. These fees vary depending on the subscription plan selected. Additionally, the company earns income from payment processing fees through Shopify Payments, transaction fees for using external payment gateways, and revenue-sharing with third-party developers on the Shopify App Store.	Subscription fees are a core income source, providing access to Shopify’s platform and features. Payment processing fees generate income from transactions. Transaction fees from external payment gateways are additional revenue. Revenue-sharing with app developers on the Shopify App Store contributes to income.	Revenue from subscription fees (e.g., Shopify Basic, Shopify Plus), payment processing fees (e.g., Shopify Payments), transaction fees for external payment gateways, revenue-sharing with third-party app developers (e.g., app sales on the Shopify App Store).
Customer Segments	Shopify serves a wide range of customer segments, including small and medium-sized businesses, entrepreneurs, and established brands looking to establish or expand their online presence. The platform caters to merchants across various industries and sectors.	Shopify’s target demographic includes entrepreneurs, SMBs, and established brands seeking an easy-to-use and scalable e-commerce solution. The platform’s flexibility and scalability accommodate diverse business needs and industries.	Entrepreneurs, small and medium-sized businesses (SMBs), established brands, merchants across various industries seeking an e-commerce solution.
Distribution Channels	Shopify distributes its products and services primarily through its website, where merchants can sign up for subscriptions and access resources. Additionally, the company operates the Shopify App Store, which allows merchants to browse and install third-party apps to extend the platform’s functionality.	The website serves as the primary distribution channel, enabling merchants to sign up and manage their subscriptions. The Shopify App Store extends platform capabilities through third-party apps.	Distribution through the Shopify website (shopify.com) for subscription sign-ups and resources, the Shopify App Store for third-party app installations.
Key Partnerships	Shopify collaborates with third-party developers and app creators who build and offer apps on the Shopify App Store. These partnerships expand the platform’s functionality. Additionally, Shopify may partner with payment processors and financial institutions to provide payment services to merchants.	Collaborations with third-party app developers enhance the platform’s capabilities and offerings. Partnerships with payment processors and financial institutions ensure secure payment processing for merchants.	Collaborations with third-party app developers (e.g., app creators offering inventory management apps), partnerships with payment processors (e.g., Stripe, PayPal), collaborations with financial institutions (e.g., offering Shopify Capital funding options).
Key Resources	Shopify’s key resources include its e-commerce platform, a library of customizable templates and themes, payment processing infrastructure (Shopify Payments), a network of third-party app developers, customer support, educational resources, and a commitment to innovation and user-friendly design.	The e-commerce platform is the core resource, providing the foundation for online stores. Customizable templates and themes empower merchants to create unique storefronts. Payment processing infrastructure enables secure transactions. Third-party apps expand functionality. Customer support ensures assistance. Educational resources empower merchants. A commitment to innovation drives platform improvements.	E-commerce platform, customizable templates and themes, payment processing infrastructure (e.g., Shopify Payments), third-party app marketplace (Shopify App Store), customer support, educational resources (e.g., Shopify Academy), commitment to innovation and user-friendly design.
Cost Structure	Shopify incurs costs in software development and maintenance, hosting and infrastructure expenses, customer support and assistance, marketing and advertising campaigns, employee salaries (including developers and customer support staff), and partnerships with payment processors.	Software development and maintenance are ongoing expenses to enhance the platform. Hosting and infrastructure costs cover server maintenance. Customer support is essential for assisting merchants. Marketing and advertising campaigns promote the platform. Employee salaries, including developers and customer support staff, represent a significant portion of costs. Partnerships with payment processors may involve fees.	Costs related to software development and maintenance, hosting and infrastructure (e.g., server maintenance), customer support, marketing and advertising campaigns (e.g., Shopify marketing efforts), employee salaries, partnerships with payment processors (e.g., transaction fees).
Competitive Advantage	Shopify’s competitive advantage lies in its user-friendly e-commerce platform, customizable templates, extensive library of third-party apps, commitment to innovation, and scalable solutions. The platform empowers entrepreneurs and businesses to easily create and manage online stores, and its flexibility accommodates various industries and business sizes.	The user-friendly platform attracts merchants looking for simplicity. Customizable templates and third-party apps offer flexibility and extend functionality. A commitment to innovation keeps the platform competitive. Scalable solutions support businesses’ growth.	Shopify’s user-friendly e-commerce platform, customizable templates and themes, extensive library of third-party apps (e.g., inventory management apps), commitment to innovation, scalable solutions for businesses of all sizes.
Value Proposition	Shopify provides businesses with an accessible and user-friendly platform to establish, manage, and grow their online stores. The platform offers customization, scalability, payment processing, third-party apps, educational resources, and support.	Shopify’s value proposition centers on empowering businesses to succeed in e-commerce. The platform’s accessibility and customization options simplify online store creation. Scalability accommodates growth. Payment processing ensures secure transactions. Third-party apps extend functionality. Educational resources empower merchants. Support provides assistance when needed.	Establishing and managing online stores with ease, customization options, scalability, secure payment processing, access to third-party apps, educational resources, customer support.

Table of Contents

Understanding the Shopify business model

Shopify’s Business Model is skewed toward subscriptions and merchant services/solutions.

Shopify’s Cost Structure, the subscription revenue, while contributing to about 27% of the company’s revenue, carries a higher gross margin (77%) compared to the merchant services gross margins of 39%.

shopify-cost-structure — While Merchant services drive most of the revenue for Shopify, in reality, subscriptions have a much larger contribution margin. Indeed, in 2023, on $7 billion in revenue, Shopify generated $3.15 billion in gross profits or about 50% gross margins. However, if we drill down its cost structure, we can see how gross margins from merchant services stood at nearly 39%. Meanwhile, gross margins from subscription services (Shopify’s MRR was $149 million in 2023) reported over 80% gross margins, thus making its subscription business critical to sustaining the overall Shopify business model.

Shopify’s Profitability went from $2.9 billion in 2021 to $-3.46 billion in 2022.

shopify-profitability — Shopify was finally profitable in 2023, with $132 million in net profits, while it was not profitable in 2022, generating over $3.4 billion in net losses. In 2021, driven by the massive wave of e-commerce throughout the COVID-19 pandemic, Shopify had turned to profitability in 2021, generating over $2.9 billion in net income, while it became unprofitable again in 2022 and back to profitability in 2023.

While Shopify’s Revenue grew from $1 billion in 2018, to $5.6 billion in 2022.

shopify-revenue — Shopify generated $7.06 billion in revenue in 2023; it generated $5.6 billion in revenue in 2022, and over $4.6 billion in revenue in 2021.

Shopify had over two million Merchants in 2022.

Shopify’s Competitors primarily comprise other e-commerce platforms like BigCommerce, WooCommerce, Squarespace, Volusion, and Magento.

shopify-competitors — In just fifteen short years, Shopify has grown from humble beginnings to become one of the fastest-growing eCommerce platforms online. The Shopify eCommerce solution is perhaps best suited to users who desire an easy, flexible and affordable starter solution for their online store. The provider now has upwards of 820,000 stores accounting for 20% of the total market share. However, the continued success of any company in the dynamic digital market is never guaranteed.

Key Highlights

Founder and CEO Ownership: Tobias Lütke, the founder and CEO of Shopify, owns a substantial portion of the company’s voting shares, representing approximately 33.8% of the aggregate voting power. Another significant stakeholder is angel investor John H. Phillips.
Business Model: Shopify’s business model is centered around subscriptions and merchant services. It provides an e-commerce platform for over 2 million merchants. While subscriptions contribute to about 27% of total revenue, the majority of Shopify’s revenue (over 73%) comes from merchant services.
Revenue Breakdown: In 2021, Shopify generated over $5.6 billion in revenue. Subscriptions contributed around $1.5 billion (27% of total revenue), and merchant solutions accounted for more than $4.1 billion (73% of total revenue).
Cost Structure: Despite subscriptions contributing a smaller portion of total revenue, they have a higher gross margin (77%) compared to the gross margin of merchant services (39%).
Profitability: Shopify’s profitability fluctuated. It became profitable in 2021, generating over $2.9 billion in net income due to the surge in e-commerce during the COVID-19 pandemic. However, in 2022, it experienced a net loss of over $3.4 billion, resulting in negative profitability.
Revenue Growth: Shopify’s revenue grew significantly over the years, from $1 billion in 2018 to $5.6 billion in 2022.
Number of Merchants: Shopify served over 2 million merchants in 2022, indicating its popularity and widespread adoption.
Competitors: Shopify’s competitors in the e-commerce platform space include BigCommerce, WooCommerce, Squarespace, Volusion, and Magento.
Growth Trajectory: Within a relatively short span of fifteen years, Shopify has transformed from a small startup to a major player in the e-commerce platform market, with a significant market share and rapid growth.
Evolving Market: While Shopify has achieved remarkable success, the competitive and dynamic nature of the digital market means that continued success is not guaranteed.